Understanding the Changes to Mortgage Qualifications

The world of Real Estate is ever changing, sometimes its hard to keep up with everything that is going on. Today I thought I’d write a post to outline the recent changes to qualifying for a mortgage in Canada, considering the huge impact it could have on Canadian home buyers. In my next Blog post we will explore some of the recent incentives put in place to combat the new stricter guidelines.

To qualify to purchase a home in Canada, you must meet the following criteria:

• The home must be located in Canada
• You must have at least twenty percent of the total home value on hand to be used as a down payment for the home
• If you do not have twenty percent you can apply through Genworth or CMHC (which are Canadian providers that insure higher risk mortgages) but they require that buyers come up with at least five percent of the total home value to qualify.

Additionally the following rules apply when applying for an insured high risk mortgage

1. As mentioned above a minimum down payment of five percent which applies to homes valued at five hundred thousand or less. If the purchase price is over five hundred thousand, then the minimum down payment becomes five percent for the first five hundred thousand dollars and then ten percent on the remaining balance up to a one million dollar maximum purchase price.

2. Your total monthly housing costs, (which includes your principal, interest, property taxes, heating, and if applicable fifty percent of condo fees or leasing costs) should be no more than thirty two percent of gross household income.

3. In addition, your total debt load should be no more than forty percent of your gross household income.

4. The “Stress Test” which is required to all home buyers (whether you have the twenty percent down payment or not) states that you must not only qualify for a mortgage at the agreed upon interest rate with your lender but you must also be able to make your payments at the bank of Canada’s five year posted interest rate. This is for your protection should interest rates rise over the course of your mortgage repayment.

**There may be other requirements that are applicable in specific circumstances and requirements are subject to change at any time.**

You can review the guidelines at: Finance Canada or Canadian Mortgage & Housing Corporation

If you’d like more information feel free to contact me anytime.

I would be happy to discuss any questions or concerns you may have regarding these changes to home buying.