CMHC (Canadian Mortgage and Housing Corporation) insurance premium allows first time and experienced home buyers an opportunity to qualify for their dream home. It allows you to get a loan of up to 95% of the total purchase price of your home while protecting lenders in the event you aren’t able to make your payments. Without having a 20% down payment, a buyer is required to have mortgage default insurance.
Changes to CMHC guidelines in 2020
CMHC recently announced changes to its coverage criteria for insured mortgages. The changes announced by CMHC that took effect on July 1, 2020 are likely to make it more difficult for home buyers to purchase a new home with down payments of less than 20%.
The following changes now apply for all new applications that require mortgage insurance through CMHC.
- Gross debt service (GDS) ratios must be under 35, down from 39
- Total debt service (TDS) ratios must be under 42, down from 44
- Borrower’s credit score must be at least 680, up from 600
- Borrowed down payments are no longer permitted
Lenders can still choose to insure mortgages through private default insurance providers such as Canada Guaranty and Genworth Financial. These two default insurance providers have opted to not follow suit of CMHC’s changes effective July 1, 2020 leaving a question of how banks are going to respond to CMHC changes.
Learn more about the impact on home buyers here.View New CHMC Rules