Proving Your Down Payment: What Lenders Need to See

Before your lender advances a mortgage, it will want to see that the down payment is yours and where every dollar came from. This guide is for buyers getting a mortgage in BC: what lenders and insurers usually ask to see, source by source, how far back your statements need to go, and how to be ready before you remove your financing subject.

The short version

How much you need, and whose money it must be

The minimum down payment depends on the price, as CMHC and the Financial Consumer Agency of Canada (FCAC) set out:

• $500,000 or less. 5% of the price.
• $500,000 to $1.5 million. 5% of the first $500,000 and 10% of the rest. On a $900,000 home, that is $25,000 plus $40,000, or $65,000.
• $1.5 million or more. 20% of the price, and mortgage default insurance isn't available.

With less than 20% down, you will typically need mortgage default insurance; see Mortgage Default Insurance. FCAC notes that the minimum down payment normally has to come from your own funds. CMHC lists the common sources as personal savings, RRSP withdrawals, a non-repayable gift from immediate family and funds borrowed against assets you can prove you own.

The paper trail lenders look for

Lenders want to see your down payment in your accounts over time, not just a balance on the day you apply. How far back they look is a lender or insurer policy, not law. Three months is common: mortgage insurer Sagen's policy calls for at least 3 months of account statements, MCAP asks the same for savings and investments, and Peoples Group's guidelines say funds must have been in place for at least 90 days. Coast Capital's broker guidelines ask for a 60-day history.

• Complete statements. Each should show your name and account number, and together they should cover the whole period without gaps.
• Large deposits. Anything that isn't your regular pay may need an explanation and proof of where it came from. Peoples Group, for example, asks this for any deposit of $10,000 or more.
• Transfers between your own accounts. Include statements for both accounts, so the lender can follow the money.

Why so much detail? Lenders, mortgage brokers, real estate brokerages and BC notaries all have obligations under Canada's anti-money-laundering rules, which FINTRAC oversees. Lenders also need to know the money isn't an undisclosed loan: MCAP asks for confirmation that the funds are not borrowed.

Savings, investments, RRSPs and the FHSA

• Savings and TFSAs. Statements for the period your lender asks for. Avoid moving the money if you can.
• Investments. Peoples Group asks for a statement showing the account holder, account number and balance, and that the investment can be cashed. Prices can move before closing, so decide early when to sell, and keep the records of the sale and the transfer.
• RRSPs under the Home Buyers' Plan. If you qualify, usually as a first-time home buyer, the Canada Revenue Agency (CRA) lets you withdraw up to $60,000, using Form T1036. You need a written agreement to buy or build when you withdraw, and the home must generally be bought or built before October 1 of the year after your first withdrawal. Contributions made in the 89 days before a withdrawal may not be deductible, so ask your accountant before a last-minute top-up.
• First Home Savings Account (FHSA). You can contribute $8,000 a year, up to $40,000 in total. A qualifying withdrawal, made with Form RC725, requires, among other conditions, that you are a first-time home buyer, have a written agreement to buy or build before October 1 of the following year and intend to live there within a year. You can use the FHSA and the Home Buyers' Plan for the same home if you qualify for both.

Expect your lender to ask for statements showing the balance, and possibly proof of the withdrawal; CIBC's document checklist, for example, lists the Home Buyers' Plan withdrawal. For how the programs work, see First-Time Home Buyer Programs in BC.

Gifts, sale proceeds and borrowed money

• Gifts. Lenders usually want a signed gift letter confirming the money doesn't have to be repaid, and proof it has reached your account; MCAP asks for a bank statement showing the deposit. I cover who can give and what the letter says in Gifted Down Payments in Canada.
• Selling your current home. Expect to provide the sale contract with all subjects removed and current balances for any mortgage being paid off. MCAP also asks for a statement from your lawyer or notary confirming your net proceeds.
• Borrowed money. CMHC will insure some mortgages where the down payment comes from an unsecured personal loan or line of credit: for borrowers with strong credit, on one- or two-unit homes with 5% to 9.99% down, at a higher premium (4.50% instead of 4.00%). The loan must be arm's length and not tied to the purchase or sale. Sagen, another insurer, requires a credit score of at least 600 at those down payment levels and counts the loan payment in your debt ratios, so borrowing reduces how much you can qualify for.

