Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process. Information is subject to change without notice.
For conventional mortgages, a minimum 2 year history of self-employed earnings is required. Income must be verified by financial statements that were prepared by a professional, accredited accountant. T1 Generals and NOA’s should be used to verify the income on the financial statements.
For conventional mortgages, commission income is verified regardless of the LTV. An average of 2 years income is used to qualify. The following documents should be obtained to support your client’s income:
Small Businesses / Partnerships
Smaller businesses, one person or sole proprietorship operations, may not have complete or accountant prepared financial statements. In these cases, 2 years NOA along with T1 Generals including all schedules should be used to confirm income.
Insured Mortgages Requirements for Self Employed and Commission Income
For insured mortgages, the following requirements apply for both self-employed and commission income:
A minimum of 2 years history of self-employment can be documented through the following:
The actual income used for self-employed borrowers is calculated by either:
a) Obtaining the borrower’s last 2 years NOA’s and calculating the 2 year average from the amount shown on Line 150 and gross up the result by 15%
b) Taking the 2 year average of the amount the calculation above and adding to this amount, the 2 year average of the following items as shown on the most current audited or accountant-prepared financial statements or the T1 General, Statement of Business Activities (T2124) or Statement of Professional Activities (T2032):
Typically, 100% of the client’s salary is used as income with the following documents available to support this income:
For salaried borrowers where additional sources of income (above their employment salary) are used for the debt service assessment, the following requirements apply:
Overtime may be used to qualify the borrower provided there is a proven track record and the opportunity for continued overtime exists for the future. At least a 2 year track record should be used for conventional deals to provide a comfort level that additional income is likely to continue from this source.
For CMHC high-ratio mortgages where the overtime income is needed to qualify the loan. If confirmed, 100% of the 2 year average from this source may be considered toward servicing the mortgage.
A car allowance may be considered as income if it is a “perk” of the job and a car is not needed to perform the job. Where a borrower must use a car to perform their job function, the car allowance cannot be used for mortgage servicing because it would then be a reimbursement of employment expenses rather than additional income.
Bonus income may be used to qualify the borrower provided there is a proven track record and the opportunity for continued bonus income exists in the future. 100% of bonus income may be used toward servicing the mortgage if there is a 2 year track record at the same or increasing levels for conventional loans. 2 year history is required for insured financing.
For applicants paid on an hourly basis, a recent pay stub, job letter and last year's NOA are the preferred documents to confirm your client’s income.
The job letter must contain the following;
Furthermore, the letter should be on company letterhead and signed by a person in authority. It also must have been issued within the previous 30 days.
For Conventional and CMHC insured loans, if employment is seasonal (e.g., construction, fishing, farming, etc.), only earned income can be used as confirmed by tax returns for the past 2 years.
Employment Insurance (EI) payments are included only if they represent a typical cyclical income pattern that is likely to continue in the future.
Second or Part-time Job
If the borrower has two part-time jobs 100% of the income may be used provided the two part-time jobs reasonably equates to one full-time job. For example does it make sense for the type of employment (for example physiotherapy, fitness instructor, etc.)
If the borrower has a full-time job and also has a part-time job, the additional income can be included in debt service calculations if it has been consistent for at least 2 years and it is expected to continue. In this case, 100% of the income may be used.
If permanent part-time employment is the borrower(s) primary employment, income can be used based on guaranteed hours. Where the applicant has had the job for 2 years or more, a 2 year average can be used.
Employment by a relative
If the applicant is employed by a relative, the employment letter should be backed up with current pay stubs showing year-to-date earnings and a current year NOA.
If an employment letter is handwritten for whatever reason, it should be backed up with current pay stubs showing year-to-date earnings and with a current year NOA.
Tables on diskette / Hand Written Pay Stubs
If your applicants pay stub is tables on diskette or hand written additional documentation is required via 3 months bank statements with corresponding pay stubs to validate deposits and/or a current years NOA.
Tips should not be used unless you can obtain a 2 year track record at the same or increasing levels.
100% of income (claimed on income tax returns) from this source may be considered towards servicing the mortgage.
Rental income must be verified by a signed lease agreement. The appraisal report must indicate market rent and actual rent if the property is tenanted. The lesser of market rent or verified rental income must be used. Please note that T1 Generals and/or Bank Statements might be requested as an additional form of confirmation in addition to the lease agreements.
If the property is not yet rented, the appraisal report including the “schedule A”, indicating market rents for the subject property, is acceptable.
