CMHC, First time buyers, Mortgage qualifying CMHC Changes the Game.... Again! - Ryan W. Smith - House & Home Mortgage Co.

I don't know about the rest of you, but it feels to me these days like the world is desperately looking for change. It's fitting then that yesterday CMHC, Canada's largest and only government-run mortgage insurer, decided to drop some fairly serious rule changes on us all. 

If you or someone you know are considering buying a home this year, while putting less than 20% down, then you need to be aware of these changes and how they might impact your mortgage qualifications. And just as importantly, if you've already got a pre-approval in place (whether with us or with someone else), then I'd suggest you reach out and get that pre-approval reviewed in light of these new changes. 

Here's the update in a nutshell:

  • The changes come into effect July 1, for anyone needing CMHC insurance (i.e. buyers with less than 20% down):
  • A new lower limit to the Gross/Total Debt Servicing (GDS/TDS) ratios down to 35%/42%, respectively (down from 39%/44% previously)
  • A new, higher minimum credit score of 680 for at least one borrower (previously 600)
  • Non-traditional (read: borrowed) sources of down payment will no longer be acceptable as down payment

In practical terms, the reduction in in 'debt service ratios' means that the average family now qualifies for 11% LESS mortgage than before. In our market this is an average drop in mortgage amount of $45,000-$60,000. This is a huge change! The minimum credit score requirement is less impactful, but could be a challenge for young buyers who are struggling with balances on student loans, credit cards, or other debts. Even if your payments are on time, carrying high balances on these accounts can easily drag your score under 680. Wondering what your own credit score is? Or how to improve it? Fill out an application with us @ and I'd be happy to take a closer look with you!

From CMHC about the rationale for these changes:

“COVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” said Evan Siddall, CMHC’s President and CEO. “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.”

BUT, there is a silver lining in all of this (at least so far!)... 

Good News Everyone!

Canada's two private mortgage insurance providers, Canada Guaranty and Genworth Financial, have both so far declined to implement these changes. This means that assuming we get no surprises from the two of them, we should still have access to mortgage insurance using the previous debt servicing and credit qualifications. What this will probably mean in practice, is that they may start becoming more particular about accepting/approving clients, but that if there is good reason to do so we'll still be able to get approvals with lower credit scores or higher debt servicing, from Canada Guaranty or Genworth. 

As always, we're here to help you understand and navigate these changes as they happen. You can rest assured that we're going to stay up to date with these developments so that we an continue to provide you with the most accurate advice and the best mortgage solutions possible!

With all these changes coming, now would be a great time to get your own pre-approval in place. If you're ready to dive in you can fill out an application in our easy-to-use online system @ OR call/email any time!