As the news and restrictions of most activities began happening in mid to late March, many industries have been subject to changes in the way they conduct business. This is no different for our industry and here at Rocky Mountain Mortgage Company, we are working diligently to ensure we stay on top of all of the regulation shifts and keep people informed of their options. Most people would be surprised to learn that buying a house may have just gotten easier.
The healthcare crisis has certainly impacted mortgage rates, mortgage applications, and the way lenders do business. The immediate economic turmoil was obvious, but there is still some uncertainty as to the longer-term economic effects of this, seeing as places like Texas are still not completely in the clear (as of July 2020). It appears that as the pandemic first hit the industry, it was harder to get a loan. Today, it seems the process is in the favor of the borrower. In fact, qualified borrowers with stable employment have access to some of the lowest rates in history.
According to Freddie Mac, the lowest weekly rate was at 3.31%, while presently mortgage lenders are lending out with a rate of 2.5%. This means that affordability has soared for many people. Most forecasts show that rates will remain this low for the rest of the year.
Initial Impacts of COVID-19 on Mortgage Loans
As news of the pandemic hit and the economy became very uncertain for many people, there were several initial impacts that seemed to make it difficult for interested lenders.
First, there was a restriction on mortgage financing. Lenders became overly cautious because, all of a sudden, the value of homes was in question. At the same time, millions of Americans were out of a job, meaning many of them would not be able to make their payments.
Secondly, there was an overflow of applications. As soon as the low rates hit, interested buyers raced to get their application in and take advantage of these low rates. Rates had a short spike, but it didn’t last too long.
Third, some lenders toughened up their requirements for lending. Some even raised the deposit requirement of up to 20%.
Other Changes to Contracts and Appraisals
It is worth noting that the pandemic has also added some Coronavirus clauses to some contracts. These exist to protect the buyer or seller in case something delays the closing of the home.
Due to many businesses being closed and others seeing restrictions, essential functions, such as appraisals or inspections, have to be delayed. These clauses in the contract help to protect both parties for situations that are out of their control.
The caution created by the pandemic has also led to many questions regarding the appraisals of home. How to value a home was already something that people in the industry had been debating for some time. The healthcare crisis has made it difficult because of the need for appraisers to enter the home. Many sellers do not want appraisers to enter a home and many do not want to enter the home due to potential risk. This has led to several approaches, one being a temporary grace period on appraisals that gives buyers 120 days to get the task done but allows the lender to close on the mortgage loan.
Checking Your Credit During the Pandemic
In general, borrowers are only allowed one credit report every 12 months or so. Due to the pandemic, the three major credit reporting agencies including Equifax, Experian, and TransUnion were offering free credit reports weekly until April 2021. This gives potential buyers a great opportunity to keep an eye out on their credit and make the necessary changes to see that score goes up. At the same time, buyers need this to be able to keep an eye on their credit.
Mortgage Forbearance Programs
Economic help like mortgage forbearance programs allows some homeowners to reduce payments for principal and interest for about a year. All these changes and shakes up simply mean new rules and regulations and a new way of conducting mortgage loans.
The forbearance programs indicate the following:
- You can temporarily suspend or reduce your payments
- It is not mortgage forgiveness. So at the end of the forbearance period, you will still have to repay what you owe. You will have some options on how to do this, including one lump sum or higher monthly payments.
It’s important that you contact your home loan provider for information regarding your specific loans. Loans that are not backed up by the government work a little bit differently and might not be eligible for the CARES act. It’s important for you to understand the financial changes and implications happening to your loan.
Get the Home Mortgage Loan You Need
As your trusted mortgage lender, Rocky Mountain Mortgage Company is here to help you navigate the uncertainty of buying a home in this current climate. Buying a home was already complicated enough for many people, today there are a lot of unprecedented changes to consider and take into account. Call us today and find out more.
