Mortgage Lending guidelines are about to get tougher in Canada

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) July 18, 2008 -- This is hot news, and probably something you want to know if you are saving for your first home in Canada. There is important news unfolding straight from our federal government, Department of Finance. Lending guidelines in Canada are going to tighten up and for some, it will be harder to enter into the housing market to buy a home.

The U.S. housing market has been in turmoil for some time now and, interestingly enough, the writing was on the wall as early as 2005. I located an article, written by Stephen Evans of the BBC News, dated April 26, 2005 entitled “US house market boom set for bust?” and here we are, today, watching this monstrous calamity unfold.

In an effort to help the Canadian housing market remain robust, it seems a very good time for the federal government to step in and lay some new ground rules for home buyers to help Canadians avoid the same mess.

Canadian Mortgage and Housing Corporation or “CMHC” controls 70% of the mortgage insurance market and they will be implementing new lending guidelines effective October 15, 2008 that will affect those who are purchasing a home with less than a 20% downpayment and who are purchasing a home after this date. Here below is a summary of what is coming.

- the zero-down mortgage program will be removed. You can no longer buy a house unless you have a downpayment and enough money to cover your closing costs.

- mortgages can only be amortized up to 35 years as a maximum. The 40-year amortization program will also be removed.

Probably the biggest and most important change is this. Individuals who are planning to buy a house, and who only have 5% of the purchase price available plus their closing costs, are also going to need to have a minimum credit score of 620 to qualify for an insured mortgage.

There are currently some private lenders who will want to ensure that the zero down mortgage is available for home buyers, but this is yet to be determined as they meet with the Department of Finance to assess the option going forward.

Even though the official change to lending guidelines for insured mortgages is scheduled for October 15, 2008, some lenders have already started to update their lending guidelines to comply with these new rules but all other lenders will be scrambling to update their guidelines in the near future.



This article was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge.

You can contact Elizabeth directly by phone at (905) 510-5785, by email at Elizabeth@missmortgage.ca or visit her website at: www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca

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