Income and Job Stability – Your income determines how much you may borrow. In most cases, 32% of your gross income for salaried, non-self employed or commissioned persons is used to determine how much you can borrow to cover the cost of the mortgage payments, taxes, and any applicable maintenance. All other debts i.e. car loans, credit cards etc. must not exceed an additional 12% of your gross income.
Credit History – Your credit must show that you pay your bills on time. If not, you may still be approved but the interest rate may be higher than expected. What you need to supply the lender:
a) Income confirmation: For salaried persons: letter of employment and most recent pay stub.
b) Down payment confirmation: The lender will require that you demonstrate what source your down payment is coming from. You will have to send in bank statements, statements showing RRSP’s, stocks etc. You must show a 3-month history of the money. If there are any large lump sum deposits, you are likely to be asked to show where the deposit originated. For mortgages where your down payment is less than 20% of the purchase price, you will also be asked to
demonstrate that you have access to 1.5% of the purchase price in your bank account. You must be able to show this through a credit card, line of credit, gift from family or savings in case closing costs run higher then expected.
c) Contract of purchase and sale: This is a copy of the accepted offer of the home you intend to purchase and a copy of the MLS listing sheet.
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