When you apply to buy or rent a home, most mortgage lenders and landlords will ask for a letter of employment to verify your income and job stability. Read this, if you want to know what should an employment letter look like and how to get one in Canada.
What Is An Employment Letter?
An employment letter is a document that you can acquire through your employer, then use as proof of your income and job status. While there are several ways to use an employment letter, it’s a standard requirement when you apply for personal loans, lines of credit, leases, and mortgages because it shows how capable you are of making payments.
When Do You Need An Employment Letter?
A employment letter can come in handy more often than you think. For instance, here are some common situations where you may need a letter of employment in Canada:
To Rent A Home
Rental properties can be very expensive to finance and maintain, so most landlords and property managers look for trustworthy, financially stable tenants. Landlords will often use these letters to determine a tenant’s risk level. People with jobs (especially full-time jobs) are more likely to pay rent and keep up with their other bills and debts.
Your landlord may also check your credit score to evaluate your creditworthiness, so be sure you apply when your credit score is in a healthy spot.
To Get A Job
When hiring new employees, some employers will perform background checks to make sure applicants have the required work experience. While some may ask for a personal reference, others may ask for a job reference letter. So, if you apply for a job in Canada, be ready to present a letter from your current or most recent employer.
To Qualify For A Mortgage
Homes can cost hundreds of thousands of dollars, so a solid letter from your employer is often mandatory when you apply for a mortgage. Applicants with part-time or unsteady incomes often have trouble qualifying for large loans, low-interest rates and good terms. A letter of from your employer can help you adjust the terms of your current mortgage as well.
You can request a letter of employment for a mortgage from your supervisor or human resources department. Remember to include it with your lender’s required documents when you apply. This can help speed up the process and prove your creditworthiness. A high credit score is also important if you want the best chances of approval and the lowest interest rates.
What Should Be Included In An Employment Letter?
The stronger your letter of employment is, the better your chances of approval will be for whatever financial product you’re trying to get. Along with your contact details (and those of the recipient), your letter should include the following information:
Most landlords and lenders prefer to see an official company letterhead featuring your employer’s company name, logo, address and contact details. The more reputable the company, the better the approval results.
Additionally, your letter of employment should contain any other relevant information, such as your job title, number of work hours, and the year you started. A brief description of your job duties could be required too.
One of the most essential parts of any letter from your employer is your salary information and pay/compensation structure. It should also state whether you work part-time, full-time, freelance, or on contract.
Date and Signature
Once your letter of employment contains all the mandatory information, it just needs to get signed and dated by a representative of your employer (usually within 60 days of applying for a mortgage, lease, or new job).
Other Information You May Need To Include
Depending on who you’re providing the letter of employment to, some may require additional information. For example, some lenders will ask an employer for additional information about your:
- Seasonal wage changes
- Recent income changes
- Pay deductions
- Overtime income
- Job probation
- Maternity or paternity leave
Do All Lenders And Landlords Need A Letter To Confirm Employment?
In Canada, not every lender or landlord will ask you for a physical letter that details your employment when you apply for a job, lease, or loan. However, most need to verify your financial information (mainly your income) by looking at documents like your pay stubs, bank statements, and/or notice of assessment(NOA) from the Canada Revenue Agency (CRA).
If your lender doesn’t require an actual letter, they might contact your employer directly by phone or email instead. They may even offer a special form that your employer can fill out on your behalf. Don’t forget to obtain their signature for this.
Thinking About Renting or Buying A Home In Canada?
Then don’t forget to ask for a letter from your employer, because it can drastically affect your chances of approval for the best rental deals, loans, terms, and interest rates available. Speak with your employer, landlord, or lender today for more information about letters of employment today.