Three new Canada Mortgage & Housing Corporation (CMHC) lending regulations went into effect July 1, 2020. Note, these might not affect you if you get mortgage insurance from private companies, rather than from CHMC.
Source of Down Payment
CMHC says: Non-traditional sources of down payments that increase indebtedness will no longer be treated as equity for insurance purposes.
What it means: CMHC will no longer allow you to use borrowed funds for your down payment.
Debt Service Ratios
CMHC says: (We’re) lowering the maximum GDS from 39 per cent to 35 per cent and the maximum TDS from 44 per cent to 42 per cent.
What it means: Gross Debt Service ratio (GDS) is the share of income used to cover a mortgage + other housing costs like property taxes. Total Debt Service ratio (TDS) is the share of income used to cover housing costs + cost of servicing other debts. With a 39 per cent GDS (previously), a family with $100K income and 10 percent down would have qualified to buy a $524,980 home. Under the new rules, that same family would only be approved to buy a $462,860 home, a reduction of 12 percent.
CMHC says: Credit scores must be at least 680, up from the previous 600.
What it means: Would-be homebuyers' qualifying credit scores must be at least 680, up from the previous 600.
Not sure you’ll meet the new CMHC requirements? As mentioned, you might still be OK. As of this writing, the rules don’t apply if you get your insurance with private companies such as Genworth MI Canada Inc. and Canada Guaranty Mortgage Insurance Co.