Income verification is one of the most critical parts of any mortgage application. An incomplete or poorly formatted employment letter is one of the most common reasons for mortgage delays. Here is exactly what lenders need and how to get it right.
What lenders need from employed borrowers
For salaried or hourly employees, lenders typically require:
| Document | Purpose | Required By |
|---|---|---|
| Employment letter | Confirms job details, income, and employment status | All lenders |
| Recent pay stubs (2–3) | Verifies stated income matches actual payments | All lenders |
| T4 slip (most recent) | Confirms annual employment income | Most lenders |
| Notice of Assessment (NOA) | CRA-verified income from tax return | Many lenders |
| T1 General (2 years) | Full tax return — required if income varies or includes bonuses/commissions | Some lenders |
Employment letter template
Below is a template that meets the requirements of most Canadian mortgage lenders. Have your employer customize it on company letterhead.
[Company Letterhead]
Date: [Current Date — must be within 30 days of mortgage application]
To Whom It May Concern:
Re: Employment Confirmation for [Your Full Legal Name]
This letter confirms that [Full Legal Name] has been employed with [Company Name] since [Start Date — Month/Year] in the position of [Job Title] on a [full-time / part-time], [permanent / contract] basis.
Compensation details:
- Base annual salary: $[Amount]
- [OR] Hourly wage: $[Amount] at [Number] guaranteed hours per week
- Regular overtime (2-year average): $[Amount] per year
- Annual bonus (2-year average): $[Amount] per year
- Commission income (2-year average): $[Amount] per year
[Employee Name] is not currently on probation and their employment is in good standing.
Should you require further verification, please contact:
[Manager/HR Name] [Title] [Phone Number] [Email Address]
Sincerely,
[Signature] [Printed Name] [Title] [Company Name]
Critical elements lenders look for
| Element | Why It Matters | Common Mistakes |
|---|---|---|
| Company letterhead | Proves the letter is legitimate | Using plain paper or personal email |
| Full legal name | Must match ID and mortgage application | Using a nickname or shortened name |
| Start date | Lenders want to see stable employment (usually 3+ months minimum, ideally 1+ years) | Omitting or providing approximate dates |
| Employment type | Full-time permanent gets the best treatment. Probationary or contract may reduce qualifying income | Not specifying permanent or leaving status ambiguous |
| Base salary | The guaranteed portion of income lenders rely on | Providing gross vs net confusion |
| Variable income (bonuses/OT/commissions) | Lenders average 2 years of variable income. Must be shown separately from base | Lumping everything together as “total compensation” |
| Contact information | Lenders may call to verify the letter | Missing phone number or using a personal number |
| Recent date | Must be within 30 days | Using an old letter from a previous mortgage application |
Income verification by employment type
Full-time permanent employees
| Required Documents | Notes |
|---|---|
| Employment letter (template above) | Must confirm permanent, full-time, not on probation |
| 2–3 recent pay stubs | Must show YTD earnings consistent with stated salary |
| Most recent T4 | Confirms annual income |
| NOA (some lenders) | CRA-verified income |
Part-time employees
| Required Documents | Notes |
|---|---|
| Employment letter | Must state guaranteed hours per week |
| 2 years of T4s | Lenders average 2 years of part-time income |
| 2 years of NOAs | Verify consistent income over time |
| Pay stubs (2–3 recent) | Verify current hours and income |
Contract / term employees
| Required Documents | Notes |
|---|---|
| Employment contract | Must show remaining term, rate of pay |
| 2 years of T4s (or T4As) | Demonstrates consistent contract work |
| History of contract renewals | Lenders want to see a pattern of continued employment |
| Pay stubs or invoices | Current income verification |
Lenders are more cautious with contract workers. Having 2+ years of continuous contracts in the same field significantly helps your application.
Commission-based employees
| Required Documents | Notes |
|---|---|
| Employment letter | Must state base salary (if any) and confirm commission structure |
| 2 years of T4s | Lenders use the 2-year average of commission income |
| 2 years of NOAs | CRA-verified totals |
| Pay stubs showing commission | Recent commission earnings |
| Commission schedule / structure | How commissions are calculated |
Important: Lenders use the lower of the 2-year average or the most recent year’s commission income. If your commissions are declining, the lower recent amount will be used.
Self-employed borrowers
| Required Documents | Notes |
|---|---|
| 2 years of T1 General tax returns | Full returns including all schedules |
| 2 years of NOAs | CRA-confirmed income |
| Business financial statements | For incorporated businesses — revenue, expenses, retained earnings |
| Articles of incorporation or business registration | Proof the business exists and is active |
| T2 corporate returns (if incorporated) | 2 years |
| Business bank statements (12 months) | Some lenders accept as stated income alternative |
Self-employed income challenges
The biggest issue for self-employed borrowers is that the income you report on your tax return is what lenders use, not your gross business revenue. If you aggressively minimize taxable income through business deductions, your qualifying income for a mortgage will be lower.
| Tax Return Income | Gross Revenue | Lender Uses |
|---|---|---|
| $60,000 | $150,000 | $60,000 (average of 2 years of tax return income) |
Options for self-employed with low reported income:
- B-lender stated income — Some B-lenders accept 12 months of bank statements to estimate income. Requires 20%+ down payment. Rates are 0.50%–2.00% higher
- Report more income — File amended returns reporting higher income. You will pay more tax, but qualify for more mortgage. Two years of higher reporting needed
- Larger down payment — A larger down payment reduces the amount you need to borrow, making qualification easier
Verification calls
After receiving your employment letter, many lenders will conduct a verification call to your employer:
| What They Verify | How |
|---|---|
| That you work there | Call the company’s main number (not a number you provide) |
| Your job title and status | Confirm details match the letter |
| Your start date | Confirm tenure |
| Your income | Confirm salary or wage matches the letter |
Tips:
- Alert your HR department or manager that a verification call may come
- Ensure the contact person named in the letter is available and expecting the call
- If your employer has a strict policy against disclosing income on the phone, discuss this with your broker in advance
The bottom line
A complete, properly formatted employment letter is one of the easiest parts of a mortgage application to get right — yet it is one of the most common causes of delays. Use the template above, include all required details, ensure it is on letterhead and dated within 30 days, and give your employer a heads-up about the verification call. For self-employed borrowers, start organizing your tax documentation well before you plan to apply.