The Paperwork Checklist for Buying a Home in Canada
If it ain’t on paper, it ain’t true!
Documentation is the root of all transactions – property, education, career, finances or even a relationship. Modern living is built on a foundation of paper – you need legal paperwork to be in place for every stage of your life, from birth to death and everything else in between.
A home is likely the biggest buy in your life, and it is natural that you wish to be completely assured that it is yours in the eyes of the law. No one wishes to wake up one day to realize that they may lose their home due to a lack of proper documents.
In Canada, like everywhere else in the world, buying a home is an exciting yet complex trail of paperwork and documentation. Whether you’re a first-time homebuyer or a seasoned investor, it is easier to know the necessary documents for your home-buying journey.
This article is a comprehensive documentation guide with a checklist of the essential paperwork you’ll need when buying that Toronto condo or a semi-detached home in Edmonton. It does not touch upon the actual buying process itself but is a compilation of the documents that will be part of the transaction.
Identifying the documents and ensuring that you have them or know how to get them is a firm step towards a hassle-free home-buying experience. Remember that each province will have its own regulations, but overall, this serves as a checklist for your needs.
Ok, let’s get started!
Table of Content
Identification and Income Verification
Every purchase starts with identification and establishing your finances.
Likewise, the first step in the home-buying process is to establish your identity and prove your income. Lenders will require the following documents:
Government-Issued Identification
A valid government-issued ID, such as a driver’s license or passport that includes your current address.
Social Insurance Number (SIN)
Your Social Insurance Number, which is a crucial identification for financial transactions in the country.
As a citizen, permanent resident or temporary resident in Canada, you need a Social Insurance Number (SIN) to work, and to receive benefits from government programs.
Proof of Income
Evidence of your steady income and financial status, which may include:
- Recent pay slips T1 General tax forms from the previous year
- T1 General tax forms from the previous year
- Notice of Assessment (NOA) from the Canada Revenue Agency
- T4 or T4A tax forms
- Letter of employment detailing your job status, salary, and position
For self-employed individuals or those with rental properties, additional documentation may be required to demonstrate your income stability.
Financial Information
A potential lender will require comprehensive proof of your financial situation.
Credit Score
An up-to-date Credit Score. Lenders will check your credit history and gauge your credit score, which should be at least 600 to qualify for a mortgage. You can read more about how to navigate credit scores in Canada here and what to do if you do not have an optimum score.
Mortgage Pre-Approval
A mortgage pre-approval letter. Pre-approval from a lender is a firm indication of your creditworthiness. It also has the added advantage of letting you know the maximum mortgage amount you can qualify for.
Bank Statements
This is self-explanatory. Lenders will request your bank statements (usually several months’ worth or even a couple of years) to assess your financial stability and assets.
List of Assets and Investments
A detailed list of your assets. This list includes savings, investments, and property holdings, and is helps to assert your financial standing.
Down Payment Confirmation
A down payment is an important part of your home-buying process. As such, confirming the source of funds for your down payment is a crucial factor in the process. Depending on the type of mortgage you are applying for, you may need to provide the following documentation.
Insured vs. Uninsured Mortgage
Documents differ between an insured mortgage (less than 20% down payment) and an uninsured or conventional mortgage (20% or more down payment). You may have to furnish additional documents when you request an insured mortgage to prove your creditworthiness.
Savings or Investment Statements
Statements that prove your funds for the down payment are readily available and easily transferred. The statements should be no older than 90 days.
Sale Agreement of Existing Property
The sale agreement of your existing home. This is if you’re using the proceeds from selling your current home for the down payment.
RRSP Withdrawals (First-Time Buyers)
Proof of your Registered Retirement Savings Plan Account. If you have an RRSP and are eligible for a First-time Home Buyer’s Plan, you can withdraw up to $35,000 for the down payment.
Gift Letter
A signed letter stating that the funds are freely given as a gift. As many homebuyers do, you may use a gift from friends or family for the down payment; just ensure that you have the papers to prove it is not a loan.
Down Payment Assistance Programs
You can check your eligibility for any government-sponsored down payment assistance programs. If they are available, you will be asked to furnish details to prove your qualification.
Property Details
The final category of paperwork focuses on the property you’re purchasing. Lenders will require the following documents:
Purchase and Sale Agreement
Now, you are in home run territory. Once the finances are in order and you have shaken hands on the deal, you have another bunch of paperwork. The first in line is the Purchase and Sale Agreement – the signed contract between you and the seller that pins down the details of the transaction.
MLS Listing
The MLS (Multiple Listing Service) listing details. This provides information about the property, including estimated taxes, utility costs, and parking fees (if applicable).
Legal Description of the Home
A complete legal description of the property, including the full address and postal code.
Homeowners Insurance Policy
A copy of your Homeowners Insurance Policy. Lenders will require you to have homeowners insurance to protect your house from various risks.
Lenders’ Title Insurance
Title insurance is mandatory in Canada, protecting the lender’s interest in the property.
Additional Documents (if Selling a Home)
This is applicable if you’re selling your current home. A recent mortgage statement and the legal description of the property have to be provided.
A Few Additional Tips
To ensure an easier and more streamlined experience, we offer the following tips:
- Check once and then check again – Thoroughly review all documents to minimize errors.
- Consult your mortgage lender or a real estate professional to review your paperwork to ensure compliance and check for missing or incomplete information.
- Keep all your files and documents well-organized and easily accessible.
- Complete all paperwork and submit it promptly. This will allow you to avoid delays in the approval process and also give time for any required corrections.
- Utilize digital tools and platforms, such as the Save Max Mortgage Calculator, to streamline the paperwork.
Conclusion
The paperwork associated with buying a home is a lot, we know, but with the right information and preparation, the process can be managed competently.
Create a checklist for yourself. Understand the required documents and ensure you have them on hand. Remember, staying organized and working closely with real estate professionals can make all the difference.
Contact us for any assistance on your homeownership journey and we will help you create lasting memories in your new abode.
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