How COVID-19 is impacting mortgages
The past two months have been a whirlwind for the mortgage industry.
Deep interest rate cuts resulted in homeowners rushing to refinance and buyers ready to purchase. Then buyers were restricted to view homes virtually, coupled with tighter loan restrictions, job losses and cold feet – and other buyers more determined than ever to become homeowners.
Now, as we wait to see if April showers bring May flowers, it is a good time to take a closer look at the mortgage market and the impact of COVID-19 on both new loan activity and homeowners with mortgages.
“As trusted advisors in the mortgage space, our Mortgage Consultants are often the first person a borrower will contact when they have questions,” said Chris Cope, president, Allen Tate Mortgage.
“While we are loan originators and do not service loans, we want to provide helpful and accurate information and resources to guide our mortgage clients, especially during this confusing time,” said Cope.
How are new loans being impacted by COVID-19?
For buyers who want or need to buy a home right now, there is no reason to wait, assuming their job has not been impacted. Interest rates remain historically low, as does inventory, but with potentially fewer buyers in the marketplace and properties become more available for in-person showings, it may be easier to find the right home.
Some loan programs are no longer available or have new requirements. These include non-QM programs, Jumbo loan programs and government loans for buyers with low credit scores. Allen Tate Mortgage currently offers Government loan programs (FHA, VA, USDA) to buyers with a minimum credit score of 660 and Conventional loan programs to buyers with a minimum credit score of 620.
Buyers can also expect more scrutiny of their employment status, hours and income, which may be verified until the day of closing. Self-employed buyers must present additional documentation indicating their business is still operating at the same level as prior to COVID-19.
Allen Tate Mortgage makes it easy for buyers to get a pre-approval for a loan in this time of social distancing. Using their online application, MortgagEase, a buyer can apply for a loan and securely upload documentation in as little as 15 minutes. Buyers should be aware, however, that documents are only good for 60 days, less than the usual 120-day period.
As an added benefit to buyers, Allen Tate Mortgage is offering a $500 purchase credit at closing for all new mortgage purchase loan applications submitted before May 31, 2020.
How are existing loans being impacted by COVID-19?
One of the biggest stresses for a homeowner impacted by a job loss, furlough or reduction in hours is how to pay the mortgage.
According to the Consumer Financial Protection Bureau, an agency designed to protect the consumer, you should continue to pay your mortgage if you can do so. Forbearance is not forgiveness; it simply delays mortgage payments for a set time period and in most cases, interest continues to accumulate. The borrower will still be responsible for the debt.
If your income has been reduced to the point where you cannot pay your mortgage, or only pay a portion, the next step is to contact your mortgage servicer immediately. Because of reduced staffing and extremely high call volumes, you should be prepared before you call – and have some patience. You will need your account number, an explanation of why you are unable to make your payment, the expected duration of the problems and details about income, expenses and savings.
If you have a federally backed mortgage, you are protected by the Coronavirus Aid, Relief and Economic Security (CARES) Act with a right to forbearance if you are experiencing a financial hardship due to COVID-19. You are also protected from foreclosure proceedings by CARES through May 17, 2020.
A caution: In this time of hardship, the CFPB says scammers are out in full force. Be wary of any company that charges high upfront fees, offers promises of loan modification, asks you to make payments to someone other than your loan servicer, or requests personal information or documentation in exchange for making payments.
Is it a good time to refinance?
If your employment is secure and you intend to remain in your current home for a least a few years, refinancing may be a good option to consider, says Cope.
Interest rates are fluctuating less than they were in March and early April but are still very desirable. Many homeowners can see a reduction in payment or length of their loan by refinancing. If you are considering a refinance, Cope recommends that you reach out to your Allen Mortgage Consultant to discuss your financial goals. From there, you can provide information and documentation virtually.
As always, Allen Tate Mortgage remains committed to helping with your home financing needs. For questions, contact any Allen Tate Mortgage Consultant.