Collecting documents such as letter of employment for mortgage is the most thrilling, satisfying, pleasant, and delightful part of getting a mortgage. Said no one ever, we know. Here’s how to do it easily — and never forget a single paper.
To get approved for a mortgage, you need a whole bunch of documents. Your bank has to see them decide whether they can trust you, or not. You can tell them a hundred times that you’re rich, pinky-promise to pay the whole loan back, bring an army of people who’ll tell them how good you are, but the bank won’t believe a single word unless it’s backed by a document.
Types of Documents for a Mortgage
In short, you have just these:
- Employment documents (including letter of employment for mortgage);
- Proof of Income;
- Personal Finance and Assets;
- Down payment papers;
- References and Referees (usually not required).
Now — you can’t go to your office and tell the boss “Hey Jim, call Nova Scotia, tell them I work here”. Let’s take a look at all the documents you need in better detail.
No, just one letter of employment for a mortgage won’t do the trick. Every website says things like “You need 2 months of pay stubs”, “You need one year of bank statements”, “If you’re self-employed, show business expenses” and so on. Usually, these are not wrong, but it depends on your situation. What are the things your bank will really be interested in?
First of all, you need to know how much money you make now. If you are not yet getting a paycheck at your new job, but have an offer letter, that’s just fine. If you’re not getting any money now, but have previous employment income records at hand, use those.
If you’re self-employed or freelance — well then, this is where it gets tricky. The easiest thing is to ask your previous employer for a copy of your W-2. Or you can ask your accountant, or your lawyer, or any other person who might have the right to see those records. That’s not quite as reliable as a paycheck from a known company, though. If you’re self-employed, this is a riskier choice — but it may still be worth it if you have enough income that makes sense for a mortgage to be approved.
So, to finalize it:
Employment Documents Checklist
- Pay Stubs — as many as you can, for 6 months minimum;
- Letter of Employment for Mortgage — as recent as possible;
- Offer Letter — if you’re not getting money, but have a new job offer;
- Copy of W-2 — if you know it’s good, go ahead and use it as one of the main documents. If you’re worried, contact your previous employer or accountant and ask them whether it is okay to be used as a mortgage document;
- NoA, or Notice of Assessment from the CRA — if you cannot get a paycheck, this is about as close as you can get to have the bank see your actual income level without having you prove it with your tax return;
- Tax forms (namely T1) — if you have them;
If you are self-employed but have enough income to qualify for a mortgage, also provide the following:
- Your business license or registration documents — to prove that it legally exists;
- A letter from your accountant or lawyer — should be stating that you are who you say you are and that your business does indeed exist, and is making money (this can also be issued by a different licensed professional);
- Tax returns — at least of 3, but the longer you’ve been in business — the better it is;
- Business bank account documents — if you’re using a business to get a mortgage, this shows that the bank has money in the account and it may also be used for other purposes later on.
Savings, Assets, and Investment Documents
To get a mortgage with a reasonable interest rate you should prove that you’re not just getting paid — you also don’t gamble all your paychecks away the same week. You can do this by showing bank statements or investment documents. And if you’re self-employed, you can show that you’re actively investing in your business.
There are 3 types of assets:
- Current (including everything that you can pay right now, from cash in your wallet to a bank account and a debit card);
- Long-term (these are mainly investment papers that you can’t cash out right now (including bonds, certain stocks, and so on);
- Fixed assets (this is where your car, your house, your cabin by the lake or a private jet will go).
Luckily, you don’t need a ton of files on every single asset:
Savings, Assets, and Investment Documents Checklist
- Proof of Deposit — aka bank account info. Basically, it should show how much you have and which portion of the loan is “secured”;
- Proof of Investment — for example, investment portfolio, a statement from your broker or investment advisor (yes, cryptocurrencies count as well, just not in every bank);
- Proof of investment in your business — your accountant can do this for you;
- Statement of assets — including all three types from the above. Again — it’s a STATEMENT, you don’t need a separate document for each of your cars (if you have many), you just need to fill the form to prove that you actually own them. Unless, of course, the mortgage underwriter will have questions, then you may need to bring some extra papers.
Documents on Down Payment
If you’re not sure about your “trustworthiness” in the eyes of the bank, based on your income, assets, and employment papers — you can try to get a bigger chance of approval by literally throwing more money at them. They, however, should be 100% sure that this sum is not yet another loan, and that you have all the reasons to have about 20-30% (enough to make them change their mind) of the whole mortgage size on their hands. Here’s what can help you.
Down Payment Documents Checklist
Sale Agreement — whatever it is that you’ve sold to get money for the down payment should be proven by a document. A house, a car, your soul — it doesn’t matter. Ask the devil to give you a stamped document and tell that it’s for the mortgage underwriter — those guys probably know each other;
Gift Letter — no, not the fancy font literal letter from your grandma, saying “Happy Birthday dear, here’s some money for your new home! Love, grandma”. While it’s definitely cute, it’s not a proper gift letter in the eyes of a bank. It’s an official form that you and the person who gives you the gift both should sign;
RRSP HBP withdrawal — meaning that you took the money from your Registered Retirement Savings Plan legally, in line with the Home Buyer Plan. The conditions may vary, so you better check your RRSP rules.
Extra Documents to Help You Get the Mortgage
Sometimes even all of the above can’t start the magic. Here’s what else can help you:
- Extra income sources — of course, if you can prove it, if it’s legal, and if you pay your taxes on it);
- Mortgage Preapproval Documents — we strongly recommend getting a mortgage pre approval, it makes the mortgage underwriter who will look at your papers way, WAY more comfortable and nervous;
- Credit report — to cross out a possibility of a mistake and provide both a reference and proof of your financial literacy (you know that you can get the credit report any time you want, right?).
Final Word on Mortgage Documents
Even though you have all of the documents in front of you, including the letter of employment for a mortgage, it doesn’t mean that you’re ready to apply. Don’t be surprised when the mortgage underwriter will ask you to bring 10 more. It’s not uncommon, and it’s just a weird norm at this point. And most importantly, once you have ALL the documents, check them carefully. Double-check. Triple-check. All things good? Now check again.