This blog is set up to provide information regarding Canadian mortgages to you the consumer, as well to educate Realtors so they can provide answers to their clients. Feel free to comment and/or request a post on a specific issue. Ron Miller,
Phone 905.667.0699, Toll Free 1.855.684.8326, 4-318 Dundurn St. S. Hamilton ON L8P 4L6. Butler Mortgage Inc. Lic#12118, Agent Lic#M09001819
This is the process where you have to bring in documents to your mortgage broker or bank to back up what you told them at the time of your pre-approval.
This is probably the hardest form of document collection for people to do properly. But it must be done properly as it is the law set out by FINTRAC under Canada’s Anti-Money Laundering and Anti-Terrorist Act. If we put on the application that your down payment is coming from your own resources, than that means cash in the bank and we have to show that it has been there for 90 days (not 89) or has accumulated over the last 90 days from means that can be explained, ex. pay deposits or gifts from family. It can also be a quarterly statement from RRSP’s or another form of an investment. So, if your money is sitting under your mattress it is not an acceptable down payment on a home, put it in the bank.
I once asked a client if the deposit is coming from their own resources. They replied yes. When document collection came and I asked them for 90 days of bank statements, they replied well we got the money from a line of credit. Not good, we did save the deal under borrowed down payment. Now my question to all clients is, “Where is the Money Now? Show Me the Money!” If we put on your application that the money came from your own resources and then there is an additional deposit in your bank account for $5,000 dollars and you tell us it is from your parents, we then have to re-qualify you with gifted money and have your parents sign a gift letter. If you tell us that the money was transferred from another account then we need a 90 day history from the day it was transferred.
If you are buying your children a home with existing equity in your current home under the secondary home program with as little as 5% down, that is fine as long as we know where the funds are coming from up front.
It is ok to change your story after your pre-approval and decide your source of down payment is changing but once you have an accepted offer on a home then do your best to have your story straight.
I do ask for some documents up front, at least a recent pay stub or in the case of self-employed I would ask for two years NOA’s and T1’s.
This process is why it is so important to be completely honest with your broker because there will come a time when what you told them will have to be backed up with paper. This is also the time where the difference between a good broker and an ok broker is differentiated. It is our job to ask you the right questions and base your approval on that. You may not know the right things to say. If I ask you how much money do you make a year, and you reply 50k, I have to make sure that is correct. Is this including over time, or is it regular hours? If it is including over time then the documents required will change. In addition to asking for a job letter and pay stub, we will also need two years’ worth of T4’s from your employer to include the extra income.
Let’s say you are self-employed for less than two years and we approved you for a mortgage. We may require your T4’s from your past employer to confirm you have been in the same industry that your new business is in.
Different types of income require different documents. Also some lenders do not accept all types of income, so we have to make sure you are going to the right lender. For example, your year-end bonus may not be an acceptable form of income to certain lenders, but if you need that to qualify then obviously we will have to find a lender who will accept it.
We will also require void cheques for where you want your mortgage payments to come out of. We of course will need lawyer information, and government issued photo ID. If you are renewing we will need current mortgage statements and property tax statements. The list of documents changes for everyone's situation.
A good mortgage broker will ask you if the documents that may be required are available for when the time comes or even collect a lot of it up front. There still may be surprises, but always ask your broker or bank what you will need to prove your income. It takes three to six weeks to get a NOA from the governemnt, don't find out you need it 2 weeks before closing if it lost. (There is a way to get it in one day.) My point is paperwork must be in order all conditions met or funds will not be forwarded.
If you have any questions or concerns I am available to answer them.