“CMHC is tightening the criteria needed for self-employed borrowers to get mortgage insurance, changes that will come into effect on April 9, 2010 according to Canadian Mortgage Trends.

Borrowers who apply under CMHC’s self-employed stated income product will need a 10% down payment instead of the 5% down payment now required. These borrowers will also only be able to refinance up to 85% ltv instead of 90%.

Debbie Thomas, partner and broker of record at The Mortgage Group, recently told CMP she has noticed a trend of insurance guidelines tightening for self-employed borrowers, who often write off a large portion of their income for income tax purposes.

“The whole issue of reasonability has now been forced back and self-employed deals that used to be approved are not even close to being approved today,” said Thomas. “It hasn’t been announced or anything that has come out from the lenders or insurers, but it’s something we’ve definitely noticed.”

As well the criteria for using stated income has changed. If the business is less than three years old stated income can be used. After 3 years it has to be proven income.

Canadian Mortgage Broker News – Teusday 9, March, 2010