If you are planning to buy your first home in BC today, you will need a couple of things to get qualified. One of the most important things would be your down payment and closing costs. As Mortgage Insurers stopped providing insurance for Zero Down Mortgages a couple of years ago, the minimum down payment that is required in today’s market is only 5%! Here are some of our creative ways to come up with the 5% down payment you need.
1. Savings – If the down payment has been accumulated in your account for at least the last 90 days, all you will need to provide is a current bank statement with the 90 day history showing the balances. This will show the lender that the funds have been there for some time and are from your own resources.
2. RRSP– If the funds are in an RRSP account, you will need to provide an RRSP statement again for at least 90 days. Your bank holding the RRSP will require a Home Buyer Plan Request to Withdraw RRSP Form to be completed. The withdrawal process could take 5 to 10 business days depending on the lender and the type of RRSP it is. For the Home Buyer Plan, the maximum withdrawal limit for the first home buyer is $35,000 (as of March 2019) and the funds will have to be repaid within the next 15 years with a 1 year grace period from the date of the withdrawal.
3. Gifted Down Payment – A gifted down payment is a gift from an immediate family member and will be used towards purchasing your home. Most lenders will require a copy of a gift letter and a copy of your bank statement showing that the gifted amount has been deposited into your bank account. For a copy of a Gift Letter, please contact Ajit Hundal.
4. Borrowed Down Payment– A down payment for your first home can also be borrowed ie. from a Line of Credit, Credit Card or Loan. Yes, you are reading this correctly! If you have a large limit on your credit account, you can withdraw up to the maximum limit of the account and use the funds towards the down payment of your home. You will have to provide a statement for the credit account showing the available balance, existing interest rate and minimum payment required, then Ajit Hundal will have to include the payment details into the liabilities section of your mortgage application.
5. Cash Back from Lender – If none of the above methods of down payment are possible, our final recommendation would be to get a “Cash Back” mortgage. Basically it is as simple as it sounds. The mortgage lender will provide “Cash Back” at closing to be used towards your down payment. These lenders will offer anywhere from 3 to 5% Cash Back. What’s the catch? The disadvantage of taking the Cash Back Mortgage vs. any normal Mortgage would be that the mortgage rate would be based on the posted rate by the lender, not the fully discounted rate that you would see advertised.
Keep in mind that if you are putting less than 20% as a down payment, you will also need to provide confirmation that you will have funds available to cover closing costs. The lender will request a bank statement or proof that you have at least 1.5% of the purchase price set aside towards closing costs.
For more information on purchasing your first home in BC, please contact Ajit Hundal or to get pre-approved for your first home, Apply Online today.
