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July
29

 

With so many people out of work due to the COVID-19 crisis, we are living in a different world right now. One huge effect is that the mortgage industry is teetering on the lowest interest rates in history. During the Coronavirus pandemic, the home purchase market has not slowed down. There are currently more eager buyers than willing sellers. What does this mean to you?

Are You Thinking of Refinancing?

If you are looking to refinance and do not plan to take any cash out of your new loan, and if your loan is currently guaranteed by Fannie Mae, you can do an exterior only appraisal because of COVID-19.  There are also many property inspection waivers where appraisers can sit at their desk and look at the pictures in MLS without ever stepping inside the home. But, if you want cash back, then you have to do an interior appraisal.

When Does it Make Sense to Refinance? 

Ask yourself how much you are really spending to get this loan. You will find your Loan Costs on your Loan Estimate, page 2. Also, check to see if there is a Lender Credit offered to pay all or some of this amount. Look for the Mortgage Tax amount and government fees. Your loan amount may be adjusted by these amounts. You will need to decide if it is worth it, and how long will it take you to recoup this amount. Measure the benefit of refinancing against upfront costs you will spend. 

Shopping to Buy a New Home?

The mortgage world has adapted to continue to facilitate home purchase mortgages and refinances, but if you are shopping to buy a home, the rules are changing, and underwriting criteria is tightening:

  1. One of the largest lenders, Chase Home Mortgage, announced April 14 that any new mortgage application will require 20% down (or 20% equity if you are refinancing), and a minimum of a 700  FICO   score – which is a significant tightening. (There is a special program for low and moderate income people that will allow for less than 20% down.) 

Note: There are independent lenders who are still offering 3% down as a minimum for loan amounts of up to $510,400.

  1. The mortgage industry is under great stress right now. Jumbo loans (or loans over the Fannie Mae/Freddy Mac limit of $510,400) are becoming rare. Many mortgage companies and banks have stopped doing loans above $510,400. That's a big deal. 
  2. FHA and VA loan mortgage servicers have increased their minimum credit score. Historically, FHA allowed and insured credit scores as low as 550, but what we are seeing now is a requirement of 640 to 680 to try to minimize their risk.

The mortgage lending industry is a moving target right now. As quickly as the rules keep changing, if you applied for a loan and received your pre-approval letter even two weeks ago, you need to call your lender to make sure you still qualify.

 

State of the Mortgage Business

According to Brian Wickert, CEO and founder of Accunet Mortgage, remember that a lot of people are losing their jobs, and, "You have to have a job and income to refinance or get a new loan."

The CARES Act 

Coronavirus Aid, Relief, and Economic Security Act -The CARES Act provides fast and direct economic assistance for American workers. The U.S. Department of the Treasury has a website giving you information about the CARES Act. For everything you need to know, plus information about your personal finances, check out: 

https://home.treasury.gov/policy-issues/cares

In short, if you are having trouble making your mortgage payment, and you have a federally backed mortgage (a loan owned by Fannie Mae or Freddy Mac and insured by FHA, VA or USDA ) you can call up your mortgage servicer and tell them you have a financial hardship caused by the COVID-19 emergency. Because of the CARES Act, that mortgage servicer has to ask you if you would like the Forbearance Plan where you don't have to make any payments for 180 days, (extendable for another 180 days after that) or reduced payments. Key is: Forbearance is not free. Delayed payments must be repaid. That repayment plan will be worked out between you and your mortgage servicer. They will want you to pay it back as soon as possible. After the Forbearance period, you may be asked to make double payments or add a few hundred dollars a month to your regular payment until the total amount is paid back. So if you don't really need the relief, don't ask for the free ride. Also, there are a lot of people who do need it, so the phone lines to all mortgage lenders are jammed right now and you may have to start the process early. One good resource about Forbearance:

 https://www.accunet.com/blog/the-mortgage-f-word-of-the-day-is/

If you are in the process of getting a new mortgage loan, do not ask for Forbearance before making that first payment. During the period after closing until the first payment is made, your funds are not federally backed or insured and the Cares act only applies to federally backed loans. So find out first if your loan is owned by Fannie Mae or Freddy Mac. If you have a freshly closed mortgage, it may not be yet. If your loan is a few years old and you really need the help, then it is an excellent method to help with your loan payments. Don't ever just stop making your payments! Have a conversation with your mortgage servicer so that foreclosure doesn't begin.

Current mortgage rates are very low, and demand has gone through the roof. The wait is a bit longer, so think ahead, and get in line!

If you decide to buy a home, have a conversation with your lender to see if they can get it done by the time you want to buy. Refinance can take 90 – 120 days. Your lender may not be able to lock in a rate until you've been approved. Be clear and do not make assumptions. Also, because of the high unemployment, lenders are checking within three days of closing to make sure your employment status and income has not changed since your application.

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