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Know your Down Payment Options

May 22, 2013

How much of a down payment do you need to purchase a home?

On the May 24st episode of CP24’s ‘Hot Property’, a hot topic will be on Down Payment Options – as spring time rolls around, first time home owners and experienced home owners inevitably start to look around at new homes and consider what their options are.

Well you may not be aware of this but 5% and 0% down payment options are still available in today’s market with the right credit score and the right debt to income ratios. For the majority of home buyers out there looking to put more money down on the purchase of your new property, it is important to understand what your lender will view as a viable down payment option.

A lender will not issue their formal unconditional commitment or approval until you provide them with confirmation of down payment (and closing costs) in one or more of the following forms:

Down Payment from your own resources

You must supply verification of accumulated savings from non-borrowed funds. This may be in the form of:

• Copy of your bank statements (with three months history and large deposits MUST be explained)
• RRSP, TFSA, Canadian Saving Bonds, Term Deposits
• Stocks, mutual funds or a statement from your investment advisor

Down Payment from a gift

All or part of the minimum equity requirement plus closing costs may be provided by way of a financial gift as long as all of the following conditions are met:

• The donor is an immediate relative of the borrower
• The lender has verified that the money is a genuine gift
• The lender has verified that the funds are in the borrower’s possession prior to the time of the application to CMHC or Genworth for mortgage insurance.
• Proof of your deposits on any new home construction.

Down payment from the sale of an existing property

You will be required to provide a copy of the unconditional Agreement of Purchase and Sale on your existing property. The Agreement of Purchase and Sale needs to be accompanied by a copy of a recent mortgage statement showing the balance owing on any mortgages presently registered against the property. The difference between the sale price and the mortgage owing will substantiate the funds available for your down payment.

If you have any more questions regarding the down payment on the home of your dreams and what your options are, do not hesitate to contact us at info@monstermortgage.ca or to fill out a contact request.

Also, tune into CP24’s ‘Hot Property’ every Thursday night at 7PM and you can have your mortgage question answered live on-air. If you’ve missed an episode, and need to know the latest on mortgages in Canada, you can watch previous shows online here.