Required Mortgage Documents in Canada
What you Should Know
- There are five categories of documents you need when applying for a mortgage in Canada.
- Initially, you will need to prove your identification and source of income.
- Next, you will need to provide financial information such as your credit score, net worth, and banking statements.
- The fourth category is demonstrating your down payment source. It could be your savings, sale of your prior home, RRSP account, or a gift.
- Finally, you must provide details of the property you are buying.
Required Mortgage Documents in Canada
Buying a new property or refinancing your mortgage in Canada in Canada requires overwhelming information. Sorting your mortgage before hiring a real estate agent, will ensure that you don’t waste each other's time. To get a mortgage, you will typically need five types of documents:
- Identification - Government-Issued ID etc.
- Proof of income - Pay Stubs, Tax Forms, etc.
- Basic financial information - Bank Statements, Proof of Investments, etc.
- Down payment confirmation - Sale Agreement of Existing Property, Documents Related to Savings and Investments, etc.
- Property details - Purchase and Sale Agreement, MLS Listing, etc.
If someone cosign your mortgage, they must also provide their identification and financial information. This article will simplify the process by helping you understand the documents that can be included in each category. You can also use the document checklist at the end of this article to help you in the process.
Category One: Identification verification
Before you can begin applying for a mortgage, your lender would want to verify your identity. Quite simply, you'll need to show:
- A government-issued ID (with current address)
- Your SIN number
Category Two: Proof of income
This category of documents provides proof of your monthly income and ability to meet debt servicing ratios to the mortgage lenders. In particular, lenders will calculate your monthly mortgage payments to ensure your monthly housing costs don't exceed 39% of your gross monthly income. Additionally, your income has a direct effect on your maximum mortgage affordability.
Recent pay stubs
Your recent paystubs will verify your income. Mortgage lenders may ask for the most recent two-three pay stubs, so make sure you have them handy.
T1 general tax form
This form demonstrates how much income you earned the previous tax year. In general, lenders will only require your T1 from the prior year.
Notice of assessment (NOA)
An NOA summarizes a successful submission of your tax returns to the Canada Revenue Agency. Lenders will use it to determine your debt-to-income ratios. You will need your NOAs from the two most recent tax years.
T4 or T4A tax forms
Your T4 tax form shows how much income you received as an employee. Your T4A tax form will list any income, such as pensions, severance pay, and investment income. Self-employed individuals receive a T4A, whereas employees receive a T4. You receive these forms each year from your employer.
Letter of employment
This letter provides lenders with a sense of your job stability. Make sure the letter includes:
- How long you have worked for the current company
- Employment status (permanent, temporary, or probationary employee)
- Whether you are full-time, part-time, or seasonal
- Hourly or annual salary rate
- Guaranteed hours (for part-time or hourly employees)
- Current role and title
Additionally, make sure the letter is on a company letterhead, signed by HR or a manager, and no older than 30 days. You can learn more on our guide to getting a letter of employment for a mortgage.
Additional income considerations
- Self-employed: Business owners and contract workers are considered riskier to lenders. This is because they have less income stability than full-time employees. To make up for this, self-employed individuals applying for a mortgage will need to submit income documents for a more extended period - usually from the past three years. Additionally, they may be required to show articles of incorporation or a business license.
- Rental properties: Canada's real estate investors may be eligible to include rental income in their mortgage applications. For example, this allows those using the BRRRR method to use their rental income to qualify for a mortgage. However, if pursuing this route, make sure to have rent or lease agreements handy.
Don’t forget about closing costs
The most common mistake of homebuyers is not budgeting for closing costs. These are one-time fees that must be paid when finalizing your purchase. In general, these cost around 3%-4% of the final purchase price. However, you can use a closing cost calculator to get a better estimate.
Category Three: Basic financial information
This category is designed to provide lenders with a snapshot of your overall financial situation. In particular, they will want to know your credit score and credit history.
Credit score
Your credit score is a three-digit number that lenders use to measure your creditworthiness. To receive a mortgage, you'll need a minimum credit score of 680 for banks. There are many ways to check your credit score for free.
Mortgage pre-approval letter
A mortgage pre-approval letter demonstrates that you have enough income and credit to meet the lending criteria.
Bank statements
Your bank statements will show your net worth and help determine your total liabilities or debts. Mortgage lenders may ask for three full years of statements. If not, the most recent one-two months should be enough.
List of assets and investments
Your list of assets will show the value of your investments and property. This may include cars, boats, real estate, RRSPs, and stocks. Lenders will use this to calculate your net worth.
Category Four: Down payment confirmation
This category is pretty straightforward - lenders want to make sure you have the funds to cover your down payment. There are multiple methods to prove your source of funds, whether through your investments, the sale of your previous home, or a gift. You do not need all of the documents listed below, just enough to prove you can afford the down payment. It also helps to understand if you will have an insured or uninsured mortgage.
Insured vs. uninsured mortgage
An insured mortgage has a down payment of less than 20% of the property value. An uninsured or conventional mortgage has a down payment of 20% or more of the value. You can use a loan-to-value calculator to understand the type of mortgage you will need.
