CMHC has many changes coming on July 1st. Here are some of the key changes.
1. Minimum Beacon Score for at least one borrower must be 680 which is up from 600. This may create a challenge for anyone who may have encountered some financial challenges or difficulties with previous credit facilities that have effected their credit score.
2. Limiting your down payment sources means going forward you can’t utilize such sources like existing lines of credit as a part of your down payment. Basically, CMHC will not allow any down payment coming from a source where it would result in further indebtedness.
3. Probably the biggest change involves the GDS/TDS ratios where as of July 1st, the maximum ratios will decrease from 39/44 to 35/42. This represents your PITH (principal, interest, tax, heat) on your property + any other debts (I.e. loans, credit card balances, lines of credit, leases) divided by gross verified income. To give you an example, if someone presently qualifies to purchase a house for $500,000 with 5% down, under the new ratio benchmarks, the price point would drop to about $445,000. This represents a huge difference in the price range the client can shop.
The good news is that we UNDERSTAND that the other two insurance providers, Genworth Canada and Canada Guaranty, have given no indication that they are following suit with CMHC’s changes.
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