Applying for mortgage - What paper work should I prepare and how?

[Andy R.]

Hi everyone,

I've been watching the market and saving for a down payment for a couple years now and I'm getting to point where I might be ready to start making offers on my first duplex or triplex in Southern-Ontario.

When the time comes to visit the bank I want to look as prepared and professional as possible, and I'm wondering what sort of paper work I should be putting together and how I should present it? Do I need anything other than personal financial statements and income/expense statements for the property I'm interested in? Should I put everything together in a binder or a bound document? Any advice would be much appreciated. Actual examples would be great too!

Thanks,

Andy

[Roy N.]

@Andy R.

Anthony is on the correct tract, but our terminology and details are a little different north of the 49th.

If you are planning to approach one of the Big-5 or a credit union, they will normally do a pre-approval which will let you know the limits of what you can afford - it also allows you to respond more quickly to a property you find (which may not be a good thing for a new investor). 

If you are planning to approach a secondary lender - several of them will provider better rates, particularly if you will be an owner occupant - many do not do pre-approvals and you will need to contact them once you have a signed purchase agreement.

Regardless of the lender you plan to approach, it always best to go-in with the information they will want ... which includes:

• CRA Notice of Assessments (NOAs) for the past 3 taxation years.  If you do not have your NOA for 2015 yet, then bring a copy of your T1;
• If you have investments, including registered accounts where you are the beneficiary, bring recent account statements;
• Bank statements showing your account balances for the past 2-3 months;
• If you have recently changed jobs, or received a promotion/pay increase, include 2-3 months of pay stubs and/or a confirmation of income letter from your employer (on their letterhead).
• If you have any debt - student loans, auto loan, credit cards, LoC, etc. - include recent (last 2-3 months) statements for each.
• If you have any court ordered payments -such as child support or restitution - bring a copy of the order and recent receipts;
• If the property you are purchasing is a residential rental property (1 - 4 units), bring copies of leases - or Estoppels - for all presently rented units.  Most lenders will count some of the revenue towards your income for qualifying.  Hint:  If you plan to occupy one of the units and they are all presently occupied, designated the weakest unit (lowest rent and/or month-2-month lease) as the one you will occupy.
• An insurance quote if you have been able to obtain one.
• For Identification, your drivers licence and/or Passport will suffice.

You could bring a market analysis with you, but the residential mortgage agent probably won't look at it (or know how to interpret it) - they'll plug numbers in to a computer application - which makes its own assumptions about vacancy, etc..  For a residential property, it's all about your ability to carry the loan.

After you have started a financing application with a lender, they will ask for other information such a letter from your insurer indicating you have coverage and they are the {primary} named insured.

As far as how to provide all of this to the lender, we normally provided electronic copies on an encrypted usb stick/thumb drive and then provide the agent with the decryption key out of band.