Mortgage Pre-Approval Documents Needed in Newfoundland and Labrador

Getting pre-approved is usually the first real step of buying a home. It gives you a rough idea of what a lender may be willing to lend, so you can shop with a realistic budget. Lenders want proof of who you are, what you earn, what you owe and where your down payment is coming from.

In Newfoundland and Labrador, the lender sets its own pre-approval requirements, and they can differ with your situation. This article walks through what is commonly requested, how your down payment sources fit in, and what to get ready before you start house hunting.

This article covers the law of Newfoundland and Labrador.

What pre-approval does and does not do

A pre-approval is a lender's preliminary view of what you may be able to borrow, based on the information and documents you give it. It is not the same as final mortgage approval, which usually depends on the specific property and on the lender being satisfied with the remaining details.

Because each lender sets its own terms, how long a pre-approval lasts, whether a rate is held and what conditions apply all vary. Ask the lender to explain these in writing before you rely on the number.

Documents lenders commonly ask for

There is no single official list, so treat this as a typical starting point and ask your lender or broker for their exact checklist.

• Government photo identification, and sometimes a second piece of identification.
• Proof of income if you are employed: recent pay stubs and a letter from your employer confirming position, pay and length of service.
• Tax documents if you are self-employed or have variable income: several years of tax returns and notices of assessment, and sometimes financial statements.
• Recent bank statements showing your savings, and any statements for investments or RRSPs you plan to use.
• Details of your debts: credit cards, car loans, student loans and lines of credit, with balances and monthly payments.
• Your address history, and consent for the lender to check your credit report.
• If part of your down payment is a gift, a signed letter from the giver saying it is a gift and not a loan.

If you are applying with a spouse or partner, expect each of you to provide your own set.

Showing where your down payment comes from

Lenders generally want to see that your down payment has been in your accounts for some time or has a clear source. Sudden unexplained deposits can lead to extra questions, so keep records of large transfers.

If you plan to use registered savings, the federal Home Buyers' Plan lets you withdraw up to $60,000 from RRSPs toward a qualifying home. You can combine it with a withdrawal from a qualifying First Home Savings Account for the same home, and contributions to that account are capped at $8,000 a year and $40,000 lifetime. Amounts above $60,000 withdrawn under the Home Buyers' Plan are reported as income. Tell your lender early if you intend to use these, because the timing affects your documents.

Credits and rebates to ask about

Some federal tax relief can affect your overall budget, though lenders do not usually count it toward qualifying. The Home Buyers' Amount is a non-refundable credit based on up to $10,000 for a qualifying home, so there is no refund if you owe no tax. In general, you or your spouse or common-law partner must have acquired the home, you must not have lived in another home you or your partner owned in the year of acquisition or the four preceding years, and you must intend to occupy the home as your principal residence within one year. A person eligible for the disability tax credit may be exempt from the first-time buyer test in some cases.

The federal First-Time Home Buyers' GST/HST rebate applies to new or substantially renovated homes, not resale homes. If you are buying a resale home, it will not apply.

Costs to budget for beyond the down payment

Newfoundland and Labrador has no land transfer tax, but the Services Charges Act imposes a land registration charge when a conveyance of land or a notice of mortgage is registered. The charge on a deed is $100 plus $0.40 for each $100 or part of $100 of value above $500. On a $300,000 purchase, that works out to $1,298. A $240,000 mortgage would carry a registration charge of $1,058.

Your lawyer, the government fee calculator and your lender can confirm the current figures for your purchase. Legal fees and other closing costs are separate.

What to do next

• Pull your credit report and fix any errors before applying.
• Gather identification, income proof, bank statements and debt details in one folder.
• Decide whether you will use the Home Buyers' Plan, a First Home Savings Account or a gift.
• Ask each lender what their pre-approval covers, how long it lasts and what could change it.
• Avoid taking on new debt or making large unexplained deposits while you are pre-approved.
• Speak with a lawyer before you sign an offer, so you know what happens after the lender signs off.

Frequently asked questions