Employment by Others (Salary)
In general, employment and income should be confirmed with a formal letter from the employer stating length and type of employment (ie: as full time, part time, regular, probation, etc), and the amount of salary. Lenders are also responsible for providing additional supporting documentation such as current payroll stubs and applicant’s annual tax returns or the tax assessment receipts. To demonstrate the necessary stability of an applicant’s employment, borrowers should have been continuously employed by their current employer for a minimum of one full year. Those applicants who may be on probation or work under short-term contracts, are normally not considered salaried employees. Please note: prior employment history should always corroborate an applicant’s current employment circumstances.

Employed, Irregular Income
For qualifying purposes, fluctuating incomes such as commissioned sales or short-term contracts are usually taken from the borrower’s historical income-producing patterns. A minimum basis of two years is considered reasonable to estimate an accurate qualifying income average. Customary documentation might include confirmation of commission agreement or employer contracts, plus the personal tax returns (with annual assessment notices) for the past two years. If a realistic income consistency cannot be confirmed from this sampling, the reporting period may be extended beyond two years.

Self-employment Earnings
Self-employed applicants should be able to demonstrate at least two full years of successful operation. This is to be verified through an overall review of financial statements from the business and/or individual income tax returns. When income tax returns are used to verify income, they should also be supported by the official Notice of Assessment from Revenue Canada. The borrower’s income alone, or in combination with that of a co-applicant, must also be considered as sufficient to cover the mortgage debt, property expenses and external debt repayment, while leaving sufficient cash flow for typical day-to-day living.

For those who are self-employed and unable to show traditional documentation to support their income, you may have the option to declare or state your reasonable income. If you have been in business for 3 years or more, are asking for a government-insured (low down payment) loan on the one hand, but have yet to pay much in the way of income tax on the other, the welcome mat is withdrawn quickly.