When COVID-19 hit there were big changes for everyone, and the mortgage industry was no different. As time goes on new guidelines continue to emerge, so I found it best to list some points below about what has transpired recently and some obstacles that most lenders have overcome.
Interest Rates are low! — This is not breaking news, but this trend has continued through COVID-19.
Exterior Only Appraisals — Up until Governor Wolf decided to allow real estate activities to take place, almost every purchase transaction was able to have an exterior only appraisal. With our mortgage company we are back to doing standard interior and exterior appraisals on all properties. Most lenders are also doing this.
Appraisal Waivers — These have been received a little more frequently than before, and I am sure this is not by accident. We are seeing on some transactions where buyers put a significant amount of money down that appraisal waivers are being granted. This is more common for refinances than purchases.
Self Employed Buyers — This is a BIG ONE. As of today the guidelines have changed as far as what is required from our Self Employed Buyers. Previously we had been able to obtain a year-to-date profit and loss statement that was relatively informal. As of today’s writing (June 15, 2020), Freddie Mac and Fannie Mae are requiring business bank statements for the year that coincides with the profit and loss statement. The deposits in the bank account need to match up with the P&L. If they don’t, the only other option is to obtain an audited P&L from an accountant, which would be time consuming and expensive. Please make your Self Employed Buyers aware of this.
Furloughed or Out of Work? — Many buyers have been furloughed or let go from their employers. Requirements may vary between lenders, but for our company we just need the buyer to return to work prior to closing. We can verify this through a formal verification of employment with their HR department. This is an important piece of information to be aware of when looking at settlement dates. Most people are back to work, but there are still many people out there who are awaiting a return.
Government Interest Rates — When the Stimulus Bill was passed that allowed for many Americans to receive a check from the government, it had some language in it that made it much less desirable to be a servicer of government loans. As a result there were very high premiums for FHA and VA rates for a period of time. In addition to higher rates, the qualification standards were raised by many investors, making it difficult or impossible for low credit score buyers to qualify for an FHA loan. Things have been trending in the right direction recently, and FHA interest rates at most mortgage companies are now extremely competitive. Qualification standards are still a little tighter at most companies though, so it is very important for your government buyers to update their pre-approval if they haven’t already done so.
FHA 203k Loan — This renovation loan offered by FHA is not currently being offered; however, the hope is that this program comes back soon.
Hopefully this information is relatively helpful. It is difficult as guidelines and requirements have been constantly changing since mid-March. The best advice I can give anyone is to stay in contact with your lender, and make sure that your buyers do as well.
David Fuchs, Traditions Mortgage
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