Canada First Mortgage

Ok…so we know it’s harder to get a mortgage these days.  Now-a-days, lenders and insurers want to know why you missed a payment a year ago, or 2 yrs. ago!  Sometimes it’s easy to forget to make a payment here and there, but when you “forget” to make the payment two months; THREE months in a row, they want to know what’s up!  The lending guidelines have definitely tightening the reigns…there’s no question.  A year ago, a missed payment or two would have been overlooked by many and discarded as, “ahh-well…at least they are “current” on all their debts NOW.”  Nope.  There’s more reason for lenders and insurers to clamp down on lending after the lax guidelines of yesteryear.

Just when you thought it was getting hard, Genworth (competitor to CMHC) decided that they are going to make things a little tougher.  Effective April 18th, if you want to refinance your home (between 90.01% - 95% of the value of your home), your minimum “allowable” credit score is going from 650, to 700.  A refinance on your home (between 85.01% - 90%) will require a 660 score; this is up from 600.

Also, currently if your credit score is above 680 - you are allowed up to 44% of your household income to go towards your monthly financial obligations (like credit cards, loans, etc.) and mortgage payments (Principle, Interest, Heat, and Taxes) - a.k.a; Total Debt Service (TDS).  Come April 18th, the total percentage allowable to go towards TDS will be 42%.

Business for self individuals?  It gets tougher.  Minimum down payment required is 10%.  This is up from a minimum of 5% down.  Credit score still needs to be impeccable minimum of 700.

At present, CMHC has not come up with any changes to their programs…but time will tell.  Usually when one moves, the others at least LISTEN really closely.  Am I worried about these changes?  I have to be honest…  At first glance when I read this, I thought - damn…that closes the doors on a lot of potential customers.  BUT, I can’t help but notice that the mortgage industry is simply taking a step back, and practising some very basic lending guidelines that were in effect years ago.  We have to remember that it wasn’t long ago that we had all these (what seemed like) ”rights” on the mortgage front.  We have to remind ourselves that getting a mortgage is still a priveledge…not a right.  We have to prove ourselves to banks…maybe a little more than what we had to prove ourselves with them a couple of years ago.  I know, I know….I can hear you screaming now; “you can’t just give all these allowances, and then take them away just like that!!”  Ummm….yes they can.  Let’s flip it over on it’s back for a second…

Let’s say YOU are the bank.  It’s YOUR money.  YOU have to make the decision on who to give a mortgage to, and who not to give a mortgage (your money) to.  After being fairly easy with your money and allowing mortgages on “lighter” guidelines, you found yourself losing a lot of your money.  Wouldn’t you want to tighten your belt too?

We know the old adage “one bad apple spoils the bunch”, right?  It’s not much different.

So, at the end of the day what we are left with is mortgage guidelines that look a little retro.  It’s not a bad thing….it’s an adjustment thing.

Sincerely,
Dan Mass, AMP

dan@canadafirstmortgage.com

403-294-0033