Posted by John Doe
Getting a mortgage can be a complicated experience, especially if it’s your first time. There are many things involved in applying for and getting a mortgage. First, you will have to make sure you can afford the deposit, closing costs, and monthly mortgage payments on the property you’d like to purchase. In order to do so, you’ll need to work out your incoming versus outgoing expenses. You can subtract your outgoing expenses from income in order to see just how much you will have left over for mortgage payments.
When you’re in the preliminary stages of applying for a mortgage, it can be helpful to use a mortgage cost calculator or speak to a mortgage professional. You don’t want to go through the whole application process and then realize you’re not ready to have a mortgage just yet.
Mortgage lenders look at many components of your financial health when deciding whether to approve your mortgage or not, including:
- credit score;
- any existing debt;
- outgoing expenses;
- whether you have any dependants, such as children or elderly relatives;
- employment situation;
- mortgage term;
- what kind of mortgage you are applying for, for example, a joint mortgage can be better as you will have two incomes to put towards it;
- the value of the property;
- how much of a deposit you can put down.
As you can see, there are many factors taken into account that will influence whether you can get a mortgage, as well as what kind of mortgage term and rates you will be offered. It can be overwhelming, and many home buyers turn to mortgage professionals for assistance and advice during the application period.
Once you’ve decided to apply for a mortgage there are several documents you’ll have to produce. Below are some of the documents you’ll be asked to provide when applying for a mortgage.
You will need to provide several documents about the property you are hoping to purchase, so that the lender can determine the property’s value, and whether you are able to afford it. Documents related to the property include:
- copy of signed sales contract (your offer);
- proof of deposit;
- contact information for realtors, builders, attorneys, and insurance agents (basically, everyone involved in the purchase of the house);
- copy of listing sheet for the house or condominium, and legal description if applicable.
The documents you will be asked to provide related to your income will vary depending on what kind of employment you have. If you are self-employed, it can be a bit trickier, as you will need to provide statements of earnings for a minimum of two years. You may need to hire an accountant to help you compile and prepare these statements. Because it can be more difficult to get a mortgage if you are self-employed, it’s helpful to seek the advice of a mortgage professional.
If you are a salaried employee, you can provide the following documents to support your income claim:
- current employment letter;
- current (within 30 days) pay stub;
- other documents proving additional income such as bonuses, car allowance, and overtime.
For those paid an hourly wage, you must provide:
- current pay stub;
- letter of employment;
- last year’s NOA.
There are many other types of employment situations, all of which will affect your application and the documents you are asked to provide, such as:
- rental income;
- multiple part-time jobs;
- commissioned work;
- small business ownership or partnership;
- childcare benefits and other tax benefits;
- pension, disability, or other non-taxable income;
- seasonal work;
- alimony/support payments.
All of these go towards proving your income is sufficient for you to afford your mortgage payments. You will need to provide extensive documentation proving how much you earn for each income stream. If your source of income is unconventional or otherwise complex, it would be best to have help from a mortgage professional, so you know exactly which documents are needed.
Down Payment Confirmation
You must be able to prove that you can afford the down payment on the property from your own resources. This means you cannot borrow money in order to afford the minimum down payment. You must provide bank statements in order to show the accumulation of savings over time, proving you are able to afford the down payment from your own resources.
In some cases, the down payment may be paid for with the aid of a gift from relatives, liquid or other assets, or proceeds from the sale of another property. You will need to provide documentation to show where the money came from, in this case.
As you can see, the documentation you must provide when applying for a mortgage depends on your financial position, employment situation, as well as other variable factors. Especially if it’s your first time applying for a mortgage, a mortgage professional is an invaluable resource to ensure you get the application right, the first time.