CMHC Changes Its Product Requirements
On April 25th, 2014, CMHC announced that it will be changing the requirements for its insurance program. It will be discontinuing self-employed insurance applications without 3rd party income verification and second home insurance, as of May 30th, 2014.
What does this mean for self-employed applicants? If you are purchasing a home with less than 20% down, you must have valid income verification, not just a self-stated signed document. Now, if you do not have the required documentation and choose to still go the self-stated income route, it seems that the applicant must have 20% down to avoid the CMHC premium. However, the new rule does not change into gear until May 30th, 2014, so if you find yourself at alarm due to this change, now would be a great time to apply for a mortgage.
It seems to be that CMHC is making the changes due to many self-employed applicants falsifying their income, and unethically signing the self-stated document. As a precaution for the housing market, CMHC plans to stabilize and “weed out” these applicants. Not only will it decrease the number of defaults by applicants who were unqualified in the first place, but also keep housing prices stable.
CMHC has also decided to change its second home program. Traditionally, homeowners were allowed to have up to two properties insured against default. As of May 30th, 2014 this will also change to allow only one property to be insured per homeowner.
What does this mean for homeowners? If you are looking to purchase a second owner-occupied home with less than 20% down with CMHC, now would be a great time to take advantage. After the set date, you will require at least 20% down to avoid CMHC insurance to purchase a second home, may it be a vacation or recreation property.
There has been no hint whether the two private insurers will follow CMHC’s new changes.
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