Friday, November 18, 2016

High Ratio Borrower Eligibility and Criteria - What Buyers Need to Know

Hi Everyone,

Since all the new rules for financing have changed, I thought I would give you a quick outline of how a high ratio mortgage would work and what you need to qualify.

First of all, at least one borrower must have a minimum credit score of 600.  Your credit history must be good with established credit history, reasonable monthly payments and amount of debt vs income, # of credit cards.

A newcomer to Canada can buy with 5% down payment, foreign credit history and alternative sources of income.

If you trying to mortgage a 1 to 2 unit owner occupied property - you require 5% down minimum.   If you are buying a 3 to 4 unit owner occupied property - you require 10%  down.   The maximum purchase price for an insurance mortgage is $1,000,000.    Please note these properties MUST be owner occupied and not investment properties.

All properties that go through CMHC must be suitable for year round occupancy.

Lenders must approve property first if a mobile home, log home, remediated grow home, UFFI or "Fixer Upper"... so know that these homes are much harder to finance.

CMHC either auto approves based on the information or sends to an Underwriter for further review.  If there is anything "special": about the property, that should be told to the appraiser prior to viewing the property.

Appraisals are to confirm the lending value for insurance purposes only.  All high ratio mortgages are government insured and even if the appraisal comes in different that the selling price, it does not mean the home is not mortgage worthy .... it is just extremely important to work with a reputable real estate agent who works with reputable mortgage brokers - as this makes all the difference in the world when it comes to smooth transactions and closings.

If your appraisal comes in lower than the purchase price, that may change the mortgage amount which in turn could cost result in you getting private funding for additional funds but working with a professional realtor can help and assist in the issues should they arise... and understand, this is only a real factor when you are using a small down payment to purchase as the Government does not want to mortgage a home that is inflated and should the market shift and your home is worth less than the mortgage amount, what protection is there for the Banks and Govt... hence why they do this.. look what happened in the U.S. with no money down purchases and a bad real estate market !  Chaos.  At least in Canada they are very careful with how far of a debt load they will let people take on.

So I hope this sheds a little light on the new changes and I recommend everyone takes the time every few months to just run an Equifax report to check your credit score.  It is important for your financial future.  You can go to ... and if you need information on re-financing, mortgages, home buying or selling, I would be happy to assist you and point you in the direction of true professionals that can make your home ownership and investment dreams a reality !!   On that note, have a great weekend ... and thanks for taking the time to read this !  Cheers !

Michelle Makos
Royal Heritage Realty
Vice President/Sales Representative
Direct Line 416-300-3004

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