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Changes To Insurance Criteria, Starting July 1st

  • Higher Credit Score – Under the new criteria, at least one borrower on the insurance application must have a minimum credit score of 680, up from the current minimum of 600. According to the CMHC, 5.9% of CMHC-insured mortgages in the first quarter of 2020 fell under the 680 score. 
  • Gross Debt Service (GDS) – Under the new criteria, the GDS ratio tightened to 35 and Total Debt Service (TDS) ratio updated to 42. A borrower’s GDS ratio is a calculation of housing expenses including mortgage payments, property taxes, utility costs and condo fees (if applicable) as a percentage of annual income. The TDS ratio is a calculation of all GDS ratio expenses plus other debts including car payments, credit card expenses, or loan expenses, as a percentage of annual income.
  • Non Traditional Downpayment Sources – Borrowers can no longer use credit cards, unsecured personal loans or lines of credit to fund a down payment. All borrowers will be required to source down payments from their own funds when the new criteria comes into effect on July 1. The CMHC notes that eligible sources of funds include “savings, the sale of a property, non-repayable financial gift from a relative, funds borrowed against their liquid financial assets, funds borrowed against their real property, or a government grant.”

If you have any questions or concerns about how this might impact your home search, don’t hesitate to reach out to Adam, Kelly or Eric for help.

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