BREAKING NEWS: Lenders Changing Mortgage Guidelines Due To COVID-19 Pandemic
Many Lenders Changing Mortgage Guidelines due to the liquidity issues on the secondary mortgage bond market.
- The coronavirus pandemic has lenders scrambling for changes
- Investors of mortgage-backed securities (MBS) has halted and/or limited buying mortgage-backed securities of borrowers with under 680 credit scores
- Most lenders have increased credit score requirements on government and conventional loans
- Most lenders have increased their minimum credit score requirements to 660 to 680 FICO plus discount points on FHA and VA loans
- JP Mortgage Chase have stopped taking applications on all government loans (FHA, VA, USDA)
- Chase Mortgage only takes applications on conventional loans for borrowers with a minimum 700 credit scores and 20% down payment
- Many lenders have lowered debt to income ratio caps as well
- Lenders have tightened credit and lending requirements on all loan programs due to the uncertain secondary mortgage bond markets
- The great news is Gustan Cho Associates have not implemented any changes due to the coronavirus pandemic
- We still take applications on government loans with under 620 credit scores
- We still do manual underwriting and FHA 203k loans
In this breaking news article, we will discuss and cover Lenders Changing Mortgage Guidelines Due To COVID-19 Pandemic.
Lenders Changing Mortgage Guidelines On Non-QM Loans
Prior to the COVID-19 pandemic, Non-QM loans were the hottest loan program in the U.S.
- Many homebuyers who could not qualify for government and conventional loans due to not meeting its guidelines can often qualify with non-QM loans
- There is no waiting period after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale with non-QM mortgages
- Bank statement loans for self-employed borrowers with no income tax return required was a very common loan program for business owners and/or independent contractor wage earners
- Asset depletion mortgages were very popular for wealthy individuals with no steady income source
- However, after the COVID-19 pandemic hit the U.S., all non-QM loan programs were suspended until further notice
- Many non-QM lenders went out of business
- The secondary mortgage bond market and institutional investors were not interested in buying mortgage-backed securities of non-QM mortgages
- However, Gustan Cho Associates still take non-QM mortgage loan applications
- Our guidelines on Non-QM loans have changed temporarily until the secondary market stabilizes
We require higher down payment and credit scores on non-QM loans than prior to the pandemic. The non-QM mortgage markets should stabilize in the weeks and months to come.
Lenders Changing Mortgage Guidelines Due To COVID-19 Pandemic Creating Chaos In The Housing Markets
All agency guidelines from HUD, VA, USDA, Fannie Mae, Freddie Mac remain the same with no changes.
- However, many borrowers have noticed significant changes with lenders changing mortgage guidelines due to COVID-19 pandemic
- Many lenders suspended manual underwriting on FHA and VA loans
- Most lenders have halted all FHA 203k and Reverse Mortgages until further notice
- The minimum credit score required for a 3.5% down payment on an FHA loan is 580
- However, most lenders have increased minimum credit score requirements to 660 to 680 FICO
- This holds true even though the minimum HUD credit score requirements is 580 FICO
- Other lenders have drastically lowered their debt to income ratio caps to 40% to 45%
Yet other lenders do no longer accept gift funds for down payment and/or closing costs.
Agency Guidelines Versus Lender Overlays
Many borrowers who qualified for a mortgage prior to the pandemic no longer qualify with their original lenders who have imposed lender overlays. The VA has no credit score requirements on VA loans. However, many lenders now have lender overlays on VA loans such as minimum credit score requirements of 640 to 680 FICO and debt to income ratio caps. There is no maximum debt to income ratio caps on VA loans. The great news is Gustan Cho Associates will take FHA loan applications with under 620 credit scores and down to 500 FICO. GCA Mortgage Group have no lender overlays on FHA, VA, USDA, and conventional loans. We still take manual underwriting mortgage applications as well as FHA 203k and Reverse Mortgage applications. While other lenders are struggling trying to get mortgages approve, GCA Mortgage Group are busy doing loans other lenders cannot. The mortgage markets is expected to stabilize in the coming weeks and months. The reason lenders have increased their lender overlays is due to the illiquidity in the secondary mortgage bond market. Investors in the secondary mortgage bond market has no appetite for borrowers with under 680 credit scores. This should change in the coming weeks and months. We will keep our viewers updated on new developments on this story.