Received a question by email over the weekend.

Can I use my car as a down payment?

Down Payment – The amount of cash paid towards the purchase transaction by the buyer of a home. This is also known as the purchaser’s initial equity in the property, but is also used by a lender to judge the personal commitment to the property. For example, a lender considers that, if a buyer saved the down payment, or received it as a gift from a loved one, they will be far more committed to maintaining the property value and making the mortgage payments than if they acquired it for no money down. Hence the tighter qualifying rules for a Zero Down Purchase

Lenders must ensure that a borrower is fulfilling the minimum down payment requirements from the applicant’s own resources, and the lender should further verify this amount will be available at the time of closing. Down payment equity from “own resources” is interpreted to mean from… bona fide savings, an outright gift from immediate relatives, borrowing at arms-length from a third party, equity from the sale of another property, and/or duly contracted applicant labour. In addition to confirming the minimum equity requirements, the lender must also be satisfied that the borrower is able to cover expected closing costs. These may include, but are not limited to, legal fees, deposits, appraisal, any land transfer taxes and registration fees, etc.

Applicant’s Savings
Lenders look for a 90 day history on accounts

Sale of Another Property

If down payment equity is to come from the sale of another property, verification of this equity must be obtained. The lender will confirm the previous property’s selling value plus the outstanding balance of any existing financing on that property.

Sale of Stocks/RRSPs
If the down payment is to come from the sale of stocks or bonds, the lender must verify the fair market value of such assets.

Family Gifts
Outright gifts from immediate relatives are normally an acceptable  source of down payment. Gifts are to be documented by a formal letter from the donor declaring the amount as a “true gift” and not a loan. Confirmation of deposited funds will also be required.

Call me to discuss 604-273-2002

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

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An independent Mortgage Specialist associated with the Verico Mortgage Network.