Statement of savings or investments
This document proves that the funds you use for your down payment are liquid (meaning they can be easily accessed). The statement must be less than 90 days old and list the account holder, account number, type of account, and current balance. If you are selling stocks in a taxable account, keep in mind the capital gains tax you will need to pay at the end of the tax year.
Sale agreement of existing property
Existing homeowners can use the proceeds from selling their previous house as the downpayment for their next house. If you are using the sale of your last home for this, then you will need to include a copy of the offer.
However, if you can’t sell your home fast enough, then don't worry - you can use a HELOC or a bridge loan to finance your down payment. Just be aware of how these loans affect your debt servicing ratios, as mentioned in category one.
RRSP withdrawals (first-time buyers)
First-time homebuyers in Canada can withdraw up to $60,000 from their RRSPs for a down payment. This is known as the RRSP Home Buyers' Plan, which allows qualified individuals to receive the money without paying taxes. However, the funds must be repaid into your account within 15 years.
Gift letter (gifting down payment)
A gift letter proves that you will receive funds for your down payment from an outside source, such as friends and family. The letter should include:
- Name of giver
- Amount gifted
- A statement that the funds are a gift and not a loan
Down payment assistance programs (DPAPs)
Given the rising housing market prices in Canada, it's tough for many to afford a down payment. This is why the federal, provincial, and municipal governments across Canada have created down payment assistance programs to help you buy a home.
There are also many incentives for first-time homebuyers, such as tax rebates.
Category Five: Property details
The final category is straightforward - lenders want to see details of the property you are buying. Additionally, if you are selling another home, they ask for information on it too.
Final purchase and sale agreement
This is the signed contract between you and the seller. Lenders want to see this because it provides details such as the date of purchase and final purchase price.
MLS Listing
The listing is helpful to mortgage lenders because it provides them with an estimation of your property taxes, utility costs, and condo fees (if buying a condominium). These are all inputs required to calculate your gross debt service ratio.
Additional ways to save time
Follow the tips below to expedite your mortgage application.
- Triple check all documents: It's not uncommon to make mistakes when completing paperwork. Carefully review everything to make sure it's filled out accurately.
- Have your mortgage lender review: You could be missing something even with multiple reviews. Have a fresh set of eyes to ensure everything is completed correctly to minimize mistakes. If you are using a mortgage broker, they may suggest changes that improve your chances of receiving a mortgage.
- Complete all paperwork: Having a mortgage application held up because you forgot to complete a section is no fun. Make sure everything is completed in full.
- Organize your files: Many files are required to receive a mortgage. Keep a folder to store your documents in.
Legal description of the home
A legal description is a complete legal description of the property that states the full address and postal code. This information can be found on your final purchase and sale agreement and on documents such as tax assessments, title certificates, etc.
Homeowners insurance policy
Most mortgage lenders in Canada will require you to have homeowners insurance. This will protect your home from repair costs due to water damage, fire, and more. You will need to provide a copy of the policy to your lender. If you are buying a condo then you will need to prove you have condo insurance. If you need home insurance, the best way is to apply for quotes online. This will give you a feel for pricing, and understand which policies you need. You can visit our page for a full list of insurance providers in Canada.
Lenders' title insurance
Finally, lenders require you to obtain title insurance in Canada. This will protect your lender if someone else has a claim on your property.
Additional property details (if selling a home)
Those selling their existing home to buy a new one will need to submit a few additional documents to their mortgage lender. In particular, you will need to submit a recent mortgage statement and a legal description of the home you are selling.
The bottom line
Many documents are required if you're trying to get approved for a mortgage in Canada. Mortgage lenders want proof of your identification, income and basic financial information. They also need confirmation on the down payment source. You'll also be asked to provide property details about the house, including legal descriptions and insurance policies. If you already have a mortgage, you can save time when buying a new home by porting your existing mortgage.
Mortgage Document Checklist
Category One: Identification
Government-issued ID (with current address)
SIN number
Category Two: Proof of income
Most two-three recent pay stubs
T1 general tax form from the prior year
Notice of assessment from the last two years
T4 tax form
Letter of employment from the previous 30 days
Additional Considerations
- Self-employed
T4A tax form
All files from above but for a more extended duration
- Real estate investor
Lease/ rental agreement from tenants
Category Three: Basic financial information
Credit score above 600
Mortgage pre-approval letter
Bank statements from the most recent one-two months
List of assets and investments
Category Four: Down payment confirmation (Only need your source of funds)
Statement of savings or investments no older than 90 days
Sale agreement of existing property
RRSP withdrawals (first-time buyers)
Gift letter (gifting down payment)
Category Five: Property details
Final purchase and sale agreement
MLS Listing
The legal description of the home you are buying
Homeowners insurance policy
Lenders' title insurance
Additional Considerations (if also selling a home)
Recent mortgage statement
The legal description of the home you are selling
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Disclaimer:
- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
- Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.