The Canada Mortgage and Housing Corporation (CMHC) recently announced that effective July 1, 2020, they’re implementing changes to their underwriting criteria for insured mortgages that have less than 20 per cent down payment.
Concerns around the adverse impact on Canada’s housing market due to job instability and increased debt level has prompted concern that housing prices are going to drop and that this measure will reduce future risk.
“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.”
New applicants have until June 30, 2020, to avoid the additional constrictions on their application.
- A minimum credit score of applicants has been increased from 600 to 680
- Total debt service ratio (TDS) reduced from 44 to 42 per cent as well as gross debt servicing ratio (GDS) reduced from 39 to 35 per cent
- Non-traditional sources of down payment (those that increase your indebtedness such as borrowing) will no longer be accepted
This means that a new home purchaser would qualify for a lower-valued home after July 1 compared to now.
In the wake of COVID, this is another barrier that the homebuilding industry will face as many potential buyers will no longer qualify or will have to adapt to lower-priced home purchases or face delaying their purchases until they are able to save 20 per cent down payment to avoid the CMHC criteria.
Considering this short qualifying timeline, potential buyers should ready their pre-approvals quickly. We urge our Members and homebuyers to secure new home financing pre-approvals as soon as possible to capitalize on today’s more flexible market.
We’ve got you covered
ANHWP has teamed up with First Calgary Financial to offer our Members and their homebuyers a rate advantage on new mortgages.
As a leader in residential mortgage lending, First Calgary Financial offers a suite of additional advantages to buyers and builders including extended rate guarantees, no requalifying, and an accommodating mortgage payment deferral program. First Calgary also has a wide range of optional mortgage protection choices available that can help protect new home buyers from financial hardship in the event of loss of employment, become disabled, or experience a critical illness.
*Note: mortgages through First Calgary and the ConnectFirst Credit Union network are available in select Alberta regions only, and do not include Edmonton at this time.