Tuesday, June 30, 2020 / by Vanessa Saunders
Last year at this time, mortgages in forbearance programs represented 1% of all mortgages. As of May 10, 2020, more than 4 million borrowers were able to declare financial hardship and delay making payments on their loans for up to a year. Things are a-changin' in the mortgage world. The Covid-19 pandemic and economic shutdown have left the mortgage markets bubbling with volatility, and lenders are changing to meet the new normal.
Is it still possible to get a mortgage? The answer is yes, but some of the rules have changed.
Lenders are asking for higher qualification thresholds.
Expect more hoops to jump through, especially on mortgages that are deemed more "risky" than others - jumbo loans, high-balance conforming loans and investment property loans.
(A conforming loan is a mortgage that is equal to or less than the dollar amount established by the limit set by the Federal Housing Finance Agency ( (FHFA) and meets the funding criteria of Freddie Mac and Fannie Mae.) Buyers will need credit scores above 680, a steady job, more cash in hand an an ability to close a deal quickly.
Lenders are swamped with applications.
Expect for your application to take longer than normal. Volume is high throughout the Hudson Valley, and lenders are struggling to keep up with the paperwork.
Lack of clarity keeps the market jumpy.
People are nervous about the future, and this has made mortgage rates trend lower on average, with occasional bumps in interest.
Five questions buyers should ask themselves before they go home shopping:
1. What kind of mortgage do you need? Conventional? Or do you qualify for a federally backed FHA or VA loan? Also, will you have enough in savings to make mortgage payments if the economy fails to rebound?
2. How secure is your current income or job? Can you guarantee a lender you have a reliable income?
3. What is your credit score? Visit Equifax, Experian, or TransUnion for your credit report, to see if you qualify for a favorable loan and interest rate. Like your income, will your credit-worthiness grow or at least remain steady for the term of the mortgage?
4. Are you in a position to close quickly? Market fluctuations could mean your qualification threshold may change.
5. Put together a loan application file with all the necessary paperwork (pay stubs, credit reports, W-2 forms, tax returns and bank statements before applying for a mortgage. (Your loan originator will be able to supply you with a complete list of documents you'll need to provide.)
Don't be discouraged. Getting a mortgage isn't impossible. There are plenty of resources available, and many have near record low interest rates. Finding a good mortgage banker who can show you your options and guide you through the process is a great way to start your hunt for the perfect house.