What Documents You’ll Need For a Mortgage, and When You’ll Need Them
As we’ve discussed before, mortgage qualification is based on three factors: income, credit and down payment. As we’ve also discussed, these 3 factors remain even if you are self employed -you’ll need to show your credit (that’s an easy one, since we can obtain a copy of your credit report for you), show proof of your down payment, and provide documentation to prove your income. The purpose of this blog entry is to provide you with a quick checklist of exactly what items you’ll need to provide your mortgage broker with in order to prove your income, and down payment.
Documents needed to show your down payment
Thankfully, the requirements for showing your down payment remain the same whether you are self employed, commissioned, or a T4’d employee. In order to prove your down payment, you’ll need to provide your mortgage broker with a 90 days bank statement, showing sufficient funds for your down payment.
The down payment money doesn’t need to be in the account for the entire 90 days, however, all of the required funds must be present in the account on the last day of the statement. For example, if you’re purchasing a home for $400,000, the $20,000 down payment doesn’t need to be in your account for the full 90 days, but instead, your account could start off with $0 in it 90 days ago, so long as it has $20,000 on the last day of the statement. The funds can be all your own, investments, RRSPs, gifted money from a direct relative in certain circumstances, or even borrowed funds in some cases.
If you’re planning on using RRSPs, or investments for a down payment, you’ll need to transfer those funds into your account before providing your mortgage broker with the 90 day’s bank statement. You’ll also need to provide your mortgage broker with 90 day’s statements for the RRSPs, or investments.
In the event that your down payment is coming as a gift from a family member, you’ll want to obtain a ‘gift letter’ from your mortgage broker that would be filled out by the person gifting you the down payment money. Next, you’d deposit the funds into your bank account, and once again, provide a 90 days bank statement for the account.
If your down payment for your new home is coming from the sale of your existing home, you’ll need to provide a copy of the Sale Agreement with condition waiver, along with a copy of the most recent mortgage statement to confirm the difference between what you owe on your home, and what you’ve sold it for.
You’ll need to provide your mortgage broker with 90 day’s bank statements a minimum of 3 weeks before your scheduled possession date. For example, if you were purchasing a home to move into on July 15th, you’d need to provide your mortgage broker with the required bank statements by no later than June 24th.
Documents needed to prove your income for a mortgage when self employed
As we’ve discussed before, there are several different types of mortgage products available for self employed Albertans looking to purchase a home. Since there are several different mortgage types available to self employed borrowers, there are several different income documentation requirements. As someone looking for the lowest cost mortgage available, you should provide your mortgage broker with the following documents:
- Your most recent 2 year’s personal Notice of Assessments (example: 2014 and 2015 tax years)
- Your company’s most recent 2 year’s company financial statements (example: Y/E July 2014, and Y/E July 2013)
- Your company’s Articles of Incorporation
- Your company’s List of Directors and Shareholders
By providing your mortgage broker with these 4 items, your mortgage broker will be able to determine which of the many different types of mortgages available for self employed borrowers you’ll be able to qualify for. Then it’s simple, your mortgage broker will present you with your options, and together, you’ll be able to select the lowest cost mortgage.
What happens next?
Once you’ve provided your mortgage broker with the appropriate documentation, your mortgage broker gets to work. You’ll be provided with financing options, and a budget to work with. By providing your mortgage broker with the documents needed for purchasing a home up front, you’ll save yourself time, be able to shop for a home worry free, and then obtain a mortgage with ease.
If you have any further questions about qualifying for a mortgage, and are self employed, do not hesitate to give us a call at 780-479-2222.