90 Day Source Of Down Payment Rules Explained by A Mortgage Broker Kelowna
Purchasing a home and securing a mortgage is a milestone for Canadians. However, understanding and meeting the rules and requirements set by lenders can be overwhelming. One particular rule that often confuses homebuyers is known as the “90 day source of down payment” rule. As a Mortgage Broker Kelowna, in this blog post, we will delve into the intricacies of this rule how Canadian lenders utilize it and why transferring funds can pose challenges during your mortgage journey.
Additionally, we will provide insights from a Mortgage Broker based in Kelowna to help you navigate this critical aspect of home financing.
Section 1; Grasping the Concept Behind the 90 Day Source of Down Payment Rule
1.1 What is the 90 Day Source of Down Payment Rule?
The 90 day source of down payment rule serves as a guideline employed by Canadian lenders to ensure the authenticity of a borrower’s down payment.
It mandates that any funds you plan to use as your down payment must have been in your possession for at least 90 days before the mortgage funds. This rule serves the following purposes;
1. Risk Mitigation; Lenders aim to minimize the risk of lending to borrowers who may be financially unstable or relying on short-term loans to fulfill their payment requirements.
2. Anti-Fraud Measure; It helps prevent fraud by ensuring that borrowers do not borrow the down payment from another source before applying for a mortgage.
3. Stability Assessment; Lenders evaluate the stability of your situation by examining your down payment funds history over 90 days.
1.2 Legitimate Sources of Down Payment
Canadian lenders typically accept down payment funds from the following sources;
• Savings or checking accounts
• Investments like stocks and mutual funds
• Gifts from immediate family members
• Proceeds from selling an existing property
• Windfalls like lottery winnings or inheritance
Regardless of where it comes from having clear documentation for the source of your payment is essential.
Section 2; Challenges Arising from Moving Money Around
2.1 Increased Scrutiny from Lenders
Lenders take the 90 day rule seriously and thoroughly examine the source and movement of your funds. If you have been transferring money between accounts or sources it can raise concerns for lenders.
Questioning the legitimacy of the funds could potentially cause delays. Even put your mortgage application at risk according to our expert Kelowna Mortgage Broker, Ric Lazare. Lenders need assurance that the down payment funds are secure and not subject to repayment or changes.
If there are transfers within a 90 day period it might signal instability. Resulting in additional scrutiny.
Maintaining a transparent paper trail for your down payment funds is crucial. Lenders may hesitate to approve your mortgage if you cannot provide documentation showing the source and movement of your funds over 90 days.
Ric Lazare emphasizes the importance of documentation stating that without it lenders might find it difficult to establish the legitimacy of your down payment source, which can hinder the approval process.
Borrowing money before applying for a mortgage to meet your down payment requirements can be risky. If lenders discover that your down payment funds are borrowed they may view it as an increased burden. This could impact your ability to make mortgage payments. Potentially leading to rejection of your application.
Ric Lazare suggests that it is essential to organize your down payment ahead of time to avoid relying on borrowed money. Lenders prefer to see that you have managed your finances responsibly and have not taken on debt.
There is a possibility of facing rejection for your mortgage application if the lender has doubts about the source of your down payment or if you fail to meet the 90 day rule. Such an outcome can be devastating for homebuyers.
Section 3; Successfully Navigating the 90 Day Rule
Successfully navigating the 90 day rule for your payment is crucial when applying for a mortgage in Canada. Here are some tips to help you achieve that;
3.1 Plan Your Down Payment in Advance
To overcome the challenges associated with the 90 day rule it is recommended to plan your down payment in advance. This will allow time for your funds to stabilize over a period of at least 90 days thus demonstrating their stability to lenders.
Ric Lazare advises starting with saving for your payment if you are considering buying a home. This not only helps meet the 90 day rule but also showcases responsibility, to lenders.
3.2 Keep Detailed Records
Make sure to keep records of all transactions related to your down payment. This includes bank statements, investment account statements and any other relevant documents. Having documentation will help establish the legitimacy of your funds
3.3 Minimize Account Activity
Try to minimize any activity in your accounts within the 90 day period leading up to your mortgage application. Avoid moving money between accounts as it can cause confusion and raise questions from lenders.
Ric Lazare recommends maintaining stability during this period by minimizing account activity and keeping your funds in one place, which can simplify the approval process.
3.4 Be Transparent with Your Lender
Honesty and transparency play a role when dealing with your lender. It’s important to be forthcoming about the source of your down payment. If you have received gifts or loans from family members ensure that you provide the documentation to verify their legitimacy.
3.5 Seek Professional Guidance
Consider seeking advice from a mortgage broker like Ric Lazare, who’s a reputable Kelowna Mortgage Broker with expertise in Canadian real estate financing. A mortgage broker can offer insights assist with documentation and guide you through the mortgage application process.
Section 4; Mortgage Broker Kelowna Conclusion
In the real estate market the 90 day rule, for the source of your down payment is a crucial requirement when applying for a mortgage. This rule plays a role in preventing fraud and ensuring that borrowers maintain their stability. However, navigating this rule can be quite challenging especially if you’ve recently moved funds around before applying for a mortgage.
To improve your chances of getting approved for a mortgage it’s vital to plan your payment in advance keep clear documentation limit account activity and be open with your lender about any financial changes.
If you need assistance with this process it’s beneficial to seek guidance from a professional, like Ric Lazare, a trusted Mortgage Broker in Kelowna He can simplify things further and increase your likelihood of securing a mortgage that aligns with your homeownership goals.