To help ensure the Canadian housing market does not follow that of the United States, the Canadian Government has implemented some new mortgage rules.   

The maximum amortization period of government-backed mortgages will be reduced to 35 years from 40 years, a minimum down payment of 5% will be required and there will be a minimum credit score requirement.  The new rules apply only to new mortgages and will not affect mortgages that are already held by Canadians.  New loan documentation standards will also be introduced.

The federal government guarantees mortgages through mortgage insurance made available through the Canada Mortgage and Housing Corporation (CMHC) and from private mortgage insurers.  Under current rules, the federal government will back insurance on mortgages where the loan-to-value ratio is up to 100%. The new rules will limit that ratio to 95%. Homebuyers may borrow the remaining 5%, but it won't be insured under the new rules.

Canadian lenders haven't initiated many government-backed mortgages for borrowers with low credit ratings, but the finance department says that to ensure that remains the case, borrowers credit scores will now have to meet a minimum of 620.

The new documentation rules will also require evidence of reasonableness of property value and of the borrower's sources and level of income.