On Thursday, June 4 2020, Canada Mortgage and Housing Corporation (CMHC) announced new, tighter mortgage borrowing criteria that will apply to all insurance applications beginning July 1, 2020. CMHC is Canada’s largest mortgage insurer and offers mortgage default insurance to property buyers to ensure lenders are protected in the event that borrowers fail to pay their mortgages. Mortgage default insurance is mandatory for high ratio mortgages, which are mortgages where the down payment is between 5% and 19.99%.
CMHC cited the impact of COVID on several sectors of the economy and its recent 12 month forecast on home price declines as the key factors in its decision to change its underwriting criteria. According to CMHC President and CEO, Evan Siddall, these changes 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.”
So what does this mean for you? It means that an applicant must now have Higher Credit Scores, Lower Debt Service Ratios, and Limit Down Payments from Non-Traditional Sources.