Effective June 1, 2021, the qualifying “stress test” rate for uninsured mortgages will increase from the current 4.79% to 5.25%. Even though this is an artificially high rate just for qualification purposes, it still takes a bit out of your borrowing power. Here is what we know so far:
Does this apply to both uninsured and insured mortgages? As of right now, it only applies to uninsured mortgages. The qualifying rate for insured mortgages will stay at 4.79%.
What happens if I currently have a pre-approval in place? Even if you have a pre-approval in place, you will need to have an accepted offer in place BEFORE June 1st or they will be using the higher 5.25% qualifying rate.
I’m making an offer on a home, will this affect me? As long as you have an accepted offer in place by May 31st, you will be able to qualify using the lower qualifying rate of 4.79%. You can still have subjects that will be removed after June 1st but you must have the accepted offer in place prior to June 1st.
How will this affect my borrowing power? Generally, you are looking at a decrease of about 4% for the total mortgage amount you could qualify for. For example, someone that could qualify for a mortgage of $403,000 using the 4.79% qualifying rate, will only be able to qualify for a mortgage amount of $385,959 AFTER June 1st.
If you have any questions about the new qualification rules and how it will affect you, please don’t hesitate to contact our office. We’re here to help!