March 2016 Newsletter
March 8 2016 Posted by
Be prepared with your income verification
One of the most critical components of a successful mortgage approval is verifying your income. Being prepared up front will make the entire process easier and less stressful. Here is a summary of the different types of income and what is acceptable as verification to lenders.
Full-time salary: Provide a recent paystub and letter on company letterhead of employment signed by an authorized officer confirming position, annual salary and length in position. If you are new to your position, the letter must state that you are no longer on probation. Lenders will follow up and confirm these details. Commissions and bonuses can be supported by averaging your last two notices of tax assessments.
Commission, contract, part-time, seasonal employment: Company letter and paystub are required. Income must be consistent and can be proven with a 2 year average of tax assessments or T4s. If the position is contract, a copy of the contract and any renewals is required.
Self-employed: Two years of tax assessments, a business license/registration or articles of incorporation and the last 2 years T1 general tax returns or 2 years of accountant prepared financial statements if incorporated. Since the amount of income is purposely kept low, some expenses on the statement of business activities can be added back. If income is difficult to prove then be sure to have a strong credit history and downpayment.
Child support: A copy of the separation/divorce agreement and three to six months bank statements are typically required. This income should be less than 30 per cent of total income.
Disability: A letter confirming permanent status along with a paystub.
Maternity leave: Some lenders use full employment income if the employment letter confirms a return date within one year.
Pension/RRIF/Investment income: Most recent tax assessment, T4A’s for pension income. There must be sufficient funds in the investment to support the income being withdrawn.
Being fully prepared to verify your income will make a considerable difference to your stress level and mortgage success. If you have any questions, ask!
$750 tax incentive for first-time buyers. When you buy your first home, you may be able to take advantage of the Home Buyers Tax Credit (HBTC) when you file your tax return.