Mortgages: What Do I Need for My Mortgage Application?

In today’s day and age, qualifying for a mortgage loan certainly isn’t as simple as it was in the past. Even a short decade ago, borrowers could qualify for an amicable mortgage loan with a simple letter of employment and a sub-par handshake.

Nowadays, it’s safe to say that the times-are-a-changing. While qualifying for a modern-day mortgage loan isn’t exactly rocket science, it does require a fair share of documentation. In the very least, this will be anything from proof of income and a detailed credit report to a statement of assets and liabilities.

Of course, disclosing such personal information and documentation may feel a little intrusive at first. This is especially the case for first-time homebuyers that have not likely had to disclose this information in the past. However, it’s important to consider this loan from the perspective of the lender. Remember, these lenders don’t you know personally. As a result, they’re looking for all of the proof possible that you’re capable of repaying such a large-scale loan in full and on time.

At the end of the day, anyone providing a loan is generally looking for a borrower that possesses the lowest perceivable risk possible. In order to minimize your perceivable risk, you want to put forward the most mortgage documentation possible. So, do yourself a favour and gather each of the following documents in preparation for your meeting:

  • Tax returns
  • Employment letters with salary and length of employment
  • Pay stubs
  • Proof of income
  • Credit report
  • Renting history –this is especially important if you’re lacking credit history
  • Bank statements
  • Statement of assets
  • Statement of liabilities
  • Confirmation of your downpayment funds (proof of savings or investments, a gift letter, a withdrawal from RRSP, proof of sale of existing property, etc.)
  • Photo identification

Of course, every situation is unique and some borrowers might be required to supply more specific mortgage documentation than others. This is especially the case for those that are self-employed or those that were born outside of the country in which they’re looking to purchase. As a general rule, it’s always best to provide as much financial documentation as possible. The more relatable documentation that you provide, the more confident your lender will be in qualifying you for a favourable mortgage.

So, what happens once you submit all of your mortgage documentation?

 From here, your mortgage lender will assess the documentation and run some numbers. Once this process is complete, they’ll be able to provide you with a general idea as to how much they are willing to lend you. They’ll also note what type of interest rate that you qualify for as a borrower. In most circumstances, your level of risk is directly related to the type of interest rate that you will be offered.

For example, let’s say that your lender determines that your level of risk is relatively high. This could be the result of anything from a large-scale debt load to a not-so-ideal credit score. While they may still be willing to qualify you for a mortgage, this mortgage may be subject to a higher interest rate. This higher interest rate is what allows this perceivable risk to still be worth it for the lender.

By the end of your meeting with the lender, you will have a general idea as to how much you can borrow and at what interest rate. In many cases, this interest rate will be held for a period of sixty days.

Once you have this information, you’re now equipped to begin looking at properties that fit within this budget. It’s officially time to begin your house search!