The modifications have to do with debt service ratios and credit score requirements
• Gross debt service (GDS) ratios must be under 35, down from 39
• Total debt service (TDS) ratios must be under 42, down from 44
• Borrower’s credit score must be at least 680, up from 620
• Borrowed down payments will no longer be allowed The changes will go into effect from July 1st, 2020.
Using the current mortgage qualifying rate of 4.94% and GDS limit of 39, a family with an annual income of $100,000 and a 10% down payment would have qualified for a home valued at $524,980.
Under the new GDS limit of 35, the same household can now only afford a home of $462,860. This is a decrease in buying power of almost 12%, all due to the change in the GDS limit.