House Series Blog #1: NEW MORTGAGE RULES IN ONTARIO, Can you buy a house?

Happy Friday!

This is the first blog post in my new savings series: Dream house 2022. Today, I am going to talk about some things I have learned about the home buying process and some new rules and regulations that have put things into perspective. 

The most recent thing I have learned is that my partner and I do not qualify for the 5% program. This is because we make more than $120k/year collectively. It is a positive and a negative because we must put more money down (10-20%) but we do not have to pay a certain insurance fee that someone who puts down 5% would have to pay.  

This has impacted our savings plan because we have to save more money! 

Below, is a list of new changes that may impact your savings/ home buying journey. Keep focused and stay aware of new rules and requirements.

1. Credit Score Increase:

 In the past, the minimum credit score was 600 but has now been increased to a 680 mandatory credit score for at least one applicant. (Mortgage Architects, Jul 15, 2020)

2. Down Payment Sources: Now, you can no longer utilize borrowed funds towards the down-payment. This includes funds from credit card, line of credit or a loan with repayment terms of any kind. Your down payment must come from your own savings. (Mortgage Architects, Jul 15, 2020)

3. Gross Debt Service Ratio: This is a ratio of “Gross Debt Service” / “Total Debt Service” and represents how much debt one can have in relation to income. The requirements for this have been decreased from prior potential of 39/44 to a more conservative 35/42. The result is reduced borrowing power in relation to existing debt and size of mortgage request to the allowed income. (Mortgage Architects, Jul 15, 2020)