Contingency Periods During COVID-19 Crisis; Which Loans Are Safe; Employment Is a Huge Concern

I mentioned yesterday that we are still getting purchase contracts and agents are still making offers, and asking us about contingency periods in light of the COVID-19 crisis.

We obviously can’t close in 14 days now b/c of COVID-19-related delays, so below are some contingency/closing periods we are requesting until the crisis ebbs.

CONFORMING, FHA AND VA LOANS

Escrow Period:	30 Days
Loan Contingency:	10 Days
Appraisal Contingency:	14 Days

JUMBO LOANS

Escrow Period:	30 Days
Loan Contingency:	12 Days
Appraisal Contingency:	14 Days

We do not recommend making non-contingent offers at this time b/c so much can change during an escrow period.

The only exceptions would be for very strong borrowers with “vanilla” conforming or FHA loans, or for borrowers with enough liquidity to pay cash for a home.

WHICH LOANS ARE SAFE?

Most jumbo, conforming, FHA and VA loans remain “safe,” as long as the borrowers have decent credit scores and debt ratios.

FHA and VA borrowers need a 640 score at least now, and a 680 score if their debt ratios are high.

If Jumbo borrowers don’t have at least a 700 score, their rate will be sky-high and their approval will be hard to retain.

ISSUES REMAINING

The big issues remaining include appraisal delays, tax transcript delays, and employment.

We are overcoming the former two but the employment situation will likely get worse, as record numbers of employment claims continue to pour in (6.6 million last week alone).

Once again, lenders won’t fund loans if a borrower’s employment situation has been adversely impacted by the crisis.

In addition, lenders are doing employment verifications within a day or two of funding to ensure borrowers have not been adversely impacted.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167