Usually, if you’re applying for a mortgage, you feel confident in your current state of employment. Your employment status usually means more to the lender than all other aspects of your application and is a strong indicator of your employer’s commitment to your future employment.

So, regardless of what your employment may consist of, it's what can be confirmed on paper with supporting documents that matters most. Let's walk through a few of the usual ways lending institutions will look at your current work status.

Permanent Employment

The gold star of employment. If your employer has made you a permanent employee, it implies that your position is as secure as any position can be. When a loan provider sees permanent employment status (passed probation), it gives them the confidence that you're important to the company and that they can rely on your income.

Probationary Period

Regardless of the quality of your employment, if you have only been with the company for a short time, you'll be required to show that you have passed the probationary period. Although most probationary periods are usually 3-6 months, they can on occasion be much longer.

The lender will want to confirm that you have completed your probationary period before approving your mortgage, as your employment can be terminated without cause at any time during this set time frame. Once your probationary period has ended the lender will be much more confident in your employment status.

Let’s say that you've only been with a company for one month, however you've been working with them as a contractor for several years, and they agree to wave the probationary period based upon their previous working relationship with you, that would usually satisfy the lender with all the confidence they need if there are supporting documents in place.

Adult Leave

Let’s say there is a period you plan to be on parental leave, if you have an employment letter that states your absolute return to work to your regular position and the date it commences, then you can use your return-to-work income to qualify on your mortgage application. It's not the leave that the lender sees as a risk, its the issue surrounding your return to your previous position and the pay rate that they're most concerned with.

Term Contracts

Term contracts are the most unclear and misunderstood employment contracts out there as they are generally well-qualified individuals that are working excellent jobs without documented proof of future employment. A term contract indicates that you have a begin date and an end date, and you are paid a specific amount for that specified quantity of time. Sadly, the lack of security right here is not a lot for a mortgage provider to go on when evaluating your lasting ability to repay your home mortgage.

So to qualify income on a term contract, you want to have documented and confirmed the income you've earned for a minimum of two years. However, lenders like to see that your agreement has been renewed at least once before they consider it as earnings towards your home mortgage application.

In Summary

If you've just recently switched jobs, or are considering making a change and qualifying for a mortgage is in your future, please connect with us at Canadian Mortgage Experts anytime and we would be happy to work through every detail with you. Your goals are achievable no matter what they are.