How Long at a Job?

One of the most common questions homebuyers ask when applying for a mortgage is, “How long do I need to be at my job to qualify?”

Prime lenders assess employment history as a key factor in determining a borrower’s financial stability and ability to make mortgage payments. While a longer, consistent work history can strengthen an application, the specific requirements vary based on employment type. For salaried employees, completing a probationary period—typically three months—plus another 9 months (so 1 year altogether) is often enough, while commission-based and self-employed borrowers generally need at least two years of verifiable income.

For borrowers who don’t meet the strict employment requirements of prime lenders, alternative lenders (B-lenders and private lenders) offer more flexible solutions. Alternative lenders are often willing to approve mortgages with shorter job tenure, fluctuating income, or non-traditional employment structures. Self-employed individuals, contract workers, and commission-based earners who may struggle with traditional qualification rules can often secure financing with as little as six months of demonstrated income or a strong down payment. While the flexibility is appealing, these loans often come with higher interest rates but looser debt servicing ratios and often more flexible credit scores.

In this article, I’ll break down how different employment situations impact mortgage eligibility with prime and alternative lenders and what borrowers can do if they don’t meet the standard requirements.

Prime Lender Requirements

Required Employment Time (Prime Lender)

Documentation Requirements (Prime)

Alternative Lenders

Stated Income Programs

Prime Lender Requirements

To qualify for a prime mortgage with a prime lender, a borrower’s employment history plays a crucial role in determining their stability and ability to repay the loan. Prime lenders generally require applicants to demonstrate consistent employment for at least 1 year.

Key Considerations:

• Employment Stability: A stable employment history indicates financial reliability, which is crucial for mortgage approval.
• Probationary Period: Lenders do not consider you to be permanently employed during the probationary period of a new job. However, when this period has passed and you are officially employed, the probationary time is included in your period of employment.
• Industry Experience: If you’ve recently changed jobs but remain within the same industry, especially in a similar or more advanced role, lenders view this favourably. Demonstrating a history of consistent employment within the same field can mitigate concerns about job stability. For example, if you have worked in the same industry in a similar role for 3 years and then move to a new employer for a year, your employment experience from an underwriting perspective is generally considered to be 4 years.

Required Time (Prime Lenders)

Different lenders have different guidelines regarding the minimum length of time a person needs to be continuously employed by an employer. The required time at a job varies based on the type of employment:

1. Salaried and Full-Time Employees

• Minimum time at job: 12 months (probation period completed)
• Most prime lenders require a borrower to be past their probationary period (typically 3 months) before considering their income for mortgage approval.
• If the borrower has been in the same industry for several years, even if they have recently changed jobs, lenders may be more flexible.

2. Hourly Employees (Full-Time)

• Minimum time at job: 12 months (varies by lender)
• If the borrower has consistent hours, lenders will use their guaranteed hours for income qualification.
• If hours fluctuate, lenders may take an average of the last 2 years of income (T4s and pay stubs).

3. Contract Employees

• Minimum time at job: 2 years preferred, but some lenders accept 6-12 months with a contract renewal.
• If the borrower has a history of contract renewals or has been in the same industry for several years, lenders are more flexible.

4. Self-Employed Borrowers

• Minimum time in business: 2 years
• Most prime lenders require two years of filed tax returns (T1 General) and Notice of Assessments (NOAs).
• Alternative lenders (see below) may accept one year if income is strong.

5. Commission-Based or Bonus Income

• Minimum time at job: 2 years
• Lenders will use an average of the last 2 years of income (T4s or NOAs).
• If there’s a large year-over-year increase, some lenders may only use the lower income figure.

6. Part-Time Employees

• Minimum time at job: 2 years
• Lenders want to see a consistent history of earnings to ensure income stability.

7. Temporary Employees or Gig Workers

• Usually not accepted by prime lenders unless there is a 2-year history of consistent earnings.
• Alternative lenders are a better choice.

Exceptions and Additional Considerations

• If a borrower recently changed jobs but has been in the same industry for several years, lenders may accept this if they have a strong employment history.

Documentation Requirements

To support your application, prime lenders typically request the following employment-related documents:

• Employment Letter: This should detail your job title, start date, salary, and employment type (full-time, part-time, contract). Ensure the letter is on company letterhead and signed by an authorized representative.
• Recent Pay Slips: Current pay stubs no earlier than 60 days prior to the original application submission date
• Annual Documentation (annualized income on the current document and the income on the annual document, or annualized year-to-date paystub income and current paystub income) (most recent NOA, previous year-end paystub, most recent T4).
• Bank Statements: Statements from the last three months showing payroll deposits can further substantiate your income.

These documents help prime lenders assess your financial stability and ability to manage mortgage payments.

