When qualifying for a mortgage, where the down payment comes from is always an issue. 

The mortgage lenders with the best rates will require a history of where the down payment has come from.  They will also want proof that the borrower has the closing costs (legal fees and land transfer tax) which they will estimate at 1.5% of the purchase price.

Amount of Down Payment

As you know the minimum down payment is now 5% of the purchase price.

• A minimum down payment of 5% but less than 20% of the purchase price will require CMHC, Genworth or AIG high ratio mortgage insurance
• A down payment of 20% of more won't require high ratio insurance (except for business for self or commission "stated income" which will require 25% down)
• A large down payment (35%, 50%, etc of the purchase price) will usually still require down payment proof and history.  There are very few exceptions to this requirement.

CMHC requires mortgage lenders to prove that the borrower has the down payment and has had it in a provable location for at least 3 months prior to closing.  

Even when the down payment is more than 20% and CMHC is not involved mortgage lenders will still require this proof and history.  A couple of the reasons for this requirement are concerns about fraud and money laundering.

Acceptable Poof of Down Payment and History

• 3 months bank account statement(s) history.  The bank statement should contain the clients name, account number, the bank name and transaction dates
• RRSP, GIC or other Investment statements which show the same information
• Agreement of sale for a current property, as well as, a recent mortgage statement (the difference being the down payment)
• Gift Letter from an immediate family member and the letter has to say that the money doesn't have to be repaid (see sample attached).  The gift funds will have to be in the borrowers account 20 days before closing.
• Borrowed Funds  borrowed from a bank or other financial source where the monthly payment can be verified and taken into consideration in the qualifying (TDSR).

Unacceptable Poof of Down Payment

• Less than 3 months history
• Cash from an non verifiable source
• Foreign Money Transfers  which arrive less than 3 months prior to closing.  A few countries with banking systems similar to ours may be able to provide acceptable bank statements.

This 3 month history requirement can be a big problem if it can't be verified that the funds have been in the mortgagors procession for this length of time.  You can't go back in time to correct the problem. 

Most Important Points

• Minimum down payment 5% of the purchase price
• 3 month history of where the down payment has come from, provable by statements from Canadian sources
• Money coming from out of Canada put it in a Canadian bank at least three months prior to closing, even if the down payment is large (50% or more).  There are money laundering concerns.