COVID-19 Mortgage Updates; Interest Rates; Jumbo; Guidelines; Appraisals
Below are a series of important COVID-19 updates as they relate to the mortgage industry.
Jumbo interest rates are now about 1% higher than conforming rates. This is in sharp contrast to the previous few years when jumbo rates were almost always lower than conforming rates for strong borrowers.
Low balance (under $510,400) conforming interest rates are again near record lows, and about 1/2 percent lower than where they were in January.
High balance ($510,400 to $765,600) conforming interest rates remain about 5/8% higher than low balance rates.
JUMBO MARKET LIVES
Jumbo financing remains available for qualified buyers, but rates are much higher and turn-times are much slower.
Rates are higher b/c of extra risk, excess demand, too little capacity, and too few competitors (now that Wells Fargo and many mortgage banks have pulled out of the market).
Jumbo financing is much more difficult for refinancing borrowers (as opposed to buyers), as many lenders are simply refusing to do jumbo refis now and others are limiting refis to only exceptionally strong borrowers.
JUMBO FINANCING = TEMPORARY FINANCING
We like to remind borrowers that the jumbo market will very likely spring back to life once the COVID-19 crisis ebbs.
And when it does, rates will likely plummet, enabling current jumbo borrowers to refinance into lower rates at no cost.
This is something jumbo buyers should keep in mind if they are concerned about current jumbo rates.
Many mortgage banks with their own appraisal panels are able to get appraisals performed in a timely manner now for purchases. This includes appraisals that require interior inspections.
Refi appraisals are still taking considerably longer but we are seeing improvements in this area as well.
Appraisal waivers or interior inspection waivers are also much more common now, as lenders are fast adjusting requirements to accommodate borrowers during the crisis.
Lenders cannot fund loans if primary borrowers have been laid off or furloughed.
Lenders are also doing verbal employment verifications immediately prior to funding in contrast to “normal times” when such verifications are often performed two weeks (or more) prior to funding.
Borrowers with precarious employment situations should alert their lenders immediately to explore solutions instead of hoping that their loan might fund anyway.
TAX TRANSCRIPTS/4506-Ts – RELIEF
This was a major issue for us last week b/c the IRS stopped providing tax transcripts (via 4506-t forms). Fortunately, almost every lender is now accepting alternatives such as CPA letters and borrower-generated transcripts.
For FHA and VA loans, credit scores need to be above 640 now (in most cases) and debt ratios need to be under 48 now in most cases (as opposed to as high as 56.99 previously).
Jumbo loans require higher credit scores now (in the 700s), at least 20% down in most cases, and ample reserves (as much as 12 months of PITI in many cases).
Reserve requirements are much less stringent for conforming and FHA borrowers and have not changed significantly; weaker borrowers might be required to have only a month of reserves, for example, while many borrowers still require none.
CONTACT YOUR LENDER BEFORE MAKING OFFERS
We have a surprisingly large number of buyers still in the market.
B/c guidelines and asset positions are changing every day, we encourage all agents and borrowers to contact their lender prior to making every offer to ensure pre-approvals still stand.
Once again, we have set up a Forbearance Resource Center on our website for agents and borrowers who are interested. This is something we update daily and encourage everyone to share.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167