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Income Planning for Home Financing...

Home is your one of the largest and most important financial transaction you will ever make.  For Home Financing, income is necessary to qualify for best mortgage rate.  We hope that following information would help you to know income requirement so that you can enjoy mortgage savings being a First Time Home Buyer, New to Canada, Existing Home Owner or Investor.

Employment Income:

• For Permanent Full Time Salaried Employee, usually base salary is considered as long as you are NOT on probation. 
• For Permanent Full Time Hourly Employee, usually hourly income is considered based on guarateed hours as long as you are NOT on probation.
• For Part Time or Temporary Employee, usually income is considered based on last 2 years when working with same employee for over 2 years.
• For Employee who are earning extra income through bonus, overtime, living allowance, car allowance, gratuity, etc, usually higher income is considered based on last 2 years when you are working with same employee for over 2 years.
• Document Requirements: 
  • Job Letter on Company Letterhead showing your full name, starting date, job title, Salary or guaranteed hours with hourly rate, Not on probation, Human Resource Contact name and number, signed by Employer
  • Recent 2 Paystub showing CPP/EI/Tax deduction and YTD Income
  • Recent 2 years Notice of Assessment (i.e. NOA).  If any taxes owning on most recent NOA then confirmation that it is paid off
  • Optional - Recent 2 years of T4's

Self-Employed Income:

• Self-Employed individuals have their own business and withdrawing either salary or dividend from business income to declare on personal taxes.
• Verified income is considered usually based on last 2 years personal taxes when you are working within same business for over 2 years.
• Stated income is considered usually when your business is making higher income but you are taking very less income on personal taxes.  This can also be situation for Professionals who changed from Employee status to Self-Employed status.
• Dividend income reduces your personal taxes and increases your declared income.  Consult with your Accountant professional to consider spliiting income between Salary and Dividend from your company.
• Document Requirements:
  • Recent 2 years Notice of Assessment (i.e. NOA).  If any taxes owning on most recent NOA then confirmation that it is paid off
  • Recent 2 years T1 General showing all schedules
  • For Incorporated Business - Certificate of Incorporation, Articles of Incorporation,  Recent 2 years of Financial Statement or T2
  • For Sole Proprietorship Business - Contract Agreement or Letter from Company having contracts with.

Rental Income:

• If you are having rental properties then certain % of rental income can be considered.  Rental income calculation varies substantially with every lender and thus we recommend to consult with us as we have access to 20+ lenders.
• Most of lenders have limitation on 4 number of properties you own personally but we have lenders who can work with more properties.
• Document Requirements:
  • Lease Agreement or Market Rents,
  • Mortgage Statement,
  • Property Tax Bill,
  • Condo fees if applicable,
  • Recent T776 Rental Statement for rental properties declared on personal taxes

What is Difference between Verified Income and Stated Income?

Note: For applicants who does not fit above guideline, there are lenders (recognized financial institutions) who are able to take more risk with slightly higher rate.  However minimum down payment required is 15% to 20% depending on credit score and type of property.

Resources:

• Canada Revenue Agency - My Accounts for Individuals - You can download Notice of Assessment, T4's, T1 General with all schedules
• How to withdraw RRSP under Home Buyers Plan
• Income/Tax Planning for current tax year
• Credit Management
   

With current market situation and tightening of mortgage rules by Government of Canada (OSFI), we have access to 20+ big and small banks providing you the mortgage solution and flexibility that meet your personal needs.  We are Mortgage Professionals to help you plan for home ownership (i.e. purchase, pre-approvals, cash back, renewals, renovations), provide step by step guidance to prepare for mortgage financing and implement personalized savings strategies to payoff mortgage sooner.  There is no cost for our expert services and to seek for professional help you can contact us at 1-888-927-8270.

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