Where a down payment is allowed to come from

Most people think of the down payment as a number to reach. Lenders think of it as a number and a history. Where the money came from, how long it has been yours, and whether you owe anyone for it all change the answer — sometimes more than the amount does.

This is about the sources, not the minimums. How much you need is on the first-time buyer page.

Your own savings, and the ninety days

The simplest source is money that has been sitting in your account. Lenders will generally ask for ninety days of statements on every account the funds come from, and they read them.

What they are looking for is not a healthy balance. It is unexplained deposits. A sudden five figure credit three weeks before closing will be questioned, every time, regardless of how ordinary the explanation is. You will be asked to prove where it came from, and “a friend paid me back” needs a paper trail like anything else.

This is anti-money-laundering obligation rather than suspicion, and there is no way around it. The practical consequence: move money early. Funds that have been in place for three months are simply accepted. Funds that arrive during the application become a document request at the worst moment.

The FHSA

The First Home Savings Account is designed for exactly this purpose. Contributions are deductible like an RRSP, and qualifying withdrawals to buy a first home come out tax-free like a TFSA, with nothing to repay afterwards.

For most first-time buyers who are saving from income, it is the first account to fill. The one thing worth knowing is that the account has to be opened before it is useful — contribution room starts when you open it, not when you become eligible, so opening one early costs nothing and preserves room you may want later.

An RRSP withdrawal under the Home Buyers’ Plan

The Home Buyers’ Plan lets a first-time buyer withdraw from an RRSP without the withdrawal being taxed, provided it is repaid to the RRSP over a set schedule. Miss a scheduled repayment and that year’s amount is added to your income and taxed.

Two practical points. The funds generally need to have been in the RRSP for ninety days before you withdraw them, so a last-minute contribution and immediate withdrawal does not work. And the repayment is a real future obligation — modest, but real — so it belongs in your budget rather than being treated as free money.

The FHSA and the Home Buyers’ Plan can usually be used together.

A gift from family

Gifts are common and completely acceptable, from an immediate family member, with a signed gift letter confirming the money is a gift and not repayable. The funds usually need to be in your account before closing rather than promised.

The detail that causes trouble is the word repayable. If there is an understanding that you will pay it back, it is a loan, it has to be disclosed, and it changes your debt ratios. Undisclosed, it is a misrepresentation on a mortgage application. The article on gifted down payments covers this properly.

Proceeds from selling something

Selling a property, a vehicle or an investment is fine as a source. What the lender wants is the chain: the sale agreement or bill of sale, the statement showing the funds arriving, and the connection between the two.

Selling a home to buy the next one is the common version, and the risk there is timing rather than acceptability. If your sale closes after your purchase, the money is not available when you need it, which is what bridge financing exists to solve.

Borrowed funds

You can, with some lenders, borrow a down payment — a line of credit, a personal loan, or a program built for it. Whether it is allowed depends on the lender and on whether the mortgage is insured. It is a narrower path than the others.

The arithmetic is unforgiving, though. You take on a second debt payment, that payment counts against your ratios, and it reduces the mortgage you qualify for. The same money in savings would have gone further. Borrowing to buy sooner can still be the right call in a rising market, but go in knowing it costs you approval room, not just interest.

What you cannot do is borrow the money and present it as savings. It shows up in the statements.

The one that surprises people: cash

Physical cash deposited into your account is the hardest source to use, because there is no trail behind it. Even when it is entirely legitimate — years of tips, a private sale, family practice — a lender cannot verify what a cash deposit was before it was cash.

If any part of your down payment is currently cash, deposit it now, well beyond the ninety-day window, so the statements simply show a settled balance.

What to have ready

For each source, one clean piece of evidence:

• Savings — ninety days of statements, with any unusual deposit explained
• FHSA or RRSP — the withdrawal confirmation and statements
• Gift — a signed gift letter and proof the funds arrived
• Sale proceeds — the sale agreement and the deposit landing in your account
• Borrowed — the loan agreement, and expect the payment in your ratios

The short version

Lenders verify the source of every dollar of a down payment, not just the total. Money that has been in your account for ninety days is invisible to the process. Money that appears during the application becomes a request for proof at the point where you have least time. Whatever the source — savings, FHSA, an RRSP withdrawal, a gift, a sale — get it settled in your own account early and keep the paperwork that explains it.