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FOUR THINGS TO KNOW ABOUT GETTING A HOME LOAN DURING COVID-19 

By Jessica Hudson  |  June 1, 2020   



Thinking about pursuing a purchase loan or refinancing your existing home loan? Getting a mortgage can already be a complex process, but during a pandemic it becomes even more complicated. As I am sure you have heard around the physical or virtual water cooler, rates are low. That means this could be a great time to take out a mortgage and lock in a low rate, however, mortgage lending looks much different now than at the start of the year. Here is what you need to know:  


Be ready to prove (a few times) that you are able to pay a mortgage

If you have lost your job or been furloughed, you might not be able to buy your dream house (or any house) right now. If your income is needed to qualify, you must be actively employed. If you have a loan in process and become unemployed or furloughed, your mortgage closing would have to wait until you have returned to work and received your first paycheck. Lenders are also taking extra steps to verify each borrower’s employment status. Pre-COVID one (or none) verification of employment was needed during the initial underwriting process. Ten days prior to closing, a verbal verification of employment was required. Now, a written or verbal verification of employment is required during initial underwriting. A verbal verification of employment is again needed on the day of funding. This can cause quite a scramble to get done considering many companies are still working remotely and someone might not be as readily available to complete this task by that day’s bank wire cutoff.  


Your credit score might not make the cut anymore

Economic uncertainty makes lenders just as nervous as borrowers, and many lenders are raising their requirements for borrowers’ credit scores. Many lenders who were previously able to approve VA and FHA loans with credit scores as low as 580 are now requiring a 640 score to qualify. These changes are temporary, but it is expected for them to stay in place until the entire country is opened back up and the unemployment numbers drop considerably.


Forbearance prohibits your ability to refinance

Understandably, many people are looking into mortgage payment deferment. It is important to know that most lenders will not allow a refinance on a loan in forbearance. When you sign your closing paperwork there is now a document making the borrower(s) attest that their loan is not in forbearance.


Loan program options have gone down

Before the pandemic, there was a plethora of loan programs to meet a wide variety of scenarios. Borrowers looking for jumbo loans, those with low credit or derogatory credit events, etc. might now find there are not any loan options for them. Lenders nationwide have suspended many of their loan offerings and are only offering conventional, FHA, VA and USDA loans. Some larger banks are still offering jumbo loans, but the reserve and debt-to-income requirements have been raised significantly.

 

 

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