Your employment status can play a very important role as it relates to your ability to obtain a mortgage. While completing a mortgage application, depending on your employment status and the lender, you may be required to provide 2 years T4’s, a job letter and pay stubs. Let’s review how some common employment status can be viewed:
Permanent Employment (Off Probation)
This is the most ideal, this means your employer has made you a permanent employee and your role is as secure as any position can be. When a lender see’s this, they feel confident that you are a valued employee, and your income can be relied on to make mortgage payments.
Permanent Employment (During Probationary Period)
Most new hires are required to complete a probationary period ranging from 3 to 6 months; lenders will not provide a mortgage to someone who has not completed probation. Reason being, is that an employer can terminate your position without cause during this period, which makes you high risk to a lender. One exception may be that if you’ve only been officially with a company for a month, but you’ve been working with them as a contractor for a longer duration, you may be able to negotiate with your employer to waive the probationary period based on the previous relationship – this should give the lender the confidence they need.
Maternity Leave
If you’re currently on or planning to be on Maternity Leave, you will need an employment letter from your employer outlining your guaranteed return to work, including position, income, and the return-to-work date. Based on this information, it can be used to qualify for a mortgage. The lender wants to ensure you have a role and income to return to, once your maternity leave is over.
Term Contracts or Part-Time Employment
These types of roles can be challenging, as there is either a defined start date / end date or inconsistency within the job. You will be required to provide incremental proof of past employment, including two years of historical data.
Overtime, Commission or Bonuses
If you work a job which provides payment for overtime, commissions or bonuses and you would like to include this income in your annual earning during the application process, you will be required to provide incremental proof of past payments over the last two years.
Retired, Self-Employed or Receive Cash Components (i.e. Tips)
If you are retired or self-employed, additional proof of income will be required (T1 Generals/ Notice of Assessments) will be required to apply for a mortgage. If you work in an industry where you receive cash tips, the tip amount would need to be declared on your T1 Generals to use that portion of your income to apply for a mortgage. Sometimes additional documents might be requested and not limited to, T4A and bank statements and commission reports.
The above information is for demonstration purposes only, and should not be solely relied on to apply, assumed or used to remove financing conditions. If you have questions about how your employment status and how it pertains to a mortgage, I would be happy to chat.