Fulfill your mortgage conditions as soon as possible
Everyone in the mortgage industry is acutely aware how things have changed in recent years. No lender wants to fall into the same abyss as US lenders did in 2008-2009. Similarly, no underwriter wants to approve a mortgage only to find the clients in default down the road.
The result is even innocuous conditions can be exasperating to fulfill these days. If you are planning on a refinance, it’s best to budget at least a month these days; it used to be as little as two weeks. In fact, sometimes we could close in under a week in a pinch.
[notice]And if you are buying a new home, and your conditions are not all satisfied completely by two weeks before the closing date, some lenders may not even close on the day you need![/notice]
For example, pretty much every mortgage granted requires the borrowers to verify their income and employment. It used to be a job letter and a recent paystub did the trick. But lenders are wary and are looking to ensure no false or inflated information is on your application. They are also big on income and employment continuity.
To confirm salaried or hourly income and employment these days, you may be required to produce:
- A recent paystub
- Print out of your bank account activity for the past three months, demonstrating regular payroll deposits
- Past two years Notice of Assessment from Revenue Canada, or maybe “just” the past two years T4’s from your employer. This information confirms employment longevity
- A letter from your employer, on letterhead, stating your position, start date, full time or part time status, and compensation
If you are self-employed, you may be asked for:
- Past two years personal tax returns (T1 General)
- Past two years personal Notices of Assessment from Revenue Canada (CRA)
- A recent HST return
- Corporate financial statements, tax returns, and NOA’s for two years, if applicable
- Business bank account statements, anywhere from three to twelve months activity
- Proof you are self-employed – a Master Business License or Articles of Incorporation are typically what is needed
[notice]And all of that is just to satisfy only one condition – your income and employment confirmation.[/notice]
Other common mortgage conditions are:
- If you have an existing mortgage or have co-signed for someone else, you will have to prove current balances and provide the mortgage/property details
- Property tax account status – if this is a refinance, your property taxes must be up to date.
- You may have to prove you do not owe any money to Revenue Canada (CRA)
- Most mortgages require a full appraisal
- Unless you are financing a condo, you will have to prove the property is properly insured
- Proof of your down-payment – when buying a home, you have to show where your down payment and closing costs came from – at least three months of account history is required
- Proof you have paid off certain credit balances or unpaid collections
- Condo status certificate, if applicable
The point is you cannot relax just because you heard the magic words “You are approved!” You and your mortgage agent have to keep focused to ensure all your mortgage conditions are met well in advance of your closing date. It can be quite frustrating, as lenders sometimes like to spring new conditions on us – so be prepared!