Money from abroad, cash and crypto

• Savings held outside Canada. Move them early. Peoples Group, for example, asks for statements from the foreign account showing at least 90 days of history, a copy of the wire transfer and proof the money arrived in your Canadian account. Exchange rates can change the amount that lands, so leave a cushion. More in Buying a Home in BC as a Newcomer to Canada.
• Cash. Money kept at home has no record of where it came from, and lenders generally won't count funds they can't trace. Deposit cash savings well before you apply and expect to explain them.
• Cryptocurrency. Lenders generally won't count crypto itself. You would sell it, which can be taxable, move the Canadian dollars into your bank account and show the trail, such as the exchange's buy and sell records and your wallet history. Ask your lender, and your accountant, before you count on it.

Your deposit and your closing costs

The deposit you pay with your offer is part of your down payment. BCFSA, BC's real estate regulator, explains that once the deal completes, the deposit is added to the rest of your down payment, and suggests asking whoever holds it for a receipt. Keep that receipt with the statement showing the money leaving your account, because lenders often trace the deposit too.

Closing costs come on top. FCAC suggests budgeting 1.5% to 4% of the price, and with less than 20% down, BMO, for example, says you must have at least 1.5% of the price for closing costs beyond your down payment. On a $900,000 home, that is $13,500, so you would show at least $78,500 in total. See what those costs include in Closing Costs in BC.

Timing, and sending the money safely

Your lender reviews your documents during approval, and its commitment lists conditions, such as proof of down payment, that must be met before it advances the money. I suggest having your lender sign off on the down payment before you remove your financing subject; see Subject Clauses in BC.

Your lawyer or notary then tells you how much to send. The People's Law School notes that you usually meet them on, or a few days before, the completion date, and suggests asking your bank well ahead how much lead time it needs. Before you send anything:

• Call to confirm. Phone the office at a number you already know, not one from an email, and confirm the payment details.
• Treat last-minute changes as a warning. The Canadian Anti-Fraud Centre advises verifying payment instructions independently and confirming any change to banking details through contact information you trust.

More on these scams in Title Fraud and Real Estate Scams.

Questions buyers often ask me

How many months of statements does my lender need?

Often three months, or about 90 days, but each lender sets its own rule and some ask for less. The statements should show your name and account number, and any unusual deposit in that period will need an explanation.

Does the deposit I paid with my offer count toward my down payment?

Yes. When the sale completes, the deposit held in trust becomes part of your down payment. Keep the receipt and the statement showing the money leaving your account.

Can I use money from my TFSA or investment account?

Yes, if you can document it. Lenders want statements showing the balance and that the investment can be cashed. Sell early enough that a market drop doesn't leave you short.

Can I borrow part of my down payment?

Sometimes. Mortgage insurers accept some arm's length borrowed down payments, such as an unsecured line of credit. With less than 10% down, expect stricter credit rules and, with CMHC, a higher premium. The loan payment counts in your debt ratios, so you may qualify for a smaller mortgage.

Why does my lender ask so many questions about my money?

Lenders, mortgage brokers and real estate brokerages have anti-money-laundering obligations, and lenders must also confirm the money is yours and not an undisclosed loan. Clear answers and complete statements keep your file moving.

Planning your purchase? See how much house you can afford, read about getting a mortgage when you're self-employed, or try my mortgage calculator.

This article is general information, not financial or legal advice. The details come from CMHC, FCAC, the CRA, FINTRAC, BCFSA, Sagen, the Canadian Anti-Fraud Centre, the People's Law School and lenders' published guidelines, and were current at the time of writing; each lender sets its own document rules, so follow the conditions in your commitment. For CMHC's summary, see the general requirements for mortgage loan insurance.