The stability of your income shows your capacity to carry the mortgage and any other debts showing up as facilities on your credit bureau report. Your income must be established past the probationary period if your employment is new. Changing employers in the middle of your mortgage financing is not advisable. Lenders will use a two-year average on non-guaranteed income such as hourly, bonus, overtime, contract or self-employed income.
Types of Income in Canada
On the A or Prime lending side, lenders can use your taxed income, but any forms of income that are not taxed will not be considered. Upon exception, up to 70% of non-taxed income could be used for qualification. If you change industries and don’t have two years of average income, the lender may average your year-to-date received income over two years to get a conservative value.
Canadian Income Documentation
Lenders will ask for various documents to satisfy their risk assessment. The main documents that borrowers may need to provide are paystubs, letters of employment, and T4s if they are employed. At a minimum, Business Registration or Articles of Incorporation, Notice of Assessments (NOAs), T1 Generals and 3 months of business/corporate/individual bank account histories are required for self-employed or incorporated individuals.