Lending guidelines are about to get tougher in Canada

by Elizabeth Blair.
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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. 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 certain established minimum credit score to qualify for an insured mortgage. While there has been no official update on what that minimum credit score will actually be, the lenders will be scrambling to update their guidelines soon.

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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