Frequently Asked Questions
- What is an Employment Letter?
- What is a Paystub?
- What is a T4/T4A?
- What is a Notice of Assessment?
- What is a T1 General Tax Return?
- What is 90 Days of Bank Statments?
- What is an Offer to Purchase?
What is an Employment Letter?
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A current employment letter refers usually to a typed letter on company letterhead, signed by a human resources manager, staff manager or payroll clerk that clearly states your official start date, expiry date of any probationary period, your wage (either your annual salary or your hourly wage) as well as any annual bonus or commission structure, minimum amount of hours worked (if applicable) and your official job title. This letter must be dated within 30 days of your mortgage application. This employment letter must provide the contact information for the company or the person providing the letter so that the mortgage company can contact them to confirm the information on the letter. The letter, together with verbal confirmation from your employer will satisfy the lender of your current employment status as stated on your application.
What is a Paystub?
A current paystub is a computer generated form that indicates your salary or normal hours worked, your hourly wage, your source deductions (income tax, CPP and EI) as well as any other regular deductions for union dues, RRSP or CSB deductions, shift premiums, vacation pay etc. This paystub must be dated within 30 days of your mortgage application and will serve to further confirm to the mortgage company of the income stated on your mortgage application.
What is a T4/T4A?
A T4 form is the summary of your previous year's earned income as reported by the employer. It is a computer generated form by the human resources department or payroll department at your employer and is normally provided to you by the end of February each year. It is normally a pink and white form that is half the size of a normal piece of paper. It will have your name and address information, the name of your employer, your SIN number and your gross income recorded by your employer. This form will provide proof to the lender of where you worked the previous year and can be used in some cases, in lieu of an employment letter. In most part time employment situations, a minimum 2 years T4 forms must be supplied to confirm an average earned income.
A T4A form looks exactly like the normal T4 form but it is generated when your income is paid out as commission. Payroll departments must reflect normal salary or hourly income differently than commission or bonus earnings and therefore provide the employee with a T4A form rather than a T4 form. In most cases of commissioned or bonus income, a minimum of 2 years T4A forms must be supplied to confirm an average earned income as stated on your mortgage application.
What is a Notice of Assessment?
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Notice of Assessment?
a Notice of Assessment form is usually a 2 or 3 page form that Revenue Canada sends back to you as a summary of your received Tax Return. It will either contain a refund cheque or a bill for your outstanding taxes for the previous tax year. It is usually a full size sheet(s) of paper and is normally light blue in color. It will have your full name on it along with your SIN number and the tax year clearly indicated in the top right corner. It is normally requested by a mortgage company for 2 reasons: to confirm your taxable income (showing as your Line 150 income) and to confirm if there are any outstanding taxes owed to Revenue Canada. Normally an NOA or Notice of Assessment would be requested to any self-employed mortgage applicants to prove that no taxes are owing to Revenue Canada as tax arrears could be placed on title of your home and take precedence over any mortgage financing in a sale of the property. The lender will want to be aware of any potential liability before making mortgage financing available.
What is a T1 General Tax Return?
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A T1 General Tax Return is the multi-page document that you complete either on your own, with a tax company like H&R Block or your accountant for submission of your personal taxes to Revenue Canada. It will contain several pages for your provincial and federal tax calculations as well as several "schedules" that will contain information about tax write-offs and tax credits. If you are self-employed, your mortgage company may request 2 or 3 years T1 General Tax Returns to verify that you are indeed filing taxes as a self-employed individual and in some cases, they may want to add back several things into your income in order to better qualify you for financing.
What is 90 Days of Bank Statments?
These statements would be the transactions (deposits, withdrawals, etc) that have occurred in your bank account. These statements are normally copies of the originals that your bank or credit union has mailed to you or copies printed from your internet bank account. They are normally used to verify to the mortgage company that you have accumulated the amount of money necessary to make up the down payment and closing/legal fees to complete a real estate purchase. Any large deposits that exceed $2000 showing on your statements (other than normal payroll deposits) will have to be verified by way of copies of cheques deposited or other receipts to satisfy the mortgage company of your ability to save the money necessary for the down payment and closing costs as this is a condition of financing. Occasionally these statements will be used to verify your receipt of child support, spousal support or pension payments if other traditional forms of documentation is unavailable.
NOTE: These statements must show your name(s) and account number to verify account ownership.
What is an Offer to Purchase?
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Offer to Purchase
An Offer to Purchase Form is the form that is completed by either your real estate professional or your lawyer when a formal offer to purchase a property is made to a vendor (or seller of that property). It is the form that contains all of the purchase information - price, deposit amount, total down payment, conditions of the purchase, inclusions and exclusions and any schedules outlining further conditions of the offer to purchase the property. All real estate professionals will be able to supply an offer to purchase form and most lawyers will be able to provide you with a formal offer to purchase.