Transcript of Video Blog:
Hi everybody, it’s Rowan Smith with the Mortgage Centre. I want to talk today about down payment confirmation. I get a lot of questions about this. People concerned with why we’re asking for so much detail, why we’re asking for so much paperwork, so I’m going to address that today.
Most commonly, with 95 percent of the lenders out there, when we request down payment confirmation, we’re going to need a 90-day history. Now sometimes that’s not always possible. Perhaps the person’s down payment is coming from the proceeds of their existing residence.
Well, in those cases, I don’t need 90 days bank statements, I typically need the offer to purchase with the subjects removed, showing that the person has a firm offer on their property.
We also need a mortgage statement or something to confirm what their existing balance, if anything is on that. So that will establish the purchase price and the mortgage amount, and that difference is residual equity.
Now some lenders will want it a step further, and they’d like to see an Order to Pay. And an Order to Pay is a document you receive at the time of closing. This only comes into effect if the sale of the property occurs prior to the purchase of the new property.
And I don’t mean one day, I’m talking, if maybe somebody sells in June and they don’t buy until September. There’s been a period of time in there where the bank is going to want to see that those funds in there are in fact the person’s.
Now, you may say, “Why does the bank want 90 days? Why such a long history?” What they’re trying to do is establish that the funds are non-borrowed. They want to know that the dollars that a person have are not being borrowed by friends or family or some other distant relative. More importantly, that they’re not some sort of proceeds of crime from something illegal.
Typically, although 90 days doesn’t certainly get around that fact, if we can have 90 days of history of funds, chances are the money isn’t borrowed. So they’ll want to see bank statements, or savings accounts statements or RSP statements or what have you or something to prove it.
There are lenders that will accept less time for down payment, for when they’re doing a mortgage, some as low as 30 days. But it’s impossible for most clients to know which lender will do 30, which will want 90.
So if you’re looking for a lender and you can only provide maybe 60 days confirmation, because perhaps you got a large bonus, or perhaps you sold a vehicle, or something else that could be quite difficult to document without a complete hassle or paper chase, give me a call. From the Mortgage Centre, I’m Rowan Smith.
