2020 Mortgage Guidelines Outlook Due To Economic Slowdown

Gustan Cho Associates are mortgage brokers licensed in 48 states

BREAKING NEWS: 2020 Mortgage Guidelines Outlook Due To Economic Slowdown

2020 Mortgage Guidelines Outlook

2020 Mortgage Guidelines Outlook Due To Economic Slowdown of the coronavirus will be affecting borrowers with lower credit scores.

  • The mortgage industry took a major hit due to the economic coronavirus pandemic
  • One topic the media is not covering is the changes in the mortgage industry after the economic shut down in the United States
  • Many lenders have suspended operations
  • All non-QM lenders have halted operations on non-QM loans
  • Borrowers who locked their non-QM loans and got clear to close is now null and void
  • Many non-QM lenders went out of business
  • Only two national non-QM lenders may still be in business where they will be making an announcement within a few weeks
  • Many lenders imposed overlays on credit scores
  • Many lenders who had minimum credit score requirements on FHA loans of 580 FICO have raised them to 640 to 680 credit scores
  • There are no minimum credit scores on VA loans
  • However, most lenders implemented lender overlays on VA loans
  • Now most lenders require a 640 to 680 FICO on VA loans
  • Most lenders have stopped doing manual underwriting and other specialty loan programs such as DPA, one-time construction, 203k loans, and reverse mortgages
  • The great news, it is business as usual at Gustan Cho Associates Mortgage Group
  • GCA Mortgage Group still originates and underwrites government loans with under 620 credit scores and down to 500 FICO
  • We are one of the very few national lenders that have not raised credit score guidelines on government and conventional loans
  • GCA Mortgage Group has zero lender overlays

In this breaking news article, we will discuss and cover the 2020 Mortgage Guidelines Outlook Due To Economic Slowdown.

Changes In The 2020 Mortgage Guidelines Outlook Due To Coronavirus Pandemic

The coronavirus pandemic has hit the U.S. like a category-10 hurricane.

  • The U.S. economy was stronger than ever prior to the coronavirus pandemic hit our nation
  • The stock market was at an all-time high, the unemployment rate hit a 50-year low, homeownership hit a historic high, and the 2020 housing market forecast was strong
  • Then disaster hit. The coronavirus outbreak hit the United States and the U.S. economy came to an abrupt halt
  • Millions of businesses have closed and/or are operating at limited capacity
  • Unemployment claims hit 10 million in the past two weeks and are expected to increase substantially
  • Unemployment numbers came in north of 700,000 and are expected to hit as high as 30% in the weeks to come
  • The economy was stronger than ever until the coronavirus pandemic
  • President Trump and his administration have implemented the coronavirus stimulus package to slow the economic damage from the pandemic
  • Home purchase mortgage applications have greatly decreased due to fears of homebuyers of not having a job
  • Many Americans fear a recession that is far worse than the 2008 financial crisis
  • Many homebuyers who planned on buying a home in 2020 have halted their plans

However, there are still homebuyers who want to purchase a home in 2020. Many are worried about the 2020 mortgage guidelines outlook due to the coronavirus pandemic.

Understanding Agency Mortgage Guidelines Versus Lender Overlays

How to understand the guidelines of mortgage agencies and lenders overlays

As of today, FHA, VA, USDA, Fannie Mae, Freddie Mac has not changed its agency guidelines.

  • All lenders need to make sure their borrowers meet the minimum agency mortgage guidelines
  • However, lenders can have higher lending requirements called lender overlays
  • Lenders can have overlays on just about everything
  • For example, lenders have increased lender overlays on credit scores across the board due to the economic meltdown due to the coronavirus
  • For example, many lenders who had a minimum 580 credit score requirements on a 3.5% down payment FHA loan have increased their overlays on credit scores to 640 to 680 FICO
  • The same goes for other loan programs
  • VA loans do not have any minimum credit score requirements
  • However, due to the liquidity issues on the secondary mortgage markets, many lenders have increased credit score requirements to 640 to 680 FICO on VA loans
  • Many lenders have imposed tougher debt to income ratio overlays as well
  • The reason for increased lender overlays by mortgage companies is due to the secondary mortgage markets
  • Investors are shying away from buying mortgage-backed securities (MBS) on loan with under 640 credit scores
  • Loans under 680 FICO are now considered higher risk loans
  • Rates are higher and most lenders will charge discount points

The good news is Gustan Cho Associates have not implemented any lender overlays during the coronavirus pandemic. We still originate and fund mortgages with under 620 credit scores and down to 500 FICO. For example, one of our loan officers recently locked a VA loan with 530 FICO charging 2 points. Not all lenders have the same lending requirements on FHA, VA, USDA, and conventional loans.

Shopping For A Mortgage With Lower Credit Scores

As mentioned earlier, all lenders need to meet the minimum agency lending requirements. However, lenders can have their own higher standards called lender overlays. For example, if you get turned down for an FHA loan with a 630 credit score from one lender, this does not mean you cannot qualify for an FHA loan with another lender that either less lower credit overlays and/or no lender overlays. Chase Mortgage has stopped doing FHA and other government loans until the mortgage crisis is over. They will only originate and fund conventional loans for borrowers with over 700 credit scores and 20% down payment. Gustan Cho Associates has zero overlays on government and conventional loans. For more questions about this article, or other mortgage-related topics or to qualify for a mortgage with a lender with no overlays, please contact us at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.