Navigating the world of mortgages in Canada can be complex, especially when it comes determine the qualifying income for mortgage loan. As a mortgage broker, it’s essential to understand how lenders assess various income types. This guide outlines the different income categories considered by lenders, the evaluation process, and the documentation required.

• Evaluation Criteria: Lenders are looking to confirm you are full time permanent employee with CPP and EI deductions on your pay stub.  They are also looking to confirm you are past probationary period prior to the closing date of the mortgage.  Exceptions can be given to being past probation for people that have moved within the same field with strong history of employment.
• Documentation: Recent pay stubs, T4 slips, and a letter of employment.

• Evaluation Criteria: For salaried income see above.  For the extra earnings from commission/bonus/overtime they are looking for annualized earning over a two year period.  For this we will collection two years of T4 Slips to determine what you are earning year over year in extra income.  On an exception basis we can look into more detail at the extra income and salary break down for each year to see if there is more income we can use.  Additionally if you’ve moved jobs recently, but have a history of earning the extra income at your previous job, we might be able to look at getting an exception here to the two years of earnings with current employer.
• Documentation: Recent pay stubs, potentially year end pay stubs, T4 slips, and employment letter detailing bonus/commission structure.

• Evaluation Criteria: Because your income can be volatile and change pay period to pay period or year over year, lenders will be looking for the average income over a two year period.  This means you’ll need a minimum of two years employment with the current employer before having your income considered on a mortgage application.
• Documentation: Recent pay stubs, T4 slips, and a letter of employment.

• Evaluation Criteria: Income is considered cautiously, with a focus on job stability.  Typically lenders are going to want to see a history of work within the same field and similar pay structure, otherwise you’ll most likely have to wait until the two years with employer timeline before being able to have your income considered on a mortgage application.
• Documentation: Recent pay stubs, T4 slips, and a letter of employment.

• Evaluation Criteria: Because your income can be volatile and change pay period to pay period or year over year, lenders will be looking for the average income over a two year period.  This means you’ll need a minimum of two years employment with the current employer before having your income considered on a mortgage application.
• Documentation: NOAs, T1 Generals, T4A slips, and a letter of employment outlining commission structure

• Evaluation Criteria: Because your income can be volatile and change pay period to pay period or year over year, lenders will be looking for the average income over a two year period.  This means you’ll need a minimum of two years employment with the current employer before having your income considered on a mortgage application.
• Documentation: Recent pay stubs, T4 slips, and a letter of employment.

• Evaluation Criteria: Lenders are looking for stable and ongoing retirement income.
• Documentation: Pension slips, T4A slips, and bank statements showing direct deposits.

• Evaluation Criteria: Lenders are looking for legally obligated payments by way of separation/divorce agreements or settlements as well as confirmation of timely and consistent deposits to your account.  Support payments are typically allowed to make up a certain percentage of the income on the application, this can be restricted to 30-50% depending on the lender and type of support.
• Documentation: Legal agreements and bank statements confirming regular payments.

• Evaluation Criteria: Lenders will be looking at the age of your children to determine the longevity of this income for consideration on the application.  They will typically accept the benefit payment for all kids 12 and under.
• Documentation: Government benefit statements and children’s birth certificates.

• Evaluation Criteria: Because your income can be volatile and change year over year, lenders will be looking for the average income claimed on your tax returns over a two year period.  This means you’ll need a minimum of two tax years self employed before having your income considered on a mortgage application.  There are some lenders with addtional self employed specific programs that will consider more unique situations, such as newly self employed working in same field, or those running incorporated business that have significant retained earnings within their corporation.  Additionally, as a mortgage broker we have access to alternative lenders that get much more creative, and will look more deeply at the income being generated by your company, and not just what you are claiming personally.
• Documentation: NOAs, T1 General Tax Forms, 12 months business bank statements; and for incorporated businesses: articles of incorporation and corporate financial statements from an accountant.
• For more on self employed mortgages -> Check out our detailed post here.

• Evaluation Criteria: Lenders are looking for proven history of rental income, or for new units projected earning from the unit.  The units must be separate self contained units (ie. separate entrance, with their own kitchen and bathroom).  Typically for multiple unit buildings, lenders will want to confirm any and all units are legally zoned by the municipality and meet the fire code requirements.
• Documentation: Lease agreements, bank statements, and T1 Generals with Statement of Real Estate Income.  If it’s a new unit we may need a fair market rent assessment.

• Evaluation Criteria: Lender looking for consistency and predictability of interest income typically over a 2 year period.  This is income that very few lenders will consider, but some will on case by case basis.
• Documentation: Investment statements, T5 slips, and NOAs.

Each income type has its nuances in the evaluation process. Understanding these differences is crucial for effectively navigating the mortgage journey. Proper documentation is key, and staying abreast of lender policies can ensure a smooth application process.

When determining qualifying income for mortgage loan each income has it’s nuances in the evaluation process. Understanding these differences is crucial for effectively navigating your mortgage journey. Proper documentation is key, and staying abreast of lender policies can ensure a smooth application process.  This is why it’s key to work with an experienced mortgage broker that understands different lender offerings and unique income situation.

If you have any questions, feel free to book a time for us to discuss your personal situation.