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Mortgage Down Payments & What Lenders Are Looking For
You’re ready to buy the house of your dreams. You have a house you want to put an offer on, you’re ready and you’re excited. But, first, we have to make sure you have your mortgage down payment right and that it’s enough.
Banks are very specific on what they want to see for a mortgage down payment, depending on how the payment was obtained.
In this blog, I’ll share how banks like to see your mortgage down payment, and what they will or will not accept. It sounds simple, show them your bank statements and everything is good to go, but it can be a little more complex!
What lenders want to see for mortgage down payments.
The standard way lenders like to see your down payment is the most recent 90 days bank statements from whichever accounts the down payment is coming from.
The lenders will want the statements to be able to be connected, so it is best for at least one of them to have your name, account number and dates on it. If there are different accounts, make sure they can connect through a summary page. If you have questions about this, I will go over the main guidelines of how the lender likes to see your down payment based on different scenarios when we discuss your situation.
Common scenarios for down payments:
All from chequing & saving accounts.
The first scenario is when all of your down payment is coming from one savings or chequing account. Here’s what the lenders will want in order to approve you for a mortgage loan:
- Your most recent 90 days worth of bank statements. If it’s all from the same bank, there should be a summary page showing your account numbers, your name and a date.
- If you have several savings or chequing accounts and have moved the funds from one account to another, the lender will want to see the paper trail of the funds being moved. They will possibly want a 90-day history from each account the funds have been moved from or into. This can get annoying and tedious/invasive for clients, so it is best to leave all your funds where they are unless you have moved them more than 3 months ago. A lender won’t normally require proof past 3 months. But, there are always exceptions to the rules.
Down payment from RRSPs.
The second scenario is when part or all of your down payment is coming from your RRSPs. Here’s what the lenders will want in order to approve you for a mortgage loan:
- When the down payment is coming from RRSPs, a lender will want to see a current balance and usually will accept the most recent quarterly statement before that to prove a 90-day history. If you can get a 90-day history of deposits and balance they prefer that.
- Once they have the current balance and a quarterly statement, they will want you to redeem the funds into one of your accounts and show proof.
Gifted down payment.
The third scenario is when all or part of your down payment is coming from a gift. Here’s what you need to know about gifted down payments and what the lenders will want in order to approve you for a mortgage loan:
- You can only receive a gifted down payment when purchasing a home to live in, not for rentals. (Exceptions maybe made for private financing.)
- Funds must be from a direct family member such as mother, father, grandparents or brother or sister. (Exceptions may be made and we can discuss that during our conversation)
- The whole down payment can be a gift depending on strength of the application.
- The gift does not need to be in your account previous to getting an accepted offer.
- A lender will need a gift letter usually branded from them with the gifter’s info, signed and dated and the amount being gifted.
- The exact amount stated as being gifted should be the amount going into the account.
Questions about your down payment?
These are the main guidelines when it comes to getting your down payment organized for a home purchase. There are different scenarios and situations that may be an exception, so feel free to ask if yours is different. If you’d like to chat about mortgage down payments further, fill out the form below or give me a call at 250-826-3111.