Alimony / Support Payments
Alimony and / or support payments can be used as qualifying income provided satisfactory proof has been obtained to confirm the payments have been made regularly for at least three years. A copy of the divorce or separation agreement outlining the terms of the support payment is required with confirmation the income will remain regular for at least five years into the future
Child and Spousal Support Payments
On May 1, 1997, new guidelines became law and replaced the previous case-by-case method of determining child support, with a process that provides consistent, predictable and equitable awards. These new guidelines reflect the fact that child support payments payable under a court order or written agreement made on or after May 1, 1997, will neither be deductible from income by the payer, nor included in the income of the recipient.
Where a combination of child and spousal support payments are being made under a court order or written agreement made on or after May 1, 1997, the payments are considered to have been made first for child support and then for spousal support. Therefore, the spousal support payments will not be deductible to the payer nor included in the income of the recipient until the full child support payment that is subject to the new guidelines has been paid.
If spousal support payments are being made by the borrower, the amount should be deducted from gross income before the calculation of GDS/TDS.
Universal Child Care Benefit
Universal Child Care Benefit (UCCB) income may be used as a source of income for borrower’s qualification purposes for insured mortgages. However, considering this income is only available until the age of six, the underwriter and originator must use good judgment when using this source of income to assess serviceability. Income must be verified through one of the following:
Child Assistance/Child Tax Benefit Income
If the applicant's child is 12 or younger, the child assistance/child tax benefit income can be used for qualification purposes. The payment amount and the duration of the payment by obtaining the Canada Child Tax Benefit Annual notice and one of the following documents:
Foster Care Income - Conventional Mortgages: Foster care income (no maximum number of children) can be used provided the following guidelines are followed:
Foster Care Income - Insured Mortgages – CMHC: Foster care income (no maximum number of children) can be used provided the following guidelines are followed:
For Conventional and CMHC loans where the applicant is on parental leave and intends to return to work upon completion of their leave, 100% of their salaried income can be used provided the following is met;
Income must be validated by way of a T1 General Tax Return, supported by an NOA and/or bank statements showing the regular deposits.
If the borrower is receiving disability insurance income and the income is permanent the benefits may be utilized in accordance with the borrower’s disability insurance coverage.
Depending on the policy, the benefit may or may not be taxable (if non-taxable the income may be grossed up please reference the below gross up factors). A letter from the organization / insurance company outlining the benefits must be obtained with the corresponding deposits.
Customers who earn non-taxable income (e.g., Worker's Compensation benefits, disability income) may be eligible to have that income grossed-up when calculating debt service ratios. This means that the value of the non-taxable income can be increased to qualify the borrower for the mortgage.
Required documents to verify the income is non-taxable by obtaining two of the following:
Also confirm the non-taxable income is likely to continue for the foreseeable future. For disability income, confirm that it is long-term, provided by either a private insurer or government.
Gross up factors for Conventional Mortgages
Qualifying Income Range
Gross up Factor
Less than $15,000
$50,001 and greater
Gross-up factors for Insured Mortgages
Qualifying Income Range
Gross up Factor
Less than $30,000
$30,000 and greater
The applicant(s) must be able to provide the minimum down payment from their own resources without borrowing. See product/program specific guidelines as they may differ from the aforementioned policy.
The above information is subject to change without notice:
Gift From Relative or Employer:
Net Proceeds from the Sale of Property:
For some insured mortgage products and programs, the client must also provide evidence of cash for closing costs equal to 1.5% of the purchase price. Closing costs may be borrowed provided the payments are included in debt service ratios and based on a maximum amortization of 12 months. See product/program specific guidelines as they may differ from the aforementioned.
The above information is subject to change without notice.
Guarantors are accepted for income qualification purposes provided the Guarantor is also on title. If the guarantor occupies the property, the income will be considered for qualification purposes provided the guarantor is a direct family member. If the guarantor does not reside in the property, lenders will consider income for GDS/TDS calculation provided the guarantor is a direct family member and resides in the region where the property is located. Maximum LTV ratio is 95% in cases where the resident applicant's GDS/TDS <=40%/50%. Maximum LTV ratio is 90% in cases where the resident applicant's GDS/TDS>40%/50% and guarantor income and debts brings the GDS/TDS to 32%/40%.
Notwithstanding how title is taken (Joint Tenants vs. Tenants in Common lenders require all parties on title to be on the mortgage, and jointly and severally liable for the payment of the entire mortgage debt and the performance of all related obligations.
Canadian mortgage lenders require title insurance on all mortgages and this is a part of their instructions to the solicitor/closing service.
Maximum GDS/TDS Ratios:
(Based on the higher of the customer contract rate and the 3 year fixed rate).
***Individual Programs may have specific GDS/TDS requirements. Refer to the program details for more information***
The above information is subject to change without notice.