COVID-19 is quickly changing the mortgage industry. What you need to navigate your mortgage loan approval today. 9 things you need to know about getting a mortgage today. And it’s more important than ever to do your homework and shop carefully for your lender.
Latest News About Mortgages In Today’s COVID-19 Environment
Just as the housing market has seen big changes in the COVID-19 environment when it comes to how we can or can’t show homes, meet with out clients, etc. we are also seeing changes in the mortgage markets as a result of COVID-19. Here’s what I’ve been hearing from some of my best Charlotte area lenders — 9 changes you need to be aware of as they might very well impact your ability to get a mortgage or close on a home on time.
- FHA Premium Changes: buyers with low credit scores (600-640) may now have to pay points to be eligible for an FHA loan. Obviously, that means the cost of your loan is now higher.
- Some Lenders Requiring Higher Credit Scores for FHA Loans: some lenders have increased the minimum scores for an FHA loan up to 640-680. So even if you are willing to pay points with a low credit score, some lenders won’t consider underwriting a mortgage. This increase in minimum scores is not an FHA requirement, so it’s important to shop for the right lender if your scores are below 640.
- Some Lenders Are Increasing Interest Rates For Riskier Non-FHA Loans: if your credit is marginal some lenders are increasing the interest rate they charge you. And some won’t make loans at all for those they consider a risky loan. It’s more important than ever to do your homework about the lenders you’re considering.
- Some Lenders Have Stopped Doing Down Payment Assistance Loans: again it’s critical to shop for the right lender if you need down payment assistance. More than likely, this is a temporary situation but no one can predict for how long.
- Appraisals Are Taking Longer: since an appraisal is a critical part of mortgage loan approval you should be aware that you might need to build in some extra time into your contract contingencies to have an appraisal completed as there is more demand these days for appraisals than the available pool of appraisers can handle.
- Verification of Employment Delays: for the most part, because lenders are required to verify employment two days prior to closing to ensure employment is still in place, with human resource personnel at most companies working remotely there could be delays in getting final employment verification. This could impact your closing date and subsequently your move-in date. You will want to call your human resource department to alert them when an employment verification request is coming and to ask them to deal with it promptly.
- “Alternative” Loan Products On Hold With Some Lenders: these products can include jumbo loans, no income verification loans, etc. Again, this calls for careful shopping and research on the lender you might wish to use.
- Final Mortgage Approvals Taking Longer: for quite a while now, we’ve been seeing mortgage loans approved and closed in 30-35 days. With lengthening times for appraisals, the increased number of both new and refinance applications, mortgage company personnel (loan officers, underwriters, processors) working from home, the time frame for approval is increasing with many mortgage lenders. You need to know what the time frame is with your lender before you finalize contract negotiations to ensure your lender can meet financing contingency dates.
- Mortgage Pre-Approval: if you received your mortgage pre-approval prior to the outbreak of COVID-19, even though it may have been “good” for 60-90 days, you should double check with your lender if it’s still viable. With many people being laid-off or furloughed, pre-approvals may no longer be honored by lenders. And if you haven’t applied for a pre-approval before beginning your house search you should do so before you continue. Currently, many home sellers will not approve a showing without first seeing a prospective buyer’s loan pre-approval letter. Want to know more about why a pre-approval up-front is more important than ever? click here.
More Things To Know That Impact Your Mortgage & Closing In North Carolina
- New COVID-19 Contract Addendum in North Carolina allows for an effective 15-day delay beyond “stay-at-home” orders. This delay can impact not just your closing date, but your loan lock date, as well. It’s important to work closely with your lender to make sure your loan lock date doesn’t expire and when you actually lock in your rate.
- Closing/Settlement Issues: increasingly more closing attorneys and settlement agents are working remotely. In most cases, Realtors® are not permitted to attend closing even if their client’s settlement agent does an in-person closing. We are seeing more “drive up” closings and “mail away” closings — anything, really, to limit person-to-person contact. Regardless of how your closing takes place right now, documents require notarization, some require powers of attorney… these could all well take longer to put in place and need to be factored into your contract negotiations and decisions about mortgage funding and rate lock dates.
In The COVID-19 Environment, It’s More Important Than Ever…
If there was ever a time when it was important to be “cloned at the hip” with your lender right from the start even before you begin house hunting, it is now in the COVID-19 environment. If there was ever a time it was important to do your research on a mortgage lender and to “shop” carefully for a lender, it is now in the COVID-19 environment.
And don’t forget you should/can work closely with your Realtor® who can help guide you to the right lenders for your specific needs as well as help you navigate the mortgage approval process for you throughout the transaction.