Chapter 12: Application Analysis - Required Documentation Flashcards
What information does a T5 supply?
borrower with dividend or investment income
When does a taxpayer use a T2125?
Form T2125, Statement of Business or Professional Activities, is used to report a taxpayer’s business and professional income and expenses. This form can help the taxpayer calculate their gross income and their net income (loss), which are required when they complete their Federal Income Tax and Benefit Return.
What is a T1?
This is the Canadian tax return that individuals complete every year to calculate whether they owe tax on their income.
Briefly describe when a Mortgage Agent would be required to obtain the following documents from an applicant.
T4
T4A
Job letter
Paystub
NOA
Agreement of purchase and sales
Gift letter
Property assessment
Property tax bill
Mortgage statement
Status certificate
4: typically when a Borrower has salaried or hourly employment income
T4A: typically when a Borrower has commission income
Job Letter: typically when a Borrower’s income or position information is required
Paystub: typically in addition to a Job Letter to confirm that the individual is still employed and that the YTD income matches the Job Letter
NOA: typically to support income verification for a previous year and/or to confirm that there are no income taxes outstanding
Agreement of Purchase and Sale: typically when a Borrower is purchasing a property
Gift Letter: if the Borrower is using funds for his or her down payment that has been given to him or her by a family member
Property Assessment: can be used by the Agent to support the Borrower’s value of his or her house. It is not used to confirm the value nor will the Lender accept this, but it can support the value.
Property Tax Bill: used to confirm the amount of taxes payable and if any property taxes are outstanding
Mortgage Statement: typically used to confirm the outstanding balance of a Borrower’s current mortgage when refinancing
Status Certificate: required when financing a condominium unit
Describe the information found in an MLS document.
An MLS will provide details about the property, its sale price and Realtor information.
What is a Certificate of Independent Legal Advice and under what circumstances would it be required?
This document proves that an individual has been given advice by his or her lawyer with regards to the proposed mortgage. It is usually required when the proceeds of a refinance are being provided to a third party and not the Borrower or if the loan is a reverse mortgage.
Under what circumstances must a Mortgage Agent complete a Creditor Insurance Application?
This must be completed in every transaction, since part of the application is the waiver. If the Borrower(s) want the insurance the full application must be completed, if they do not they must complete the waiver section.
What is the purpose of a gift letter?
A gift letter is a document that outlines the terms of a gifted down payment in a purchase transaction. Money provided by a family member to be used as a down payment, as long as it is not repayable to that family member, can be used in lieu of the borrower having to use their own funds for the down payment. This form must be completed by both the recipients, or the purchasers, and the donors, who are the family members providing the gift to the recipients.
What is the balance sheet equation?
Assets = Liabilities + Owner’s Equity
What is one way to tell if an NOA has been falsified?
Notice that figures up to section 6150 are whole numbers only and do not have any cents. Have a look for this when reviewing a borrower’s document to ensure it is authentic.
What information must be in a Job Letter for it to be acceptable to a Lender?
It should be on company letterhead, have the company address and contact information, list the Borrower’s position, income, how it is paid (i.e. salary or hourly), the frequency of payment (i.e. weekly), if the person is full or part-time and/or on probation, the start date and the writer’s information and contact information.
