The client
A newly landed permanent resident recruited to a skilled role in rural Prince Edward Island, under a signed, non-conditional employment contract with a start date several weeks out. His spouse had already been working locally since they landed. Rather than wait out the gap between landing and a first Canadian pay run — a period a growing share of first-time buyers now spend as recent newcomers — the couple wanted to buy as soon as they qualified.
Applicant
Newly landed permanent resident
Signed employment contract, start date weeks away
Contracted salary
$6,200/month
Non-conditional; begins on a fixed start date
Spouse's income
$3,100/month
T4, employed locally since landing
Purchase
$310,000, rural PEI
Property tax $230/mo; lender heat estimate $110/mo
Down payment
$15,500 — 5%, the minimum at this price
Price is under the $500,000 tier boundary
Other debt
$260/mo car loan
The only item on either bureau file
The problem
A signed, non-conditional employment contract is a real, enforceable promise of income — but it is not a paystub, and most lenders' default income policy simply doesn't count a salary that hasn't started yet. Read that way, this file had almost no income at all.
The file, counting only income already being paid
- ▸Income counted: $3,100/mo — the spouse's T4 income only
- ▸GDS at the qualifying rate: 79.5% — almost double CMHC's 39% maximum
- ▸TDS: 87.9% — the file could not come close to qualifying this way
Nothing about the applicant's own income was speculative — the contract was signed, the employer was real, and the start date was fixed. The gap was entirely a documentation one: a lender's system built around pay history had no field for a salary that was guaranteed but hadn't begun.
The numbers
Structuring the loan first showed exactly how far apart the two income treatments were — and confirmed the contracted salary, once recognized, closed the entire gap on its own.
| The insured loan | Amount |
|---|---|
| Purchase price | $310,000 |
| Down payment (5%, the minimum at this price) | −$15,500 |
| Base mortgage | $294,500 |
| CMHC premium at 4.0% (90.01–95% LTV band) | +$11,780 |
| Total insured mortgage | $306,280 |
| Ratio check at the qualifying rate | Spouse's income only | Contract counted |
|---|---|---|
| Minimum qualifying rate on a 4.89% contract rate | 6.89% | 6.89% |
| Payment at the qualifying rate, 25 years | $2,124/mo | $2,124/mo |
| Income used | $3,100/mo | $9,300/mo |
| GDS (payment + $230 tax + $110 heat) ÷ income | 79.5% | 26.5% |
| TDS (GDS numerator + $260 car loan) ÷ income | 87.9% | 29.3% |
The mortgage payment itself never changed — $2,124/mo at the qualifying rate, either way. The entire swing, from a file that could not remotely qualify to one that qualified with room to spare, came from whether the contracted $6,200/mo counted as income from its own start date, or not at all until a first pay stub existed.
The solution
A mortgage broker working under Prince Edward Island's licensing framework rebuilt the file around the contract itself, not around waiting for it to start.
First, distinguished a signed contract from an offer letter. An offer letter can be withdrawn; this employment contract was signed by both parties, non-conditional, and specified a fixed start date — closer in substance to a letter of employment for an already-working employee than to a speculative job prospect.
Second, moved the file to a lender willing to recognize contracted income ahead of a first pay run. Some lenders will do this only once a new hire has actually started and produced one pay stub; others, shown a genuinely non-conditional contract with a near-term fixed start date, will recognize it from signing. The distinction is exactly the kind of question already answered for domestic hires starting a new job, covered in how Canadian lenders treat income during a probationary period — a newcomer's guaranteed contract is a stronger case, not a weaker one.
Third, kept the spouse's own T4 income documented in full alongside it. The file was never resting on the contract alone — it was a combined-income file from the start, with one income already proven and one about to be.
The outcome
Approved insured at 95% LTV, with GDS at 26.5% and total debt service at 29.3% once the contracted salary was recognized — both well inside CMHC's maximums.
The purchase closed ahead of the contract's own start date; by the time the applicant's first Canadian pay run actually happened, the mortgage had already funded.
What to take from this file
- 01A signed, non-conditional contract is not the same thing as an offer letter. The difference — enforceability and a fixed start date — is exactly what let this file be recognized ahead of a first paystub.
- 02Waiting for a first pay run is a policy choice, not a universal rule. Some lenders require it; others will recognize guaranteed contracted income from signing, especially with a near-term start date.
- 03The mortgage payment never moved — only the income used to test it did. $2,124/mo at the qualifying rate, whether the file qualified at 26.5% GDS or failed at 79.5%.
- 04A combined-income file with one proven income and one about to be proven is not the same risk as an unproven file. The spouse's documented T4 income anchored the application while the contract closed the gap.
- 05Newcomer files reward asking the specific question early. Confirming a lender's policy on contracted-but-not-started income before submitting avoided a decline that had nothing to do with the applicant's real earning capacity.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸CMHC — Purchase (Mortgage Loan Insurance) — default-insurance premium schedule by LTV band (25-year amortization).
- ▸CMHC — CMHC Home Start — minimum down payment tiers (5%/10%) and the $1.5M insured price cap.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸CMHC — CMHC Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸4.89% contract rate — rates move daily; not a quote.
- ▸accepting a signed, non-conditional employment contract in lieu of a first Canadian paystub — each lender sets its own policy for how far ahead of a start date it will recognize contracted income.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.