Notice of Assessments (NOA’s) from Revenue Canada are the single most important document required by lenders when applying for a mortgage particularly if you are self employed or are needing to include overtime and/or bonuses for income qualification.
NOA’s are an annual statement sent by Revenue Canada to taxpayers detailing the amount of income tax they owe. It includes the amount of their tax refund, income earned, tax credit and income tax already paid etc.
While you should keep all Notice of Assessments received from Revenue Canada. It is very important to keep on file at least your 2 most recent years when qualifying for a mortgage.
What lenders look for on your NOA’s is different for both self employed and salary/hourly clients.
Self Employed Borrowers:
For self employed clients that are using stated income programs the lender looks to ensure no taxes are owed to Revenue Canada. Typically only the most recent years NOA will be required.
If you are self employed and income qualifying lenders will look at both the average of Line 150 of your NOA’s for the past 2 years and that no taxes are owed to Revenue Canada. Self employed borrowers that are income qualifying are also eligible to gross up their Line 150 by 15%. The benefit of income qualifying if you are self employed is you will pay less CMHC/Genworth mortgage insurance if your mortgage is high ratio and depending on lenders may receive a lower interest rate.
When you are employed by either salary or hourly and you want to include additional income such as overtime, bonuses or part time employment lenders will require you 2 most recent years Notice of Assessments. Your income will be qualified using a 2 year average. Lenders will also look to ensure you have no taxes owed to Revenue Canada.
If you’ve lost or misplaced a Notice of Assessment you request a new copy be mailed to you by Revenue Canada by calling 1-800-959-8281. They can take up to 10 business days to arrive so it is best to request them before you get pre-approved for a mortgage.
If you have any questions don’t hesitate to contact us.