What you need to know about mortgages during (and after) COVID-19

What you need to know about mortgages during (and after) COVID-19

As experts and advisers, real estate agents have always played an important role for homebuyers. But it’s clear that during the coronavirus era, they have even more responsibility to educate clients on what’s happening in today’s market

The COVID-19 pandemic has caused several negative ripple effects across the U.S. including a huge increase of Americans asking to delay mortgage payments. With mortgages, the rate volatility is mostly constrained to non-conforming loans such as jumbo loans, high-balance conforming loans and investment property loans. For conforming borrowers, rates are still historically low.

How COVID-19 changed the mortgage market

Lenders are increasingly moving away from or raising rates on more risky loans like jumbo loans, high-balance conforming loans and investment property loans.

But since lenders don’t face the same liquidity risk with conforming loans, rates on conforming loans under $510,400 are still competitively priced. Some of the other significant reasons for volatility and disruption include:

·          Lenders are raising qualification thresholds from mortgages including jumbo loans, high-balance conforming loans and investment property loans. This means that, generally speaking, borrowers will need better-than-usual credit scores (above 680), a steady job, more cash on hand and more willingness to close a deal on short notice.  Mortgage application volume is high across the U.S. With many people trying to obtain mortgages and bank workers adjusting to working from home, banks have struggled to keep up with demand. This means the buying process and getting a mortgage approved is taking longer than usual.

Preparing prospective homebuyers

The process of getting a mortgage is emotional and stressful . Here are a few examples.

·         What kind of loan will they need — conventional, FHA or VA?

·         What sort of job security do they have?

·         How good is their credit score, and will it likely remain steady during the buying process?

·         How quickly can they decide to close on a purchase given the current environment and fluctuations?

·         Have they gathered all the required financial information (pay stubs, credit reports, W-2, bank statements, etc.) before starting paperwork?

These sorts of questions can help clients think about obtaining a mortgage while COVID-19 causes uncertainty for so many people and businesses.

Post-COVID-19 planning

In all likelihood, the coronavirus crisis will be with us ,it’s prudent to set expectations and explain to buyers that getting a mortgage during the coronavirus can be a little challenging.  For some people — those with safe jobs and savings who are seeking a loan within the conforming limit — rates should remain low. However, there may be more documentation needed than usual.  Although homebuying now might be technically feasible for many buyers, agents should ensure their clients are entering the process with their eyes open. And if buyers do want to go through the process now, they need the ability to close quickly on a property and adjust to the quirks of pandemic buying. 

Mortgage rates ticked down just slightly this week and remain at all-time lows. Rates have consistently trended downward for the last two weeks, but the daily movements have been very modest, despite a slew of economic data series that have seen record one-month improvements.

The reality is that these monthly gains were largely expected – and likely already “priced-in” – and, despite the improvements, the economic recovery still has a long way to go. What’s more, the recent surge in coronavirus case volumes across the country has called into the question the viability of economic recovery. As a result, investors appear to be hanging tight, waiting for surprising data and/or evidence of our society’s ability to function – or not function – amid rising COVID-19 case volumes before acting in a way that would force mortgage rates to respond.

Absent this information, it’s difficult to call where rates are likely to go from here. Positive news could easily jolt rates back upward, making these record-low levels a fond memory, but the gradual reduction of rates could also continue if new developments disappoint. Whichever way they go, mortgage rate movements will be driven by the spread of the virus and our ability to live with it.

With that being said, remember 1% saving in RATE OF INTEREST, can save you approx $12000 so take your pick wisely. RATES ARE LOWEST AND THIS TIME WONT COME


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