How to save for a down payment when obtaining a mortgage for a Real Estate Purchase
In Canada, the banking industry imposes strict requirements on the down payment for real estate purchases. Despite the common misconception that having sufficient down payment is enough in obtaining mortgage approval, many obstacles may surface during the loan application process. Such delays can potentially cause difficulties in closing deals on time.
It is important to note that all banks in Canada are subject to oversight by government agencies with respect to the imple mentation of anti-money laundering, (AML) measures. As such, they are obligated to exercise strict control over all down payment transactions associated with the purchase of real estate.
Typically, underwriters examine the bank statements of the account where the down payment has been deposited for a period of 1 to 3 months. During this period, any large deposits such as an amount exceeding $5,000 will be questioned with regards to its origin and validity.
For instance, if the down payment comprises a gift of $15,000 from the mother and a gift of $10,000 from the brother, some banks may require 3 months of bank statements from both donors before transferring the funds to the purchaser. In the event that their accounts reflect no sizable inflows, apart from salary earnings, within the stipulated time frame, there would be no cause for concern. However, significant fund transfers during the three-month window may raise suspicion, thereby necessitating a detailed explanation.
To avoid complications and potential delays in obtaining mortgage approval, it is advisable to deposit the down payment in an account for at least a couple of months before initiating the real estate transaction. I look forward to the inquiries and questions from prospective clients and guide you further on your mortgage applications.
