Things to consider before you apply for a mortgage.
1) do I have at least 5% of the purchase price of my new home? Can I make it 10% and save significant CMHC premiums?
2) Do I have a 90 day history of the funds in one account? If I moved funds around, can I show a clear path to the lender? To do this you need bank statements or RRSP statements that show the name of the bank, the account number, your name and the dates of the transactions. Often we pull a 90 day bank statement from the internet. That is fine, as long as you can prove that account belongs to you, with a statement tying it all together.
3) If the down payment is a gift, I will need a gift letter, stating the gift is a true gift and not a loan. I will also need to show the funds in the gift giver's bank account (90 days not required) and a statement showing the funds transferred into your own account.
4) If I am selling an asset, I will need to show the bill of sale and the funds being deposited into my account.
5) If part of my down payment is from recently received funds,like a tax refund or an insurance settlement or an annual bonus at work, I need to show both the source of the fund and the deposit into my account.
Credit and Character
1) contact Equifax.ca and request your free credit bureau. Do not buy the score that it will ask you to buy. The report needs to be reviewed annually to ensure that it is accurate. There are sometimes errors, so don't be caught unaware. Deal with errors prior to your mortgage application, not during a purchase.
2) sometimes underwriters will search the internet for items of public domain, if they are looking for character references. Keep that in mind. It is the same thing that occurs when you are applying for a job, so much is already public.
3) Deal with collections and other negative credit issues and have documented proof and some historic facts for the credit issue.
4) 3% of an unsecured credit line balance will be used against your debt service calculations, so even if you are paying interest only, you may not qualify for a mortgage if your $20,000 mastercard balance is showing as a $600/month payment against your income.
5) do not buy large ticket items during the time you are applying for a mortgage. If you are forced to buy a vehicle, make sure you clear it with your broker and they will work with the lender to make sure you still qualify. This is especially important after you remove conditions of finance.
6) read all condominium documentation or have a professional condo expert read them and advise if the condo is going to have major expenses that are not covered in the reserve fund.
Income and Stability (3 year history)
1) If you are employed, please have a copy of the last 2 t4s, the last 2 NOAs a recent pay stub and a letter of employement that states your name, your employment date, your position and your annual base income.
2) If you are self employed, but not incorporated, please have your last 2 T1 generals, your last 2 NOAs, your bank statements for the past 3-12 months, invoices or any other record showing regular income ready to present. Not all banks ask for all of these, but it is good to have them ready.
hint. If you don't have your Notice of Assessments from CRA, please log in and register for the online records. This takes a couple weeks for them to send you your password through Canada post, then you can print off your CRA records any time you want.
3) If you are self employed and have a corporation, you will need your last 2 NOAs, you last T1 generals, your corporate financial statements, your Corporation documents, showing how long you have been incorporated and who your director and shareholders are. If you have 100% of your company, is is less complicated than if you are a partner or a lesser shareholder, so make sure you provide proof.
4) Think about your longer strategy. If you plan to buy a home and have children, you may not want to qualify for a huge mortgage based on 2 incomes. At least know your plan and avoid disappointment.