BY SCOTT BOURKE
To some the word ‘mortgage’ is intimidating. Mortgages are not difficult to get and in many cases today can be cheaper than paying rent. There are many different programs out there to help you get into a mortgage whether you have the down payment saved, gifted or are borrowing.
Whenever you apply for a mortgage, the lender is going to have some conditions that need to be fulfilled before they will fund the money. Some of the standard things that you will need on a purchase no matter what the circumstance are:
Void cheque or automated withdrawal slip – this will give the banking information to the lender to make automatic payment from your account that is set up. No matter where you get your mortgage you do not have to change any of your day-to-day banking.
Name of a lawyer- every purchase that you do will have to be finalized through a lawyer. There are lawyers that do real estate transactions or most family law lawyers will do these as well. If you are unaware of a lawyer to use, ask your real estate agent or mortgage broker for a referral.
Down payment – if you are using money that you have saved over time, the lender will look for a three month history of your savings. This can be copies of bank statements, RRSP statements or investment statements. If the statements are printed off the web, they do need to have your name on the sheets or an account number that matches the void cheque as the account has to be confirmed to be yours. If you are receiving a gift from a family member you must have a gift letter signed by both the person giving the gift and yourself. The bank will ask for proof of deposit into your account. Some banks ask for the person giving the gift to prove the money had come from their own savings or investments.
Offer to purchase- if you are using a real estate agent, the realtor will go over your offer to purchase with you. The lenders would require a copy of the offer to purchase and the MLS listing for the property. If you are looking at purchasing a ‘for sale by owner’ home. Have your lawyer look over the offer before you sign anything. If you are building a home, the lender would like to see a copy of the floor plan and the specs for the home with their offer.
If you are using the sale proceeds from selling a home and purchasing another the lender would like to see:
Offer to purchase on sale with waivers – the bank will look at the purchase price on the offer to purchase if there is an unconditional sale of the home.
Mortgage statement – the lender will take the sale price from the sale of your home and compare it to the mortgage statement to confirm the down payment on the new home. If your home is clear title they will ask for a copy of your land title to confirm this.
If you are on an hourly wage or in a salary position the lenders would look for:
Income letter and pay stub – on the income letter they are looking for it to state how long you have worked for them and the position that you hold. If you are working hourly, how many hours you are guaranteed. If you are on a salary, what is your monthly or annual salary? If you have worked for them less than one year, they will look for confirmation that there is no probation. This needs to be dated within 30 days from the application date and must be on the company’s letterhead with a name, contact number and signature from management. The pay stub is used to confirm what is stated on the letter and also must be from within the 30-day period.
If you are self-employed the lenders do like to see a little more paperwork. What the lenders would be looking for is:
Personal T1 generals – for the last two years. These are forms that are sent into the government for review of your taxes.
Personal notice of assessments – for the last two years. These are the blue sheets that the government mails back to you when you file your personal taxes.
Business financial statements – for the last two years. These are the sheets that are given to you from your accountant that shows the assets, liabilities and income that your company has made.
Sometimes in rare circumstances they may ask for stuff like:
Slow credit explanation – if in the past there was some missed payment on some items on your credit bureau, the bank just asks for you to write down an explanation to them for the reasoning behind the late payments.
Confirmation of debts paid – sometimes to qualify the bank will ask that a credit card or loan is paid out. The bank will ask for a statement from the company or a bank statement showing this has been paid. They may ask for proof of where the funds came from to pay this off, just to make sure it did not come from money that was supposed to be the down payment.
Divorce/separation agreement – if this has been the case in the past, lenders want to see that there is no child or spousal support payments. If the payments are required then they must follow into the qualifying guidelines. They also are making sure the former spouse does not have the dower rights to the property.
Those are your basic papers and information that your lender will be looking for to complete the purchase of your new home. Buying a home should be one of the most exciting times in your life so being prepared can remove a lot of the stress of buying a home.
Scott Bourke is an accredited mortgage professional with Dominion Lending Centres Regional Mortgage Group.