DOWN PAYMENT REQUIRED
Take a proactive approach.
Some people wait until they’re ready to buy a house to look at their finances. We recommend taking a more proactive approach. It’s never too early to start investigating your options when considering a home purchase.
Things are coming together for you – nice car, great life and the perfect job. When it comes to qualifying for a mortgage, just having that good job may not cut it. Lenders like to see stability, in the form of good credit history and savings for a down payment.
In this post we’ll focus on down payment.
Down payment is the money paid to make up the difference between the purchase price and the mortgage amount. There are many different acceptable forms of down payment for mortgage qualifying. The minimum down payment for an owner occupied home is currently 5%. For the first time homebuyer the most common avenues for your down payment are RRSPs, savings, stocks, investments or a gift.
With the tightening of the lending regulations we are asked to provide a paper trail of sorts. The important thing to understand is that the lenders want to see a history of where the money comes from. When you have partial or the entire down payment coming from either your checking, savings, RRSP, mutual funds etc. you are required to provide documentation of accumulation of the funds by way of a 90 day history.
The entire funds do not need to have been in your account the full three months, but you need to show a gradual accumulation of the down payment saved and any large deposits or transfers to your account will need to be explained, as accumulated savings cannot be borrowed.
Lenders will ask for bank statements (with your name clearly identified), RRSP statements (with proof that the RRSPs are cashable) or investment certificates.
If the down payment has been gifted to you, (it must be from an immediate family member) you will need to provide proof of the gifted money deposited into your bank account, by way of bank statement (with your name and account number clearly identified) showing the amount and date of the gifted money. You will also be required to provide a completed gift letter to confirm gifted down payment. The deposited gifted amount must equal the exact amount shown on the gift letter.
Give us a call at your convenience to see where you stand with your down payment. You might be closer to that property than you think!