Many Borrowers have questions about how Lenders verify the income disclosed on their mortgage application. For answers to these queries and many more, an experienced Mortgage Broker is a Borrower’s best resource. With a wealth of experience, a phenomenal applicant success rate, and the ability to serve clients throughout Canada, Lisa McInnes of Verico Paragon Mortgages Inc is happy to personally field the question that brought you to this site. Simply say hello!
FAQs About Income Verification on a Mortgage Application
Q. Do Mortgage Lenders Verify Employment?
A. Yes. When a Borrower applies for a mortgage, the Lender must ensure the Borrower is able to meet the conditions of the contract. To do this, the Borrower will be asked to submit a letter of employment and a recent paystub, and they may need to sign a form with their employer authorizing the employer to release employment and income information. After that, the Lender will verify the Borrower’s employment by directly contacting the Borrower’s employer. This is a very common procedure, and most employers are happy to confirm their employee’s employment status.
Q. But my last paystub doesn’t really reflect my usual income! Will the Lender reject my application?
A. Don’t worry! Lenders want to sign mortgage agreements with eligible Borrowers – it’s a mutually beneficial partnership. When a Borrower’s most recent paystub shows less income than usual, Lisa incorporates best-practice strategies to prepare an application that provides a more accurate representation. Sometimes this includes advising the Borrower to wait until their next pay period in order to submit a pay stub that shows full-time hours, but not always. However, this is a particularly good idea if the Borrower has recently received a raise! In the event that the Borrower’s year-to-date hours are unusually low, Lisa will consult the Borrower on the issue and strategize the best way to present the Borrower’s full financial story to the Lender.
Q. What kinds of questions will the Lender ask my employer?
A. The Lender will ask your employer if you are on probation, what your rate of pay is, if you are paid hourly (and if you are guaranteed hours), or if you are on salary. Because employers are sometimes unsure of how to answer these questions, Lisa often conducts pre-verification phone calls with employers prior to submitting mortgage applications so her clients’ employers fully understand each question they can expect to be asked. This is a service provided for free to ensure the best possible outcomes for clients.
Q. What if my employer refuses to verify?
A. It’s uncommon for an employer to refuse to verify an employee’s employment, but difficult bosses do exist! Knowing this, Lenders will simply work with your Mortgage Broker to help you verify employment through alternative means.
Q. Will I qualify for a mortgage if I’m new to my job and still on probation?
A. First of all, congratulations! Many people apply for a mortgage for this very reason – they are moving communities after securing a new job, or they have finally secured a position that pays well enough for their goal of homeownership to become a reality. However, Borrowers must sometimes wait until after probationary periods are over before applying for a mortgage, as probation can present some barriers.
However, sometimes probation can last as long as one year. In some cases, there are Lenders who will make exceptions if the Borrower’s application is otherwise strong and meets Lender criteria. Lisa helps Borrowers locate these flexible Lenders and will work with Borrowers to bring their applications to the highest possible standing.
Q. Can I include a side hustle on my mortgage application if I have more than one source of income?
A. Yes, you can usually include a second source of income if you have guaranteed hours or have worked the additional position for at least two years (and have claimed it on your tax return!).
Q. How is income verified if the Borrower is self-employed?
A. The tricky process of verifying self-employment is another great reason to use a Mortgage Broker! If the Borrower is a sole proprietor, the Lender will need to see full tax returns including the statement of business activities and notices of assessments for the most recent two years. The Borrower must also confirm that all income tax is paid in full and not owing.
If the Borrower’s business is incorporated, they will need to submit all of the above as well as all T4 and T5 slips, as well as the most recent two-year chartered accountant prepared financials. Lisa will also ask for business bank statements for a minimum of three most recent months for both cases. For Borrowers new to self-employment, we are excited to introduce a new product available for folks who have been in business for under one year who meet the program criteria. Please send me a message to learn more!
Q. There may soon be a change in my employment status. How will this affect my mortgage application?
A. The answer to this question is going to depend on each different situation. Let’s first tackle a work transfer.
With the popularity of remote work, it’s no longer unusual for a Borrower to move to a new community while remaining employed in their long-term position. This scenario shouldn’t affect the mortgage application at all. However, if you are leaving a long-term job for a new position the mortgage application gets a little trickier. If the new position comes with a probationary period, you may need to put off buying a home until after the trial period has passed.
People Also Ask:
Q. What happens if my mortgage application is denied?
A. We go over this question in the article linked above, but a shorter answer might be to contact Lisa McInnes directly. We’re always happy to help!