Mallory is very excited as she has just found the perfect condo! She feels confident that the bank will provide her with a mortgage as she received a pre-approval certificate. Mallory has worked hard to get her credit score up (currently at 720). Mallory is ready to make an offer on the condo which is listed at $435,000. She has savings for a 10% down payment which she knows would require mortgage loan insurance. Mallory believes that she meets Canada Mortgage and Housing Corporation (CMHC) requirements to qualify for mortgage loan insurance:

Default Mortgage Insurance rates:

a) Mallory has been having a rough time with the bank and is no longer sure as to what a pre- approval certificate means as they now need more information on her finances to run through some ratios. Explain to Mallory what a pre-approval certificate is. (.5 marks)

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1. Mallory is meeting with CIBC to discuss her potential mortgage with them and the ratios that they require. Mallorys gross annual income is $118,000. The condo would result in monthly heating costs of $575, condo fees of $1,800 per year, while her annual municipal property and school taxes would be $4,730. Her only debt is a car loan of $865 per month. Calculate her Total Debt Service (TDS) ratio using a monthly mortgage payment of $2,600. (1 mark)

Calculation TDS:

1. Does Mallory meet the TDS ratio requirement for CMHC default insurance based on their new underwriting guidelines from July 1, 2021? (Underline and highlight your response).
2. (.5 mark)

Yes or No

1. Calculate her Gross Debt Service (GDS) ratio. (1 mark)

Calculation GDS:

1. Does Mallory meet the GDS ratio requirement for CMHC default insurance based on their new underwriting guidelines from July 1, 2021? (Underline and highlight your response).
2. (.5 marks)

Yes or No

1. Calculate Mallorys mortgage default insurance using the above table Default Mortgage Insurance rates. (2 marks)

Calculation:

TABLE D

Home Buyers Plan (HBP)

• Withdraw up to $35,000 per borrower and up to $70,000 per couple.
• 15 years to pay back the amount withdrawn

July 2021 CMHC Rule Changes On July 5, 2021, the CMHC relaxed their underwriting guidelines to match with Canada's two private mortgage insurers. These changes: - Reduced the minimum credit score requirement from 680 to 600 - Increased the maximum allowed debt service ratios from 35\% GDS to 39\% GDS, and 42\% TDS to 44% TDS - The CMHC continues to not allow borrowed minimum down payments \begin{tabular}{|l|l|} \hline Down Payment Size & Premium Charged \\ \hline 5% & 4.00%(foratraditionaldownpayment)4.50%(foranon-traditionaldownpayment) \\ \hline 10% & 3.10% \\ \hline 15% & 2.80% \\ \hline 20% & 2.40% \\ \hline 25% & 1.70% \\ \hline 35% & 0.60% \\ \hline \end{tabular}