A “Gifted” Down Payment is very common for first time buyers. Essentially, a buyer’s family member (usually very nice, warm and loving parents) will offer up money to go towards the down payment. Often this is done because their son or daughter doesn’t quite have enough funds saved up for the full 5% down payment. Or, because they want to make sure their child has enough money to make up 20% for a down payment to avoid CMHC premiums.
All that is required for documentation is a signed Gift Letter from the parents, which simply states that the money does not have to be re-paid, and a snapshot of the son or daughter’s bank account showing that the gifted funds have actually been transferred.
A gifted down payment is viewed as an acceptable form of down payment by almost all lenders. Talk to [us] to make sure that your lender accepts “gifts” as an acceptable down payment.
Click Sample Gift Letter to view a sample letter that can be used.
Thank you to my DLC colleague Jeff Ingram for this article.