How to Get a Letter of Employment for a Mortgage
When applying for a mortgage, one of the most essential documents to show your lender is a letter of employment.
A letter of employment, also sometimes called a job letter or income verification letter, proves your employment status, shows what kind of work you do, and helps a lender confirm that you have reliable income to pay off your mortgage.
What is a letter of employment?
A letter of employment will usually include your position within the company, your annual salary or wage, how many hours you are guaranteed, and how long you have been employed with the company.
The letter should be dated, written on company letterhead and signed by the individual who wrote the letter. That person's phone number should also be included should there be any further questions.
If you are self-employed, proving your income will require a slightly different process, outlined later in this article.
Why is an employment letter required to get a mortgage?
Mortgages are often large amounts of money that are paid back over the course of many years.
The mortgage lender, whether it be a bank or other financial institution, needs to feel confident that you’ll make timely mortgage payments or they may choose to deny your application.
Proof of employment shows the lender that you have a steady, reliable job and the regular income needed to make the mortgage payments. While a letter of employment is just one part of the documentation you will need to be approved for a mortgage, it is an important one.
How to get a letter of employment
The need for a letter of employment is well known to employers, so most companies have an outline already on file and ready to use. If you work for a large company, the Human Resources department will be the ones to help you. If you work for a smaller company, you can go to your boss or supervisor.
While getting a letter of employment is pretty easy, you shouldn’t leave it to the last minute. But you don’t want to have it too early either, as lenders require current information. Timelines will vary by lender but your letter of employment should generally to be no more than 60 days old to ensure the information is current.
Calculators to inform your next mortgage decision
What to do if you're self-employed
Getting approved for a mortgage can be trickier for individuals who are self employed. Because you won’t have anyone to provide a letter of employment, you’ll have to rely on different documents.
Self-employed Canadians typically need to show the following to their mortgage lender:
Tax documents. Income tax returns for the past two to three years (be aware that showing a loss in revenue will work against you) and a Notice of Assessment from the Canada Revenue Agency to show that you are up to date on tax payments will be required.
Evidence you've paid sales tax. You'll need documentation that establishes HST and/or GST has been paid.
Licenses or proof of incorporation. These are often required to establish a business's legitimacy.
Financial statements. These typically document your business's income, revenue and expenses.
Contracts. If applicable, agreements to provide products or services indicate expected revenue. (Being able to show consistent income is a big plus.)
Proof of ownership. This includes evidence to show how much of the business you own.
Bank statements. Personal and business banking account statements for 6 to 12 months to show revenue and earnings.
DIVE EVEN DEEPER
Clay Jarvis