Effective March 1, 2004, the Canadian Mortgage and Housing Corporation (CMHC) will relax its down payment guidelines.  CMHC will now allow down payments from the following sources:

1) Lender cash back incentives (please read the section on cashbacks at my website) 

2) Borrowed money (personal loans, lines of credit, credit cards)

3) Grants and gifts from any party (not just relatives)

4) Sweat equity 

In addition, home purchasers may also borrow the funds to cover the closing costs.

 

In the past, the borrower needed to raise (from their own savings or as a gift from a relative) at least 5% of the purchase price for a down payment and at least 1.5% of the purchase price to cover closing costs.  Now, these funds can be borrowed from a lending institution.

Although the CMHC has released new guidelines, it is still up to the individual banks/lenders as to decide whether they will participate in the program.  Some lenders have stated that they are not ready to participate (such as, TD Canada Trust and HSBC) on March 1.  

Here are the major points of the program:

• Premium : 3.4% premium on the mortgage amount (slightly higher than the 3.25% premium on 5% d/p product)

• As always, the unit must be owner-occupied

• Borrowers must have good credit.  The minimum credit score required is 680; if there are 2 borrowers, the credit score is averaged

• Meet the usual 32% GDS and 40% TDS ratios