If you are in the market for mortgage loan financing or will be in 2020 this information could be very pertinent to your situation. Here is what you need to know about what is going on right now and likely will happen throughout the rest of this year…
The Coronavirus pandemic is not only a health issue, but it is a significant financial issue it ripples through the entire US economy. Here is the most basic example. If your employment is considered non-essential, you get furloughed you’re not able to work, you have no income you go to your mortgage servicer and you get a forbearance for say 6 months. That mortgage servicer still must pay premiums to the end investor on your mortgage causing that servicer to have major risk while interest rates are in flux. If you multiply that scenario several million times, it is no coincidence the broader mortgage industry is facing some major financial setbacks. It is the mortgage servicers that are having major financial difficulty.
That is carrying over into new mortgage loan origination because you cannot have one without the other. The mortgage industry has two sides, the origination side which is the creation and the establishment of new mortgages, and the servicing side which is the collecting of the monthly mortgage payment for the end investor by the servicer. Each works in tandem with each other.
As a result of what is transpiring many mortgage companies are making minimum credit score changes to programs including Jumbo loans, non-qualified mortgage loans, FHA loans, and VA loans are all experiencing changes.
Most loans are allowing for drive-by appraisals. This is generally true for values under $1m, except for VA which is up to the discretion of the appraiser.
Some mortgage companies are no longer even doing FHA Loans, others have changed their minimum credit score requirement to 660 and higher while some have raised their credit score requirement to 640 which before the coronavirus was generally around 620-580.
VA loans have gone to minimum 640 credit scores. VA high balance loans have gone to as high as a 680 credit score.
Many jumbo investors have pulled out of the market as the uncertainty of the mortgage market and the uncertainty that is being established by the coronavirus begins to take shape.
If you were looking to get mortgage financing or you are already pre-approved and you have not recently updated your pre-approval and you are house hunting it would be a very good idea to have a conversation with a mortgage company that you’re working with to make sure that your pre-approval is still intact.
Many families who were recently pre-approved as recently as a month ago are now finding themselves without financing because lenders have changed their credit score requirements due to the volatility in the secondary market. Now more than ever it is critical time to work with an experienced lender who can navigate you through what is going on and can help you get to the finish line. Do not fall prey to the lender that you have seen advertising rates that you found from the Internet only to find that they can’t do your loan because their risk requirement is too high.
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