Typical acceptable income documentation requirements:
Acceptable income can be from Employment, Self Employment, Stated Income, Pensions, Child or Spousal Support, Canada Child Care Benefit, Foster Care Income, Permanent Disablity, Seasonal Employment, Casual Employment, and Rental Income.
Below is a Overview of the Types of Acceptable Income. ( Varies by Lender)
SALARIED EMPLOYEES AND COMMISION EMPLOYEES
Salaried and hourly employees may need to supply:
- A job letter and a recent pay stub to show consistent salary.
If your client’s hours aren’t guaranteed or they have a lot of overtime, your underwriter may also ask for a 2-year income history.
Commissioned salespeople typically need the same documents as a salaried employee except they may also need to provide:
- 2 years of T1’s with corresponding NOA’s if commission isn’t listed on pay stub. This is to establish a 2-year income average.
Underwriter tip: The 2-year average income and current pay stub income should be similar. The whole story will always get your deal done faster.
SELF EMPLOYED INCORPORATED OR SOLE PROPRIETOR
Self-employed clients who are incorporated and can provide traditional income verification may need to supply:
- Complete T-1 General tax return including statements of business activities. To establish a stable income, but also so a lender can see your client’s sources of income. This includes any Canada Child Benefits (CCB) and employment income.
- Notices of assessment for 2 years.To confirm there are no outstanding income taxes owed.
- Two years of accountant prepared company financials supported by business bank statements. To establish your client’s company is in good financial standing and to compare the income level being pulled out of the company is sustainable.
- Bank statements. To help your client prove cash flow and affordability.
- Current corporate search. To confirm business ownership.
Self-employed clients who are sole proprietors and can provide traditional income verification may need to supply:
- Complete T-1 general tax return including statements of business activities. To establish a stable income, but also so a lender can see their sources of income. This includes any Canada Child Benefits (CCB) and employment income.
- Notices of assessment for 2 years. To confirm there are no outstanding income taxes owed.
- Business license. To prove business ownership/partnership.
ALTERNATIVE, SELF DECLARED & OTHER DOCUMENTATION
Alternative verification of acceptable income can be provided via one of the following:
Business registration via:
- Articles of incorporation/corporate search including all directors.
- Business license/registration.
- Trade license.
- GST registrations/returns
Notice of Assessment or letter from the client’s accountant confirming no outstanding income taxes.
Alternative proof of income via one of the following:
- Recent financial statements or statement of business activities can indicate a level of income. This will need to be supported by business bank statements since the last year end.
- Contracts substantiating business income signed by both parties combined with business bank statements also provide a level of income.
Unique to self-declared
- Statutory declaration prepared by solicitor stating income used for qualification
ALTERNATE SOURCES OF INCOME
There are other income sources that can help your client’s application get approved.
- Canada Child Benefit (CCB)
- Alimony/child support
- Government and/or private pension, Foster Care Income
- Rental property income
RENTAL PROPERTY INCOME
Your client can verify their rental income via the following:
Owner occupied properties
- 50% of market rent added to income from an Approved Market Appraisal
- Must have Lease documents and proof of Deposits or Market Appraisal
- Suite must be a Legal Second Suite
Non-owner occupied properties
- Full T1 Generals showing net rental income and rental property addresses
- Or in some cases Active Lease Agreements and Proof of Rent Income being Deposited
- If not reported on T1-General, market rent from an approved appraiser at 80% rental offset using a Lender Specific Rental Worksheet
- NOTE RENTAL INCOME IS VERY LENDER SPECIFIC AND VARIES
Any questions or concerns, contact us now!