The Mortgage Pre-Approval Process

I’ve briefly mentioned that J & I are trying to see if we can get pre-approved for a mortgage. We don’t know if we’ll be able to, but if we can, we’d love to buy a house for around $380,000.

In our area, anything in this price range is definitely a fixer  upper.  This is good with us – in fact, we’d prefer a fixer upper. J is a carpenter, and my father sells building supplies. Where could we go wrong?

Plus, we won’t want to stay in one house for our whole lives, so ideally, we’d buy a dumpy house, fix it up, and sell it as an investment.

For the few years we do live in it, we’d put a basement suite or separate suite in it to generate rental income.

We don’t know if we can get approved for this at all yet, but we are in the process of gathering paperwork so that we can possibly get pre-approved. Getting banks to lend to you requires a lot of legwork.

If you go through the mortgage pre-approval process, you will need to provide several things:

1. Notice of Assessment

A notice of assessment is the document that the government sends to you after you file your taxes. Sometimes it comes with your tax refund, if you had one.

You should, of course, always keep any government paperwork or documentation. You should have one per tax year. Our bank requires us to submit notice of assessments for the last two years, for both of us.

2. Proof of Down Payment

Since it is required in BC to have a 5% downpayment on any property purchased, the bank needs to see that you actually have that money available for that purpose.

Boy & I had to print off our account statements for both of our TFSAs with ING, his GIC, both of our chequing accounts, and his RRSP.

In Canada, you can use your RRSP as part of a downpayment, and pay it back over 15 years without being penalized. This actually is a great idea as it saves money on interest for your mortgage.

Make sure that all of this documentation has the date, your name, the account balance, account number, and make sure it is current (for instance, this months balance).

3. Proof of Employment

If you are not self employed, they usually require proof of employment. This can come in the form of a couple of paystubs with the date on it. They also require a letter from an employer either confirming that you are not in your employment probationary period, or that you are guaranteed a specific amount of hours.

This can be obtained by the payroll or HR department of your employer.

If you are self employed, the last 2-3 years of income must be shown, but that can be seen through the notice of assessments.

4. Your Credit Score

Typically, lenders can find this out right away with your consent. If you want to know what it is, I recommend ordering your free credit report from Equifax, so you can dispute any faulty charges on it.

5. Your Debts

We didn’t have any debts to speak of except for my credit card which is paid off each month, but you will need a student loan balance if you have one, in the same form as the proof of downpayment.

Gather this all early

My one piece of advice, especially if you have a bit of a deadline (our lease is up at the end of January), is to make sure to gather this documentation right away. Had we known that we needed all of this before we had our appointment, we would have likely been able to know whether we are pre-approved by now.

If you lost a notice of assessment, in Canada you can find everything at the CRA website. You have to create an account and they send you a passcode in the mail, which you can enter in and print your notice of assessments from there.

Even if we don’t get approved – which we likely won’t – at least we know what we need to gather in order to speed up this process next time!