Lenders always require proof of down payment when financing a property purchase. This verification ensures that you have adequate funds to close the deal, which allows the lender to confidently proceed with the transaction. Additionally, by checking the source of your down payment over a 30- or 90-day period, lenders can confirm that the funds have been legitimately accumulated and that no fraud has been committed.
The lender uses the following calculation – full down payment + 1.5% of the purchase price for closing costs – the amount of deposited cheque = the amount the lender needs to see in your bank account(s).
For example, =
Purchase price: $500K
Down payment: $25K
Deposit cheque: $15K
Full down payment ($25K) + 1.5% of the purchase price ($7,500) – deposit cheque ($15K) = $17,500 needs to show in your bank account(s).
Types of down payment:
Personal savings / Investments
A gift from family
Sale of a property
Inheritance
Business or corporation