Do You Qualify to Buy with 5 Per Cent Down?

REW.ca

House prices in Vancouver and the Lower Mainland are higher than anywhere else in Canada. It's a tough real estate market to break in to if you don't already have equity.

But the Canadian government encourages home ownership through its Canada Mortgage and Housing Corporation and insures mortgages that are initiated with small down payments. The catch is, if you can't get the mortgage insurance, you won't get a mortgage.

Despite recent moves to tighten access to mortgages, it is still possible for home buyers to purchase with a small downpayment -- and take advantage of the lowest mortgage rates in years.

•The maximum amortization period is 30 years for government-backed, insured mortgages with loan-to-value ratios of more than 80 per cent

•The maximum amount Canadians can borrow in refinancing their mortgages is 85 per cent of the value of their homes

•Buyers must qualify for the higher five-year mortgage rate, even if they choose a lower rate. Currently the qualifying rate is 5.44 per cent.

But lending regulations are still not too restrictive. For instance, a buyer is still required to have only a 5 per cent downpayment to qualify for mortgage insurance. Canada's mortgage rules have remained much more stringent than US. regulations governing home loans, said Sherry Cooper, chief economist at BMO Capital Markets.

Because of that, she considers Canada's housing market to be in much better shape than it would be otherwise.

"Not only did Canada dodge the subprime problem, but when you look at the aggregate of equity in homes among Canadian households it is much higher than in the United States," she said.

Do you qualify to buy a home with as little as 5 per cent down? Current mortgage rates are as low as they have ever been. But they will go up, and you need to be prepared for that.

Check with your Realtor or mortgage broker for more information. Meanwhile, here are the CMHC's general requirements to qualify for Mortgage Loan Insurance.