Down payment tips – how to document the details

You’ve got your down payment and you’re ready to go. Congrats!  So what’s next?

Confirming the details

To fulfill the conditions of your mortgage approval, you’ll need to document the heck out of everything. It’s required by all lenders to protect against fraud and to prove that you are not borrowing your down payment.

Here’s what you’ll need:

1. Provide a 3-month history…

… of any bank account(s) where you have been assembling your down payment. It’s critical that your name is linked to the account; some internet printouts don’t show a name.  Talk to your mortgage professional about how to deal with that.

2. If you had any large deposits…

… within the last three months, you’ll need to show where they came from.  i.e. if you sold your car, show a copy of the bill of sale. If you transferred money in from another account, bring the 90 day history for that account too.

3. If all or part of your down payment will be a gift…

..a gift letter must be signed. Each lender has their own form for the letter. A bank statement from the giver may also be needed to verify the funds, especially if it’s for a large amount. Gifted funds can only come from immediate family members (parents, grandparents, siblings). Finally, be prepared to show the funds deposited to your account no later than 15 days prior to closing.

4. If you’re using money from your RRSP…

… provide a 3-month history of the RRSP account too. If you are withdrawing under the Home Buyer’s Plan, the funds must have been in the account for 90 days.  And make sure you budget enough time (about 30 days) to make sure your funds can be transferred out in time.  Check out my post about the Home Buyer’s Plan to get all the details.

5. If you are getting money from outside the country…

… get the money into Canada at least 30 days before funding, and provide a 90 day confirmation via bank statements from the previous account. Some lenders will ask that the money have been in a Canadian bank account for 90 days or more, so make sure you investigate this as early as possible, if this applies to you!

6. Regularly deposit all cash in the bank

… don’t stockpile at home!  See the point above regarding large deposits.  Lenders don’t like to hear that the money has been sitting under your mattress.   

7. If your down payment is coming from the sale of your existing home…

… provide a firm purchase and sale agreement, and the current mortgage statement.  Sometimes lenders will also ask to see a copy of your real estate lawyer’s letter of disbursements which shows how the proceeds of the sale will be divvied up.

8. And here’s a bonus point…

… you’ll also need to verify that you have an additional 1.5% of the purchase price to cover closing costs.  Here’s what you need to know about budgeting for those – click here.

You’re probably realizing by now that the mortgage process requires a lot of paper.  Take heart…  And perhaps plan to plant a tree or two when you take ownership of your new home!

If you have any questions, please don’t hesitate to get in touch with me.

Downpayment

Photo [c] Thanakorn Lappattaranan for vecteezy.com