Mortgage Guidelines After Unemployment

Mortgage Guidelines After Unemployment Due To Coronavirus Crisis

Gustan Cho Associates are mortgage brokers licensed in 48 states

This ARTICLE On Mortgage Guidelines After Unemployment Due To Coronavirus Crisis Was PUBLISHED On April 4th, 2020

There are many Americans who have worked hard over the years saving money to purchase a home in 2020.

  • The US economy was stronger than ever in the history in the past several years
  • Job growth was increasing quarter after quarter
  • The stock markets hit all-time record highs
  • Many workers had 401ks that went up over 50 percent over the years
  • The unemployment rate hit a 50-year low
  • HUD and the FHFA (Federal Housing Finance Agency) have increased maximum loan limits for four years in a row due to skyrocketing home prices
  • 2020 FHA loan limit is capped at $331,760 on FHA loans
  • 2023 Conventional loan limit is now at $510,000
  • There were more homebuyers than the inventory of homes
  • Homebuilders were selling out of homes prior to getting permits and breaking ground
  • Besides government and conforming loans, non-QM mortgages were gaining grounds for borrowers who needed alternative financing mortgages
  • Bank statement loans for self-employed borrowers with no income tax returns and lower credit scores were very popular
  • Then the coronavirus pandemic hit home and turned the US economy upside down literally overnight
  • The coronavirus pandemic has triggered an overnight economic meltdown
  • The coronavirus pandemic impact on the economy was devastating
  • Within weeks, millions of Americans were either laid-off or fired
  • Many homebuyers with executed purchase contracts not only ended canceling the purchase agreement but lost their jobs
  • As of today, nobody knows how long the economy is going to be closed nor how long it will get back to normal
  • Everyone is on standby
  • Many Americans do not know whether or not they have a job after the pandemic crisis is over
  • Most homebuyers have temporarily postponed their plans to purchase a home until further notice

In this ARTICLE, we will discuss and cover Mortgage Guidelines After Unemployment Due To Coronavirus Crisis.

What Are The Mortgage Guidelines After Unemployment?

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Federal Mortgage Agencies such as FHA, VA, USDA, FANNIE MAE, FREDDIE MAC has not changed mortgage guidelines after unemployment. Here are the general mortgage guidelines after unemployment for all loan programs:

  • There is no mandatory waiting period after getting a new job after unemployment as long as the employment gap was six months or less
  • Borrowers do not have to be in the same job and/or same field of employment
  • For example, a restaurant worker can get a job in another non-restaurant field after they have been laid-off and/or fired in the restaurant field and still qualify for a mortgage
  • It needs to be a full-time job
  • If a mortgage borrower has been unemployed for more than six months, they need to be on the new job for at least for six month in order to qualify for a mortgage
  • If a mortgage borrower has been unemployed for more than six months and is returning to the same job, there is no job seasoning requirements after returning to the job

Many Americans have lost their jobs due to the economic impact of the coronavirus pandemic.

Economic Impact Due To The Coronavirus Impact

Over 10 million unemployment claims were filed in the past two weeks. Many Americans who had job stability and strong income had become unemployed literally overnight. Unemployment numbers reached over 700,000 last week. Both unemployment claims and numbers are expected to skyrocket in the coming weeks. Many pre-approved mortgage borrowers who were shopping for homes have suspended the homebuying process until further notice. They want to see how the economy will be recovering after the pandemic crisis is under control. Most American workers are worried about the future of their jobs. Many businesses have either have temporarily closed their doors or went out of business. The impact of the coronavirus pandemic has definitely affected the mortgage industry. Non-QM lenders have suspended originating and funding non-QM loans. Many analysts expect most non-QM lenders will go out of business. As of today, the future in mortgage lending is uncertain. Many lenders imposed emergency lender overlays due to liquidity problems on the secondary market. Most lenders started imposing discount points for borrowers with under 680 credit scores. Any borrowers with under 680 credit scores are expected to pay a higher mortgage rate. Although mortgage rates are at historic lows, lenders are increasing rates due to capacity and liquidity issues. The secondary market halted buying under mortgages with under 640 FICO. There is no secondary market on mortgages with under 640 credit scores.

Current Mortgage Market For Borrowers With Lower Credit Scores

What is the current mortgage market for borrowers with lower credit scores

Mortgage borrowers need to monitor and pay attention to their credit scores more than ever. Fortunately, Gustan Cho Associates Mortgage Group is one of the few lenders that originate and fund FHA and VA loans with under 620 credit scores and down to 500 FICO. Most lenders have increased their credit scores to 640 to 680 FICO and are charging a lot of points. Most non-QM lenders are expected to go out of business. However, a few non-QM investors at Gustan Cho Associates are expected to be open for business in the next couple of weeks. Unemployed workers should take advantage of the $2 trillion coronavirus stimulus to get by until the pandemic is over. Creditors and lenders are not supposed to report forbearance as late payments on the credit bureaus. Make sure the creditor is not reporting any derogatory credit information on your credit report and make sure to monitor credit during times of crisis.

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