Alternative Lenders

For borrowers who don’t meet the strict employment requirements of prime lenders, alternative lenders (B-lenders and private lenders) offer more flexible solutions. Prime lenders take much more of a ‘check the box’ approach to underwriting. They must be far more conservative in their lending as they are usually lending out depositors’ money. Consequently, they are more highly regulated. Alternative lenders take more time on each file. They look more deeply into a client’s application and the business case submitted by the mortgage agent and ask themselves, can we see a way to support this client, can we structure this mortgage so that it makes sense? This approach takes more time and effort, and thus lender fees may also apply to mortgages obtained through alternative lenders. However, because the nature of work is changing, and few Canadians get a job out of school, work there for 30 years, get a gold watch, and a nice pension… alternative lenders are a growing and very important part of the mortgage lending landscape.

Alternative lenders are often willing to approve mortgages with shorter job tenure, fluctuating income, or non-traditional employment structures. Self-employed individuals, contract workers, and commission-based earners who may struggle with traditional qualification rules can often secure financing with as little as six months of demonstrated income or a strong down payment.

For example, for someone who works for themselves or works on contract, they cannot prove where their next piece of work is going to come from. There is no one to provide a letter of employment that says this person has this salary or these guaranteed hours for this much compensation. So they cannot demonstrate through documentation what they will be earning going into the future.

Traditionally, this makes self-employed or contract workers a more risky demographic to underwrite, especially for prime lenders. Yet we all know that self-employed workers can make far more money than salaried employees, especially when we consider that from 2005 to 2025, real wages for the majority of workers have experienced minimal growth. According to the Economic Policy Institute, wages for the bottom 90% of earners increased by only 15% between 1979 and 2013, indicating a long-term trend of wage stagnation. Do you want to make money? Work for yourself!

Enter alternative lending. Who says prime is less risky?

Stated Income Programs

A Stated Income Program is a lending option designed for self-employed borrowers or individuals with non-traditional income sources who may not have verifiable income documents like traditional salaried employees. Instead of relying on traditional income verification methods (e.g., tax returns, pay stubs, or T4s), lenders allow borrowers to “state” their income, which is then assessed based on reasonability and industry standards.

Key Features of a Stated Income Mortgage Program

1. Designed for Self-Employed and Commission-Based Workers
   • Typically used by small business owners, freelancers, commission-based employees, or gig economy workers.
   • Useful for borrowers who write off a large portion of their income for tax purposes, reducing their reported net income.
2. Income Declaration and Reasonability Test
   • Borrowers declare their income based on what they reasonably earn.
   • Lenders use industry benchmarks and bank statements to assess if the stated income is reasonable for the applicant’s profession.
3. Lender & Insurer Requirements
   • Some lenders may require bank statements (typically 3-12 months) to support income claims.
   • Mortgage insurers like CMHC, Sagen, and Canada Guaranty offer programs for self-employed borrowers but usually require strong credit and a reasonable loan-to-value (LTV) ratio.
4. Higher Down Payment and Credit Score Requirements
   • Typically requires a minimum of 10-20% down payment (depending on the lender and whether the mortgage is insured or uninsured).
   • Strong credit history is necessary to compensate for the lack of traditional income verification.
5. Higher Interest Rates and Limited Lender Options
   • Rates may be slightly higher than traditional mortgages due to the increased risk for lenders.
   • Often available through alternative lenders (B-lenders) and private lenders, but some major banks offer stated income programs under specific conditions.

Who Offers Stated Income Mortgages in Canada?

• TD Bank presently has a Stated Income Program; most other chartered banks in Canada do not
• Monoline Lenders & Alternative Lenders (B-Lenders): More flexible stated income options with reasonable interest rates.
• Private Lenders: Willing to accept stated income but with higher interest rates and fees.

Example Scenario

A self-employed real estate agent earns $150,000 annually but reports only $50,000 in taxable income after deductions. A stated income program allows the lender to consider a more reasonable income figure (e.g., $120,000) based on bank deposits and industry norms.

Summary

When applying for a mortgage in Canada, employment history plays a crucial role in determining eligibility, particularly for prime lenders who typically require at least one year of consistent employment. Salaried employees must complete a probationary period, while commission-based and self-employed borrowers generally need two years of verifiable income. Alternative lenders offer more flexibility, approving borrowers with shorter job tenure or fluctuating income, though at higher interest rates. Stated Income Programs cater to self-employed individuals who lack traditional income verification, allowing them to declare income based on industry benchmarks and bank statements. These programs often require a strong credit history and higher down payments, but not always; everything is very lender-dependent. As the workforce shifts toward non-traditional employment, alternative lending options continue to grow in importance, providing viable mortgage solutions for a wider range of borrowers.