Home Sweet Home Down Payments On A House
Not all down payments are created equally and not all down payments are allowable under the laws governing them. Meeting all of the financing conditions for first time home buyer loans can be difficult since you do not have equity in a home to borrow against. We'll go over some examples that are and aren't allowable so you know what to expect when it comes to down payments when working with a mortgage broker in Edmonton.
Down Payment No's
In the first example, a couple who had been renting a home for a few years signed a purchase agreement with the landlord. In the month before the couple were to take possession, they performed some renovations which they paid for and were later reimbursed by the landlord. They intended to use this money for their down payment, but it was disallowed. The laws do not allow financial incentives as down payments, either by the seller or the agents involved in the sale.
Our second example is a person who doesn't believe in putting all of their savings into a bank. Our client managed to save $30,000 but it was kept under a mattress and never deposited, which meant it left no paper trail. This money is not allowable either and would have had to be deposited into an account and left there for at least 90 days before being used as a down payment.
Why There Are Laws for Down Payments
The basic laws when it comes to down payments for first time home buyer loans and other mortgage products are that the money cannot be a cash incentive from anyone involved in the sale and cannot come from crime proceeds. That's not to say a person who stashes their savings under a mattress is a criminal, but "found money", or money without a traceable history could just as easily come from money laundering efforts or other illegal activities. All lenders are obligated to trace the origins of money offered as down payments for those reasons.
The Brighter Side of Down Payments
There are still ways you can manage a down payment if you do not have all of the cash up front. Some of these include:
- A gift letter and proof of funds
- RRSP and some other investment accounts
- Sale of property
- Line of credit or personal loan
At Dominion Lending Centres, we have experienced mortgage brokers in Edmonton that can help you with finding out if your down payment is valid as well as help you through the mortgage process. Contact us today and one of the mortgage brokers on our team will be happy to help you.Request Mortgage Info