Employment Status | How it Impacts Your Mortgage Application

Silverman Mortgage | March 12, 2019

Chances are, if you're applying for a mortgage, you feel confident about the state of your current employment, or your ability to find a similar position if you needed to. However, your actual employment status probably means more to the lender than you might think. You see, to a lender, your employment status is a strong indicator of your employer's commitment to your continued employment.

So, regardless how you feel about your position, it's what can be proven on paper that matters most. Let's walk through some of the common ways employment status can be looked at.

Permanent Employment. This is the gold star, if your employer has made you a permanent employee, it means that your position is as secure as any position can be. When a lender see's permanent status (passed probation), it gives them the confidence that you're valuable to the company and that your income can be relied on.

Probationary Period. If you've only been employed with a company for a short period of time, you're going to have to prove that you've passed any probationary period. Although most probationary periods are typically 3-6 months, they can be longer. The lender will want to make sure that you're not under a probationary period because an employer can terminate your employment without any cause while you're under probation. There isn't a lot of confidence for the lender if you haven't made it through your initial evaluation.

Now, it's not really the length of time with the lender that is being scrutinized here, it's the status of your probation. So if you've only been with a company for 1 month, but you've been working with them as a contractor for a few years, and they're willing to waive the probationary period based on a previous relationship, that should give the lender the confidence they need. You'll just need to get that documented.

Parental Leave. If you're currently on, planning to be on, or just about to be done a parental leave, regardless of the income you're currently collecting, as long as you have an employment letter that outlines your guaranteed return to work position (and date), you can use your return to work income to qualify on your mortgage application. It's not the parental leave that the lender has issues with, it's the ability you have to return to the position you left.

Term Contracts. This is hands down the most ambiguous and misunderstood employment status as it's usually well qualified and educated individuals who are working excellent jobs with no documented proof of future employment. A term contract specifies that you will be paid to do a certain job from a start date to an end date. This is not a lot for a lender to go on when evaluating your long term ability to repay your mortgage. The real conflict here is that although most term contracts get renewed or extended, your employer is not making any guarantees.

So in order to qualify income on a term contract, there are several different ways lenders look at it. The best would be to establish the income on at least a 2 year period This is where the 2 year NOA or T4s come into play, the lender would simply take a 2 year average and use that. However sometimes lenders also like to see that the contract has been renewed at least once before considering it as income towards your mortgage application.

If you've recently changed jobs, or are thinking about making a career change, and qualifying for a mortgage is on the horizon, or if you have any questions at all, please don't hesitate to contact us anytime. We can work through the details together and make sure you have a plan in place.

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How Do You Port a Mortgage?

By Zach Silverman • April 30, 2025
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What To Do If You Have Missed A Payment

By Zach Silverman • April 23, 2025
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Bank of Canada Rate Announcement Apr 16th, 2025

By Zach Silverman • April 16, 2025
Bank of Canada holds policy rate at 2¾%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario April 16, 2025 The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. The major shift in direction of US trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations. Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally. Instead, the April Monetary Policy Report (MPR) presents two scenarios that explore different paths for US trade policy. In the first scenario, uncertainty is high but tariffs are limited in scope. Canadian growth weakens temporarily and inflation remains around the 2% target. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession this year and inflation rises temporarily above 3% next year. Many other trade policy scenarios are possible. There is also an unusual degree of uncertainty about the economic outcomes within any scenario, since the magnitude and speed of the shift in US trade policy are unprecedented. Global economic growth was solid in late 2024 and inflation has been easing towards central bank targets. However, tariffs and uncertainty have weakened the outlook. In the United States, the economy is showing signs of slowing amid rising policy uncertainty and rapidly deteriorating sentiment, while inflation expectations have risen. In the euro area, growth has been modest in early 2025, with continued weakness in the manufacturing sector. China’s economy was strong at the end of 2024 but more recent data shows it slowing modestly. Financial markets have been roiled by serial tariff announcements, postponements and continued threats of escalation. This extreme market volatility is adding to uncertainty. Oil prices have declined substantially since January, mainly reflecting weaker prospects for global growth. Canada’s exchange rate has recently appreciated as a result of broad US dollar weakness. In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter. Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation. Inflation was 2.3% in March, lower than in February but still higher than 1.8% at the time of the January MPR. The higher inflation in the last couple of months reflects some rebound in goods price inflation and the end of the temporary suspension of the GST/HST. Starting in April, CPI inflation will be pulled down for one year by the removal of the consumer carbon tax. Lower global oil prices will also dampen inflation in the near term. However, we expect tariffs and supply chain disruptions to push up some prices. How much upward pressure this puts on inflation will depend on the evolution of tariffs and how quickly businesses pass on higher costs to consumers. Short-term inflation expectations have moved up, as businesses and consumers anticipate higher costs from trade conflict and supply disruptions. Longer term inflation expectations are little changed. Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well controlled. Governing Council will proceed carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war. What it can and must do is maintain price stability for Canadians. Information note The next scheduled date for announcing the overnight rate target is June 4, 2025. The Bank will publish its next MPR on July 30, 2025. Read the April 16th, 2025 Monetary Report