Mortgage Default Insurance Explained

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In June CMHC announced big changes to the way they underwrite mortgage applications which include three significant changes which will be outlined below.

Increase in Minimum Credit Score

The increase to the minimum credit score went up from 600 to 680.

A Decrease in Debt Service Ratios

Income to debt ratios also known as growth debt service and total debt service. These went down from 39 and 44 to 35 and 42, respectively.

No Borrowed Sources of Down Payment

This eliminated the flex down program which was a program that allowed clients to use their line of credit or a loan as a down payment.

Who is CMHC and why are they so important?

CMHC is the Canadian Mortgage and Housing Corporation. CMHC is a crown corporation and one of three mortgage insurers in Canada. The other two are Genworth Financial and Canada Guarantee. Insurers essentially guarantee mortgage loans for banks and lenders. Without having mortgage default insurance, applicants are unable to purchase a home with less than 20% down. It does not matter who your mortgage is insured with as all three of them had identical policies when it came to a down payment, credit, and income to debt ratios. This is due to them being very heavily regulated by the federal government.

This changed on June 8th, 2020 when Genworth Canada announced that they would not be making any changes to their existing guidelines. Since all three mortgage insurers generally follow the same guidelines and the same rules the announcement during the week before June 8th was met with a lot of panic and speculation. Genworth Canada’s update on June 8th provided a sigh of relief for clients as well as real estate and mortgage professionals.

Due to the economic impact of Covid-19, CMHC and the federal government has taken on an unprecedented amount of risk over the last few months. This is due to the federal government trying to provide much-needed liquidity to the Canadian banking system. This is just a way for CMHC to close the task for a bit and diversify some of that risk away from the taxpayer.

Contact The Mortgage Force Team

If you have any questions reach out to Sunny Vig and The Mortgage Force Team. We work with a variety of lenders and all three insurers to get our clients into their homes.

Why should you work with an Edmonton Mortgage Broker?

Becoming a homeowner can be an exciting time but the process can take long and arduous. Securing a mortgage is an important first step in the home buying process but you might not know where to begin. Working with a residential mortgage broker like the ones from The Mortgage Force Team can help make the home buying process much easier. You might ask yourself why work with a mortgage broker?

We do the heavy lifting for you

As mortgage brokers, we look for the best deals for our clients. We continuously scour the market to find the best mortgage that fits your needs. We have a list of lenders we work with and only work with very reputable and trusted lenders. We can offer our clients more choices by having access to many mortgage products from Canada’s largest banks, credit unions, trust companies, and financial institutions. The Mortgage Force Team in Edmonton will provide you with the education and guidance and take the load off your back so you can focus on everything else.

We can save you money

Another great benefit of working with us is we can save you money. The difference between mortgage brokers and banks is we have great relationships with a variety of lenders and have access to many different mortgages and products. The best part about working with a mortgage broker is in most cases our services are free. We get compensated by the lender based on the mortgage amount and not the interest rate. The only time there is ever a cost is for the most challenging credit and income solutions.

We are ready to answer your questions

Whether you are a first time home buyer, looking to refinance your mortgage, or looking to renew your mortgage The Mortgage Force Team will answer any and all questions you may have. Our job is to make the home buying process as smooth as possible for our clients. We want to be your choice for getting a mortgage in Edmonton and will work hard to get the best mortgage for our clients. Contact The Mortgage Force Team in Edmonton today and let us help you make your dream of owning a home a reality.