Mortgage During The COVID-19 Pandemic For Borrowers
BREAKING NEWS: Mortgage During The COVID-19 Pandemic For Borrowers
Qualifying for a Mortgage During The COVID-19 Pandemic For Borrowers has been challenging.
- Many borrowers who were pre-approved prior to the COVID-19 pandemic are no longer pre-approved now
- Many borrowers who got a clear to close soon realized the CTC was null and void due to lenders changing its overlays due to the pandemic
- This is not because FHA, VA, USDA, Fannie Mae, Freddie Mac changed its agency guidelines but due to lenders increasing their overlays
- Lender overlays are lending guidelines above and beyond agency mortgage guidelines
- All mortgage lenders need to have their borrowers meet the minimum agency guidelines
- However, lenders can have higher lending standards called lender overlays
- Most lenders have increased credit score requirements on all loan programs due to the pandemic
- The coronavirus pandemic has turned the U.S. mortgage markets upside down and in chaos
In this breaking news article, we will discuss and cover Qualifying For A Mortgage During The COVID-19 Pandemic.
Lenders Are Worried About Mass Forbearance Included In The CARES Act
The main issue is due to liquidity issues in the secondary mortgage markets.
- The forbearance program included in the CARES Act allows homeowners to get a forbearance for up to one year
- What this means is homeowners affected by the COVID-19 pandemic do not have to pay their mortgage payments up to one year
- However, mortgage servicers still need to make payments to investors
- Mortgage servicers also need to make payments on property taxes and insurance for borrowers with escrow accounts
- The flood of forbearance by unemployed homeowners can bankrupt mortgage servicers and create another mortgage meltdown worse than the 2008 financial meltdown
- Over 25% of homeowners may take up the federally-backed mortgage forbearance over
- This will devastate lenders
- Without a federal bailout for mortgage servicers, many lenders may go bankrupt
- Due to liquidity issues, investors have no interest in buying mortgages of borrowers with under 700 credit scores on the secondary market until further notice
This may change in the weeks and months to come where the liquidity issues on the secondary mortgage bond market are stabilized.
Things To Know Qualifying For A Mortgage During The COVID-19 Pandemic
Mortgage rates are at a historic low. After the Federal Reserve Board announced the Central Bank will drop interest rates to zero percent, mortgage rates slid further down to historic lows.
- However, why are borrowers getting quoted high mortgage rates and discount points?
- Prime borrowers with over 700 credit scores and 20% down payment are getting quoted mortgage rates in the low 3.0% percent range on a 30-year fixed-rate mortgage
- Mortgage rates on a 15-year fixed-rate mortgage are under 3.0% percent for prime borrowers
- However, if your credit scores are below 700, then you will be hit with major loan level pricing adjustments (LLPA)
- As mentioned in the earlier paragraph, there is no market in the secondary mortgage bond market for borrowers with under 700 credit scores
- Most lenders increased their minimum FHA and VA credit score requirements to 660 to 680 FICO
- Not only are mortgage rates high for 660 to 680 credit score borrowers but they also need to pay discount points
- Borrowers with under 660 credit scores are having a tough time finding lenders to qualify for a mortgage
- The great news is Gustan Cho Associates has no lender overlays during the COVID-19 pandemic
- GCA Mortgage Group still takes FHA and VA mortgage loan applications for borrowers with under 620 credit scores, unlike other lenders
For example, JP Morgan Chase stopped taking loan applications on government loans altogether. Chase Mortgage will only take conventional loan applications for borrowers with at least 700 credit scores with a 20% down payment.
Obstacles And Issues When Qualifying For A Mortgage During The COVID-19 Pandemic
There is no doubt there are obstacles and hurdles when qualifying for a Mortgage During The COVID-19 Pandemic.
- Non-QM loans just got reopened last week. However, credit score requirements have increased to 680 FICO and require a 20% down payment
- Prior to the pandemic, Non-QM loans required a 10% down payment
- Credit scores down to 500 FICO were accepted
- GCA Mortgage Group believes non-QM lenders will lighten up non-QM guidelines in the weeks and months to come once the secondary mortgage bond market stabilizes
- Gustan Cho Associates is one of the very few mortgage lenders that will accept under 620 credit score borrowers during the pandemic
- There are no credit score requirements on VA loans as long as the borrower can get an approve/eligible per automated underwriting system (AUS)
- Since GCA Mortgage Group has no lender overlays, we just go off the automated findings of the AUS
- Many lenders have stopped doing manual underwriting on FHA and VA loans
- Most lenders have stopped doing FHA 203k loans during the pandemic
- GCA Mortgage Group continues to do manual underwriting on VA and FHA loans as well as FHA 203k loans
- The mortgage process is longer than prior to the pandemic
- Most closings are 45 to 60 days versus 30 days prior to the coronavirus pandemic
However, the mortgage and real estate industries have adapted in trying to make the home buying experience as smooth as possible during the pandemic.
Return To Normalcy In The Mortgage Markets
The mortgage markets will return to normalcy. The only type of people benefiting from historic record rates is prime borrowers on single-family owner occupant homes. Investment mortgage rates are ridiculously high due to liquidity issues on the secondary mortgage bond markets. FHA and VA Streamline Refinance should return to normalcy once the secondary mortgage bond markets stabilize and liquidity is back to normal. GCA Mortgage Group is expecting a refinance boom once the mortgage markets stabilize to normalcy in the coming weeks and months.