Let's talk down payments

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Cash is nice, but your lender wants to see your statements.

When you are getting ready to purchase a home, most likely you will only concern yourself with the knowledge that you have access to sufficient funds to complete your purchase. You may not be aware that there are very specific rules that every lender must follow to confirm the source of your down payment funds.

Proving the source of your down payment funds is a requirement that every lender will need prior to issuing a final approval for your mortgage, and if you are unable to provide the required documents, your mortgage may not fund on time. 

These rules are to comply with Canada’s Anti-Money Laundering & Anti-Terrorist Financing Requirements, along with the B-20 guidelines from OFSI (Office of the Superintendent of Financial Institutions).

If the down payment is coming from your own resources, you must provide a full 90 day history of the account or accounts (savings, chequing, RRSP, mutual funds, etc.) where the funds are located. You must also provide the source of any deposits over $1000, excluding your payroll deposits. If your down payment funds are in multiple accounts, then you need to provide statements covering 90 days for each of these accounts, ensuring that the statements confirm ownership. Don’t black out anything on the statements.

So you can see that any cash you have under your mattress or in a shoe box will not satisfy the requirements. Your best course is to make deposits regularly into your bank account.

If all, or a portion, of your down payment is coming as a gift from an immediate family member, then they will need to sign a gift letter confirming that no re-payment of the funds is required. They will also need to show that the funds are available in their bank account, and you, in turn, will need to provide confirmation that the funds have then been transferred into your bank account.

There are specific requirements for other sources of down payments funds such as the sale of an asset, bridge financing or if you are planning to use borrowed funds, so please ensure that you check the requirements in advance with your mortgage broker. 

It is always best to be organized with your down payment confirmation prior to placing an offer on a home. This will make the whole process go smoother, and will ensure that you are able to meet the timeline to obtain your mortgage financing final approval.

An experienced mortgage broker will review all of these requirements with you as part of the pre-approval process. 

If you would like to know more about the requirements for the confirmation of down payment funds, please give me a call at 250.826.3543, or email [email protected] 

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.