When determining the size of a loan a lender will fund, it’s not only the amount of income that a homebuyer takes in that makes the difference but how it’s qualified. Income can come in many forms, so here’s a quick guide as to what to expect to show when applying for a mortgage.

Occupation Income

If you’re employed, your income is based on regular guaranteed hours or salary, confirmed by a letter of employment, as well as a recent pay stub. For overtime, bonuses, or commissions, your income is based on the average of the last two years, then added to your base income.

If you’re in a business sole proprietorship, the average of your last two years are used as income, given the more recent year had higher earnings. This can be grossed up at 15%. If lower earnings were reported in the most recent year, only that year will qualify income.

If you’re incorporated, the average of your last two years are used as income, given the more recent year had higher earnings. If lower earnings are reported in the most recent year, then just that year will be used. This could be in the form of dividends or a T4, whether either or both are used. T4 income can be grossed up by 15% if income is higher in the most recent year.

Rental Income

If the property you’re buying has a second suite as a mortgage helper, a portion of this up to 100%, varying between lenders, can be considered part of your qualifying income if your down payment is lower than 20%. If your down payment is 20% or higher, a portion of the rental income can offset the mortgage payments when qualifying, having an even more pronounced effect. As per usual, a mortgage agent will use the lender in your best interest.

Retirement Income

Regular monthly retirement income, such as CPP payments and payments from employer pension plans, can be applied directly to qualifying income.

Investment Income

Regular investment income, such as interest payments and dividends, can be used. Lenders generally want to see an average over the previous two years when using this to qualify.

Canada Child Benefit

If you’re a parent receiving Canada Child Benefit payments, 100% of that can add to your qualifying income. However, lenders typically only allow this only if your children are 12 and under.

Support Payments

If you’re receiving child support or spousal support, this can be applied to qualifying income. The required documents and history are subject to lender conditions.

Certain lenders could have different policies and exceptions, and there are other types of income that can be used at their discretion, but this is to be taken as a general guide.