Mortgage rules are changing, effective July 1, 2020, making it harder to qualify for a CMHC insured mortgage. CMHC just announced that they’re tightening the qualifying rules substantially, reducing buying power once again on mortgages with less than 20% down payment.
-Limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to the standard 35/42 (currently 39/44)
-A minimum credit score of 680 for at least one borrower (currently 600)
-Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity (currently CMHC has a borrowed down payment program)
If you are applying for a mortgage on your own or with someone and both of your beacon scores are less than 680, you will no longer qualify after the rules change. Or if you are relying on CMHC’s 0 down payment program, you will no longer qualify after the rules change.
The debt servicing will change your qualifying mortgage amount substantially. For example, someone making 75k/year would currently qualify for a mortgage of $360,000 under today’s rules and only $316,000 on July 1st with the new mortgage rules.
Why is this happening? The COVID-19 pandemic is affecting all sectors of Canada’s economy, including housing.
“These actions will protect home buyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth” said Evan Siddall, CMHC’s President and CEO.
Genworth and Canada Guaranty (the other 2 default insurers) have announced that they are not making these changes. In most cases, they follow suit when rule changes are made, but not at this time.
“Genworth said in a statement the company doesn’t plan to change any debt service ratio limits, minimum credit score and down payment requirements for homeowners looking to insure a mortgage with the firm.” ~BNN Bloomberg
If your goal is to own a home and you need to qualify under today’s rules, a mortgage approval must be in place before July 1st. If you plan on buying a home in the next 90 days, contact your mortgage broker to ensure your home budget is still accurate. We can put a plan into place to help you achieve your home goals.