Down payment verification used to be framed mostly as a lender concern — proving the client actually has the money. Since October 2024, it's also a direct compliance obligation for the broker: mortgage administrators, brokers, and lenders became reporting entities under Canada's anti-money-laundering law, which means identity verification and source-of-funds diligence aren't just good practice, they're a requirement with real record-keeping obligations attached.
This checklist walks why that matters, the account-history standard most lenders apply, exactly what a gift letter needs to contain, how to document a large or unusual deposit before it becomes a question, and the specific bounces that recur on down payment files most often.
Why source-of-funds matters, and who it applies to now
Effective October 11, 2024, mortgage administrators, brokers, and lenders became reporting entities under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, subject to FINTRAC's identity verification requirements for the mortgage sector, along with associated record-keeping and reporting obligations. That change formalized, for brokers specifically, a set of diligence expectations around identity and source-of-funds that were previously mostly a lender-side concern.
The practical shift: treat source-of-funds documentation as a broker-side compliance task, not just something to satisfy for the lender's underwriter. Both matter now, and the paper trail should be built with both in mind.
Step 1. The 90-day account history standard
Most lenders expect a 90-day (three-month) account history for every account contributing to the down payment, showing the funds have been sitting in a verifiable account rather than appearing suddenly and unexplained right before closing. This isn't a single codified national rule so much as a near-universal lender practice — but treat it as the default standard for every file, and confirm the specific lender's exact requirement rather than assuming a shorter window will do.
Step 2. What a gift letter must contain
- →The donor's full name and their relationship to the borrower — most lenders require the gift come from an immediate relative.
- →A clear statement that the funds are a true gift, with no repayment expected and no interest in the property attached to the donor.
- →The exact dollar amount of the gift.
- →The date the funds were or will be transferred.
- →The property address the gift is being applied toward.
- →The donor's signature, and ideally, confirmation the donor's own account shows sufficient funds to support the gift before it moves.
The detail brokers miss most: the gift letter amount has to match, to the dollar, what actually lands in the borrower's account. A mismatch of even a small amount raises exactly the kind of question a clean file shouldn't generate.
Step 3. Explaining large or unusual deposits
Any deposit that doesn't obviously match the applicant's regular income pattern needs its own paper trail, attached before submission rather than held in reserve for if it's asked about. A bonus or commission payment needs a letter from the employer confirming it. Proceeds from selling an asset — a vehicle, an investment, another property — need a bill of sale or transaction confirmation. A tax refund needs the notice of assessment showing the amount. The goal is simple: no deposit should sit in the account history without an obvious, documented explanation attached to it.
Step 4. The bounces that recur
- →Gift letter amount doesn't match the transferred amount — the single most common gift-letter bounce.
- →A lump sum appears right at the edge of the account history window, right when the 90-day clock would otherwise have started, inviting scrutiny of what happened just before it.
- →The donor's own account can't support the gift once it's reviewed, undermining the letter's credibility.
- →Cash deposits with no paper trail — these are treated far more cautiously than an electronic transfer with a clear source.
A pre-submission checklist
- 01Confirm 90 days of account history for every account contributing to the down payment.
- 02Confirm every gift letter amount matches the actual transferred amount, to the dollar.
- 03Confirm the donor's relationship to the borrower meets this lender's definition of an eligible gift source.
- 04Attach a documented explanation for every deposit that doesn't obviously match regular income.
- 05Confirm the donor's own account can support the gift, where the lender asks for that confirmation.
Running this exact checklist against every file is exactly the kind of repeatable compliance work Treadstone's AI underwriting is being built to speed up, currently in early access with an email waitlist. For a human fulfillment team running this checklist on files today, see Treadstone's fulfillment services, and pair this checklist with the deeper Pre-Underwriting File Review Checklist.