I frequently take calls from clients confused why the bank is asking for so much paperwork. You have to realize, they are lending you like hundreds of thousands of dollars, and have to do their due diligence to make sure you qualify, and that nothing is amiss. There is a LOT of fraud out there, so expect a lot of questions. That said, it’s pretty standard from bank to bank, and this video explains what you’ll need.
Transcript of Video Blog:
Hi, everybody — Rowan Smith at The Mortgage Center. Not a day goes by that somebody doesn’t say to me, when I give them my list of paperwork requirements, “Why is it so much?”
Well, you’re borrowing a lot of money. You can expect the bank is going to ask pretty much the same questions at every institution. Here is a list of paperwork you’re going to need for your first home purchase, or any home purchase. You may want to jot these down.
First, you’re going to need something to confirm your income. Now, this can take varying degrees and varying forms. It’s a little tricky, but basically, if you earn an hourly rate and you work full-time hours, we’re going to need a job letter that specifies that and tells what your job title is.
If you earn varying amounts of money — because maybe there’s overtime, bonuses, incentives, profit sharing, something like that — if you need that money to qualify, then we’re going to need to document it somehow. We have to show a track record of that extra money.
Generally, two years is what they’re going to be looking for. If you’ve only been on the job for six months and even though it looks like you’re going to make a lot more, they’re just going to use your base. They’re not going to use that higher figure.
For income, you’re going to want to get the last two years’ T4s, or notices of assessment, and a recent pay stub. It’s generally a good idea to get your two most recent pay stubs, because sometimes we can make that fly with certain lenders.
If you’re self-employed, we need proof that you’re self-employed, for at least two years. If you haven’t been self-employed for two years, that’s fine; but we have to show you’ve been in the industry for two years.
You have to have at least been doing something for the two years. It gives them something to fall back on, to let you know you’ve been in this business — whether you’ve been an employee or self-employed — for at least a two-year period of time. That’s the breakpoint for self-employed people.
You can expect us asking for things like articles of incorporation, or the last two years of T1 generals that show you filing as a self-employed person, assuming an accountant has prepared those documents. Or a business license, a GST return — something to just show us that fact.
That’s for income. If you’re buying a home, you’re going to need the contract, and if it’s in DC, the property condition disclosure statement. That answers all of the questions, such as, “Was it a former grow-up? Was it a meth lab? Is it connected to sanitary and sewer?” and all that other stuff.
You’re going to need the multiple listing servicing, the MLS deal sheet. That outlines all the specifics of the property — the square footage, heating, taxes, etc., maintenance fees, if applicable.
For down payment, you can be expected to be asked for about 90 days of bank statements showing that money. Now, if it just shows up in your account a month ago or a week ago, you have to show us where it came from.
If it came from the sales of another home, that’s fine. We just need to show that sale document and that contract. That shows that you actually did sell a home, and that’s how you got the funds.
So you’re looking at down payment, income, and property.
The property is also appraisal. The appraisal is required 100 percent of the time; however, sometimes we do it behind the scenes, electronically. You don’t ever see it. That’s a little bit complicated and it’s more of a topic for one of my prior blogs, where I covered off when appraisals are required.
There you are: Income, down payment, and property. If you can satisfy those things, or at least get those documents in motion before writing your offer, it will make the subject removal period — that period where you get to firm up your financing — much easier.
For the Mortgage Center, I’m Rowan Smith.