When navigating the world of finances, there are lots of things you need to take into consideration. If you’re not careful, it’s easy to get mixed up and confused from the lingo, processes, payments, and sometimes even penalties that come from borrowing from a lender.
So, the question arises, what is how does one prove they qualify for a mortgage? Well, we have the answers you’re looking for.
Ready for some real estate education? Let’s jump right in.
Qualifying For Mortgage
When you apply for a mortgage, the lender will be assessing every little thing concerning your financial health. The reason behind this is that fraud is a major concern when it comes to mortgage financing.
Since they have to ensure that applicants will be able to service their mortgage debt regularly, lenders have to be extremely diligent, and they won’t approve your application until they’re sure you can pay them back.
How Do They Do So?
Starting off, they need to verify your income source. For applicants employed by a company, the process is fairly easy. Upon being hired, your employer is bound to provide a letter of employment and a pay stub. Once the lender receives them, a final confirmation call is placed to your employer to verify details.
However, for self-employed or freelance individuals, the process might get a little tricky. Since such applicants aren’t on a fixed payroll, they have to undergo an extensive vetting process. At a minimum, the lender will ask for the following documents from the applicant:
- Articles of Incorporation/Business Registration
- Notices of Assessment/Tax returns from the past 2 years
- T1 Generals/Tax submissions from the past 2 years
- Financial Statements
What About the Down Payment?
If you acquired a large sum of money to finance your down payment, you need to prove how you received that as well. Sometimes, parents, relatives, or close friends gift the amount needed for it. In such a case, you’d have to provide a “gift letter” confirming that you received the money from them as a gift and do not have to repay it.
If you sold off items to gather the amount, you’d have to provide your bill(s) of sale. Lenders put you through such tedious processes to ensure that you haven’t gotten the down payment through another lender who you would have to repay alongside your mortgage payments.
Bottom Line
One of the most difficult and most important milestones to achieve as an adult is owning your own home – and this is no walk through the park. But, if you’re prepared and play your cards right, it’s not impossible to achieve. After all, hundreds of thousands of people do it every year.
