CMHC released some changes to their mortgage approval policies that are effective today, July 1st.
This will affect some buyers with less than 20% down payment. These changes are:
Reduced GDS/TDS ratios (amount of money earned as a percent of liabilities owed monthly). The lower this ratio the lower a mortgage a buyer qualifies for.
Some will see a reduced mortgage amount (therefore purchase price) of approx 12%. One example we ran for a borrower who was approved for $535,000 mortgage, would see a reduced mortgage amount to $471,500 which would reduce the price of home they are shopping for by $63,500
Minimum credit score of 680 for at least 1 borrower (previously 600)
It’s not uncommon for credit scores to be 680 so this will force some clients onto the sidelines (3 to 12 months depending on severity) and we will need to guide them to repair their credit until it meets the new minimum requirements.
Can no longer borrow a portion of the down payment from a line of credit
We are currently leveraging this strategy with some buyers and they will certainly be placed on the sidelines for 12 months or more
The good news is that most lenders have not changed their lending policies so buyers shouldn’t be greatly affected. There are 3 mortgage insurers in Canada. CMHC, Genworth & Canada Guaranty. Therefore any borrowers that apply that don’t fit the above criteria, lenders can send their application to Genworth or Canada Guaranty for approval.
Those hoping to leverage CMHC’s refinancing program on multi-unit properties will however be affected and will need to seek alternative financing options: