You are about to find the mortgage system even more diligent in months to come in proving your down payment on the purchase of a house.  Canada Mortgage & Housing Corporation (CMHC) recently gave a seminar entitled "mortgage fraud".   Apart from the old fraudulent application with false declarations, false purchase offers, the single most evident crackdown is on proving the down payment.  I gather the down payment is easiest way to commit fraud on a mortgage application.  The less the down payment, the more committed the lender will seem to prove the money is real, and indeed yours. In the past, if you were to use your RRSP for down payment, it sufficed to show the latest statement from your RRSP provider.  Today, don't be surprised if the lender asks you not only for the statement, but also the completed withdrawal form, a copy of the settlement cheque from your RRSP trustee, and a copy of the deposit slip showing the funds going into your account.  You may also be asked to show the cancelled cheque from your bank for the deposit cheque you gave to the realtor (or vendor) with the offer to purchase.  If any part of your down payment was a gift from a family member, your must produce a letter from the gift giver attesting to the monies as being an outright gift, and that the gift does not have to be repaid in any way.  The letter is to be signed by the gift giver with phone numbers for work & home attached.   You will also provide to your lender a copy of the gift cheque and a copy of the deposit slip showing this amount going into your bank account.

If your down payment is cash, you will probably be asked to produce three months worth of bank statements showing the accumulation of the funds within that account.  If any large deposits are present, be prepared to prove how you came into possession of this cash.  One of my Clients won some money at the casino ($2200), deposited $2000 in his account, and showed the lender the winning slip received when he won the prize.   Since the winning slip was for $2200, and the deposit was only $2000, he was challenged by the lender to show where the other $200 went.  If you wish to borrow the down payment from an existing asset, be prepared to show the loan documentation attesting the fact that X asset is offered as security for the loan and a letter from the lending institution saying the loan is fully secured.  You must, of course, declare this loan on your application. If you have large balances on your credit cards, you may be asked to produce  the credit card statements for the last two or three months, showing the amount owing as a derivative of onsumer purchases and not cash advances.

If there are some cash advances, be prepared to show how you spent the money.  The whole point here is to show that credit card cash advances were not part of your down payment, since you are not allowed to borrow your down payment. You may be asked to close some of your credit card facilities and part of the approval process.  You know that the whole mortgage system is based on debt service ratios.  Apart from the mortgage payment (principal, interest, taxes and heat), lenders will allow a certain portion of your debt load to come from credit cards and loans.  Since most consumers have access to borrowing on credit cards, some lenders calculate your Total Debt Service Ratio (TDSR) as if you had borrowed to the maximum available credit limit. Since some of these cards have excessive credit limits, it may put your TDSR over the allowable ratio.

The system has been manipulated for years, the end is near.  If your down payment is fabricated, chances are you will be caught, and the deal will fall through.   Before waiving your financing condition, make sure the i's are dotted and the t's   crossed.