As the new year commences, it is a good time to touch upon some annual mortgage documentation tips.
Being prepared with proper supporting documents for a mortgage application is key to accessing more mortgage options and making the process easier and faster, when you have a live purchase offer and financing condition. It is not fun scrambling for documents with a tight financing condition, this situation can be avoid with these tips below.
Have your past 2 years (better yet, 3 years, as some lenders are going in that direction) Notice of Assessments (NOAs) available. This also means you have to file your taxes on time, and have proof of taxes paid. The NOA should be mailed to you after you file your taxes. Lenders rely on the NOA because it officially confirms the government has accepted your reported income. Typically if you pay taxes when you file your return, your NOA will show confirmation that they are paid. Otherwise, you will need to provide additional proof, like a bank stamped slip, or a print off from the CRA website. It is important this proof shows your SIN number, which identifies you.
You can access many of your tax documents through the CRA website. However, this takes time to setup (CRA has to mail you a passcode that takes a significant number of business days), so do not leave it to the last minute when you have a live financing condition. Your accountant or tax filing professional may also help you with accessing these documents.
Depending on the complexity of your income, past 2 years of T1 General may also be required. T1 General is the form filled in for your tax return, it typically looks something like this http://www.cra-arc.gc.ca/E/pbg/tf/5006-r/5006-r-15e.pdf , but may have different format if prepared by accountant or software. Cases where lenders delve into T1 General include multiple income streams, pensions, rental income, and self-employment. The first four pages of the form are necessary, and then schedules such as ‘Statement of Business Activities’ in you are self-employed, and ‘Statement of Rental Activities’ for each of your rental properties.
Early in the calendar year, lenders typically send out their annual mortgage statements. For some you may need to go online and others may have mistakenly been mailed out to your rental property. Take stock of what is missing and follow-up with lenders before you desperately need the statements.
Municipalities send out their property tax notices typically late or early in the year, and many also sent notices mid-year. Collect the notices and provide your broker the most recent statement. If you are not receiving the notices, check to make sure they are not being mailed out to your rental property address. Note that property assessment notices are not the same as property tax notices.
Other documents that are generated annually or less often include leases and property management agreements. If leases are old and for long term tenants that have not re-signed leases, lender may ask for additional proof such as tenant confirmations, proof of rent deposits or rent cheques. If you have a property manager signing leases on your behalf, be prepared to produce a property management agreement. This shows that you are linked to the lease in some way.
Having these documents easily available and providing them to the mortgage broker ahead of time for review is highly recommended. It allows you time to find the documents and sort out any issues and questions the broker may have. The focus can then shift to finding and negotiating the right property for you to buy.