Down Payment Documentation

Category: Renew Refinance,

When you purchase a home, Canada’s Anti-Money Laundering (AML) policy requires us to prove, for a (1) 90-day period, (2) where your money came from.

The 90-day period is satisfied if you can provide:

  • 3 months of bank/investment account statements, or
  • 90-day history of your transaction history.

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Confirming where your money came from can be easy or frustrating … Lenders are looking for a clear history of all of the money in your account.

Easy: If your down payment has been parked for 90 days in your bank account, and you provide us with your 3 months of account statements, then we’re done. Easy!

Frustrating: If there’s an influx of money into your account, lenders require explanations for all deposits. I.E., there needs to be a clear, trackable history for each dollar deposited.

Deposits Into Your Account?

Below are deposit examples and the documentation required for each:

Personal Income from Employment

Requirement Items:
1: 90-day account history.

2: (Maybe) Pay stubs matching deposits.

Information / Explanation
Your employer is usually listed on your account statement. Should the deposits not name your employer, the lender may request for pay stubs to match the pay deposits.

Gifted Down Payment

Requirement Items:
1: Confirmation of gift deposited into account.

2: Signed gift letter on the specific lender’s template.

Information / Explanation
Down payment gifts can only be from parents. Parental figures are sometimes acceptable but an explanation will need to be provided on the relationship between the giftor and giftee. Siblings and/or friends are not allowed to gift money because lenders assume their gift is “repayable.”

Timing of Gift Deposit: Your mother is going to gift you $10K to help you purchase your first home.

When does your mother have to deposit the $10K gift?
Answer: The gift should be transferred into your account at least 1 month prior to your home purchase, with the latest being 10 business days prior to funding.

Please let us know if your gift is to come from a different country. In most cases, overseas money must be in Canada at least 30 days prior to funding.

Transfers Between Two or More Accounts

Requirement Items:
1: Deposit account history.

2: Withdrawal account history.

Information / Explanation
If money is transferred between two accounts, there must be a confirmation of deposits into one account and withdrawals out of the other. This can double the paperwork involved if dates overlap.

Following the Money: Assume you had $50K in Account Z 90 days ago. You transfer that money from Account Z to Account Y exactly 45 days ago.

How is the 90-day history confirmed?
Answer: We would need to show Account Z from 90 days to 45 days ago, and Account Y from 45 days ago until now. There must be at least one overlapping day where the money transfer shows on both accounts.

Transfers: Investments to Your Bank Account

Requirement Items:
1: Deposit account history.

2: Investment account history.

3: (Maybe) Investment account balance.

Information / Explanation
This is the same as transferring between two accounts but many investment accounts make it difficult to obtain their history. Generally, the history can be found through a 90-day “Transaction History” request online.

Sometimes the investment’s transaction history only shows money coming in and out of the account. Another screenshot of the current balance may be required to confirm the account amount.

Government Tax Returns / Programs

Requirement Items:
1: Deposit account history.

2: (Maybe) NOA showing rebate amount.

Information / Explanation
The government is usually identified on your account statements. For larger deposits such as tax rebates, lenders generally request to match your deposit to your Notice of Assessment (NOA) rebate amount.

Proceeds from the Sale of a Home

Requirement Items:
1: deposit account history.

2: Statement of adjustment from a solicitor.

Information / Explanation
If you’ve sold a home and are using the proceeds of the sale as part of your down payment, the statement of adjustments showing the net amount deposited to you will be required.

If the sale of your home is happening after the new purchase, bridge financing and other documentation may be required. 

Borrowed Funds: Lines of Credit, Loans, or Credit Cards

Requirement Items:
1: Statement confirming funds available.

2: (Maybe) Deposit into a bank account.

Information / Explanation
Borrowed funds are allowed but deemed repayable. Depending on the source of funds, the monthly repayment is 3% of the amount to be borrowed or the qualifying rate at 25 years of amortization.

Borrowing for your down payment is under the “flex down payment” program and is only supported by some lenders.

We hope this has been an easy-to-understand page on Down Payment Documentation requirements. Please let us know how we can improve it.

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