Understanding Down Payment

Understanding Down Payment

Downpayment seems to be one of the most complicated parts of the mortgage process. Seemingly, piecing together your down payment history is a straight forward task; however, it’s the single most frustrating part of our job. Here’s what banks want to see…every single time:

Downpayment From Savings, RRSPs And Investments

When your down payment comes from one of these sources, banks want to see a 90 day history of the funds. It’s imperative that your name appears on the statement/screen capture to prove that the account is in fact yours. If you can’t provide a statement with your name on it, then cross reference the account number with something with your name and account number on it. If there are any large deposits during that 90 day period, be prepared to provide a paper trail for it.

Downpayment From The Sale Of Your Home

Often times, your down payment will be from the sale of your existing property. Under this scenario, you’ll need to provide a copy of the firm sale contract on your place along with the most recent mortgage statement (with your name and property address on it). If you sold your home a while back and already have the cash, then you’ll need to provide the statement of adjustments from your lawyer (notary if applicable), and show the deposit into your account.

Downpayment From Secured Credit Line Or Mortgage Refinance

If you are borrowing against an existing property, then you need to show either a) a current secured credit line statement (HELOC) with the amount available to you and the prevailing interest rate or b) a current mortgage statement and proof of the refinanced money deposited into your bank account.

Downpayment From Gift

If you don’t have the cash and are getting it in the form of a gift, it has to be from immediate family – mother, father, sister; brother. Don’t tell us a friend is giving you a gift. No one is that nice, really. In terms of documentation, we’ll need a gift letter signed and dated (we’ll provide this) along with proof of the exact money deposited into your bank account.

Things To Avoid When It Comes To Downpayment

  1. Don’t use your credit cards or unsecured lines. This is unacceptable. Furthermore, don’t pay off your credit lines or cards and think that you can re-advance it. Banks don’t like that.
  2. Don’t move the money around from various accounts over and over. This will make your life hell when it comes to proving your downpayment, rest assured.
  3. Don’t ask why it’s the bank’s business – they’re about to lend you a lot of money; accordingly, it’s their business.
  4. Don’t hide pertinent information up front. There’s no sense misrepresenting anything as we’ll find out.
  5. Don’t wait until the last minute to organize your finances. You’re buying a house, it’s a big deal! Being organized will enable you to get through both the real estate and mortgage process without any issues.

Downpayment is a tricky part of our business. We’re still perplexed by how complicated it becomes when it doesn’t need to be. Follow these guidelines and the process will be seamless.