Did you know there are actually multiple different sources you may use as a down payment? 

Personal savings and chequing account- you will need 90 day’s worth of bank statement history 

RRSP (via Home Buyer’s Plan) - provided the funds have been accounted for at least 90 days

TFSA (Tax Free Savings Account) - must be verified via a 90 day history 

GIC (Guaranteed Investment Certificates) - So long as funds are no longer in term and a 90 day history is available

Gifted funds from immediate family members - This requires a signed gift letter stating that the gifted monies are not loaned, and therefore do not need to be repaid in the future; this may entail a statement letter from the giftor. There must also be proof that funds have been deposited into your account. 

Sale of assets or property - you may sell any owned property or chattels to secure a loan. There must be a legitimate trace of monies from the sale of any assets through a bill of sale or receipt. You must also include proof that funds have been deposited into your bank account.  

Inheritance - Yes, you may use an inheritance as a down payment. Provided there is an estate settlement or Will to show the origin of the funds and a deposit of the funds into your account. 

Equalization payments - equalization payments can be applied toward the down payment in a spousal buyout situation—particularly under the CMHC Spousal Buyout Program. This program allows one spouse to finance up to 95% of the property’s value, with the equalization payment often qualifying as the required 5% down payment.

Lotto winnings - So long as you can provide up to 90 days of history on your bank statement of deposited funds and you have the proper legal documents to show the validity of your winnings.

So, you’ve saved, and saved, and saved; every last dollar for a down payment on your dream property. You followed the recommended instructions and have gotten pre-approved. Now, you contact a broker to assist you to get a loan from the bank to finance your dreams. But, you were declined from the time of pre-approval to approval. Why? 

Changes in employment or income? Lenders typically look for two years of stable income and employment. Switching jobs, or quitting right before being approved can cause the banks to take a step back and assess the new risk. Lenders also will not accept probationary employment. Be sure to also account for the change in pay when switching jobs. Is the salary the same? Do you get overtime or bonuses? Lenders will not consider overtime or bonus income under two years of history. 

Credit score issues? A drop in your credit score due to missed payments, increased debt, or new credit inquiries can impact your mortgage approval. Lenders assess your creditworthiness to determine your ability to manage mortgage payments. Take a look at how credit is scored:

• 35% Payment history (are you paying your debts on time?) 

• 30% credit utilization (How much credit are you using vs. how much is available. Maxing out a credit card can have damaging effects on your credit score.) 

• 15% Length of credit history (A longer history of responsible credit use potentially leads to a higher credit score)

• 10% Credit mix (having a variety of credit cards, revolving credit, or installment credit can show a lender you manage different types of credit responsibly and thus, positively impact your credit score) 

• 10% new credit (Applying for new credit can temporarily lower your credit score as it may be an added risk for lenders. However, your score may recover as you responsibly build credit and history.) 

Large purchases or new debts? Implementing new debts, like financing a vehicle or making a large purchase, can negatively affect your Debt Service Ratios, targeting you as a high-risk client. 

Property Appraisal issues? Some lenders require an appraisal report to be completed during the loan process. This report assesses the estimated value of the home. If the report comes back that the appraised value is lower than the sale price, the lender may flat-out decline the approval. This is because they don’t want to loan more than a properties worth. i.e. protect their investment. 

Failure to pass the mortgage stress test? In Canada, borrowers must pass what is called ‘the stress test.’ This is a test performed by a broker that ensures you, the borrower, can withstand a rising interest rate. (usually 2% above the prime lending rate)

The Home Buyers Plan is a federal program to help new homebuyers achieve their goal of homeownership. The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw a maximum of $60,000 from their Registered Retirement Savings Plan (RRSP). This enables you to purchase and/or build a home without having to pay tax on the withdrawal. To be considered a first-time home buyer, you, or any spouse/common-law partner must not have owned and lived in a property, for the last 4 years. This includes the current calendar year in which the HBP withdrawal is made. 

Key features: 

• The RRSP withdrawal limit is $60,000. A whopping $25,000 increase from 2024!

• You must be a Canadian resident at the time of withdrawal 

• Must intend to occupy the home as your principal resident, within one year of purchase or construction 

• You must sign a written agreement to purchase or build a qualifying home 

• You must repay your withdrawal amount over 15 years back into your RRSP. This can be through installed payments.

• RRSP contributions must be made at least 90 days before the withdrawal to be eligible under the HBP. Otherwise, your withdrawal may not be deductible for tax purposes. 

• Multiple withdrawals must be made within the same calendar year