Mortgage Loan Document Checklist – Documents you will need when you apply for a mortgage

Mortgage Loan Document Checklist – Documents you will need when you apply for a mortgage

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When you apply for a mortgage to purchase a home, lenders will require you to provide extensive documentation to verify your employment, income, assets, money you owe, and other personal information including your credit report.

Compiling all those documents may seem daunting to many home mortgage seekers, but it does not have to be that way. With some preparation and knowing what to expect, you will be ready to take on this task with ease.

To ensure that you have the best chances of getting your mortgage loan approved on your terms, we have prepared a checklist of the documents a lender may request when assessing your mortgage application.

  • T4s or W2’s from current and past employers
  • Pay stubs
  • Bank Statements (last 90 days)
  • Last 2 years tax returns
  • Gift letter (if using gift funds)
  • List of your debts
  • List of all your assets
  • Proof of timely rental payments
  • Credit Report
  • Profit and loss statements
  • Signed sales agreement
  • Proof of additional income

Download our easy to use mortgage checklist and be on your way to move into your dream home.

Mortgage Loan Documents Checklist

When you apply for a mortgage loan the lender will require you to submit a set of documents before you can be approved for a mortgage loan.
I have grouped those documents in three main areas, your Income, your net worth (savings & debts), and the property.
This mortgage document checklist will help you get prepared with the correct documents so that your mortgage application goes smoothly.

Your Income

Salaried or Hourly Employees

  • Letter of Employment
  • Copies of last two pay stubs
  • T4 or W2s (annual income statement)
  • 4 Bonuses & Overtime (two years)
  • Rental Income (lease agreement)
  • Other sources of income
  • Consent to review your credit report

Self Employed

  • A two-year history of earnings
  • Tax returns for the last two years
  • Tax notice assessments (CRA or IRS)
  • Letter of Employment
  • Bank statements (last three months)
  • Other sources of income
  • Consent to review your credit report
Your Savings and Debts
  • Gift letter (if applicable)
  • Savings or Investment statements (90 days)
  • Liquid assets (bonds, securities, other liquid investments)
  • Agreement of sale of existing property (if applicable)
  • Proof of funds to pay down payment and closing
The property
  • Copy of purchase agreement
  • Copy of real estate listing
  • Property tax estimates, condo fees
  • Verification of deposit placed on the home

Other information

  • Void cheque
  • Photo ID (two pieces)
  • Your lawyer (contact information)
Mortgage Document Checklist

Why do lenders require all that information?

In short, lenders want verifiable evidence that proves that what you disclosed on the mortgage application is accurate.

The main areas evaluated are:

  1. Who you are (Your Identity & personal information)
  2. How much you earn (Your Income)
  3. Proof down payment (Your savings)
  4. Your net worth (What you own minus what you owe)
  5. The property (this is the property you are buying)

1. Who you are – Proof of your identity & Personal information

You will need to provide at least two pieces of government photo ID, places you have lived in for the last three years, employment history, and approval to access your credit report.

When it comes to proving your address and ID, the information you provide must be current.

  • Passport – must be current and not expired
  • Driving License – must have your current address
  • Property tax statement – latest one available
  • Utility Bills – usually dated within the last 3 months
  • Bank statements – physical statements are required if you use these as proof of address
  • Credit report – lenders will pull your credit report upon your verbal or written permission.

2. How much you earn – Your Income

The documents needed to prove your income will depend on your specific situation, and which lender you decide to apply with; however, the most common documents required are:

  • Employment letter from your pace of employment
  • Last two pay stubs (this will confirm the information from your employment letter)
  • T4, W2 – this is the document you get at the end of the year to do your taxes.
  • Bank statements for the last three months (account showing your income going in)

Are you permanently employed?

The lender wants to see at least two years of consistent full-time employment history.

Try not to change jobs in the months leading to your mortgage application; the reason is if you are within your probation period, the lender might view that as an issue. But if you must change jobs, make sure you are not changing careers and that your new job is consistent with your employment history.

Are you on a fixed-term contract?

If you are on a fixed contract, the lender will want to take a careful look at your employability and your credit history to form an opinion of your character, and the lender might request further information such as income tax returns for the last two years.

Are you self-employed?

Self-employed individuals will need to provide income tax returns for the last two years, and notice of assessments, as well as financial statements, if applicable.

Do you have other income sources?

If you have declared additional income on your mortgage application, you will need to provide evidence of this such as the following.

  • Rental income. This can be either current rental income or rental income you will have as from an investment property you are buying. In most cases, the lender will want to see a rental agreement signed by your tenant, and the lender may want to confirm the rental invoice going through your bank statements.
  • Tax credits

3. Proof of funds to pay the down payment

Because of money laundering policy requirements, the lender will need to know where the money for your deposit is coming from; so you will need to provide copies of bank statements or saving accounts that show you have the money, and the source of it.

The source of your down payment may come from the following:

  • Your savings
  • Gifted deposit from a family member (you’ll need a letter from the person providing the gift to say the money is a gift and not a loan).
  • If the down payment will come from the sale of your existing property, be sure to point that out to the lender since they might require you to first sale your property before approving a loan on a second property.

4. Your net worth (what you own minus what you owe)

To get a better picture of your financial situations, lenders will want to know everything you own, as well as everything you owe. This will help the lender understand how much of your current income goes against paying your existing debts, and how much money you will have available to pay your future mortgage.

net-worth

5. The property (this is the property you will be buying)

If you are applying for mortgage pre-approval you don’t need the property information since you haven’t bought the house.

For a final mortgage approval, you will need to supply information about the property.

Why?

The lender is like your partner on this transaction; essentially, they need to know what they are buying. So, relating to the property, the documents you will need to submit to the lender are:

  • The purchase and sale agreement
  • The listing agreement
  • The receipt of the deposit (if applicable)
  • Home Insurance

Bottom Line

Applying for a mortgage can become a long and complicated process if you are not prepared.

Typically you are not asked to provide any documentation until after you have submitted your application; however, having all the supporting documents ready ahead of time will be your secret sauce to a much better experience.

Also, reviewing these documents ahead of time gives you the time to address issues you may encounter such as errors on your credit report, or missing documentation.  This helps you avoid unnecessary delays.

Now that you know what to expect, we recommend to have the documents ready before you submit your mortgage application; this will result in a lot less stressful application and approval process and you will be on your way to achieve a successful home-ownership.

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