Canada’s National Housing Agency Tightens Lending Ahead of Forecasted Price Declines

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Canada’s National Housing Agency is preparing for price declines. Homeowners who have less than 20% down on their homes should expect lower debt service maximums and a ban on borrowing down payments. For most, these are positive changes set to take place in Canada because it will allow homeowners to have high credit scores, impacting the Canadian home market in a positive way. As such, this is expected to have a short-term impact on the market, but because the prices of homes are falling, there always runs the risk of less buyer motivation.

Key Takeaways:

  • The higher GDS ratios were available for buyers with excellent credit but they will no longer be available.
  • The CMHC is setting the new minimum credit score to 680, up from 600.
  • The CMHC is no longer allowing individuals to borrow money for a down payment.

“Homebuyers with less than 20% down should now expect lower debt service maximums, a more stringent credit quality check, and a ban on borrowing down payments.”

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