With the impact that COVID-19 has had on the nation’s economy and its financial markets, the mortgage brokers are dealing with significant challenges now. We’ve seen record lows at times, but also more wild rate fluctuations that are very unpredictable. Even when mortgage rates have been very low recently, getting a home loan has become significantly harder for the average borrower.
More Difficult to Qualify
Qualifying for a new mortgage loan or a home refinance has gotten tough and the requirements will only tighten more moving forward as we feel the full brunt of this recession. Big banks like JPMorgan Chase are requiring almost all of their borrowers to have at least a 700 FICO score and a 20% down payment. Qualifying for non-traditional loans that allow for lower credit scores and down payments will be increasingly difficult as lenders will be willing to take fewer risks.
The housing market is more or less “on hold” in many U.S. markets right now, with real estate agents unable to show houses and limited chances to meet in person with clients. That will change as social distancing measures are eased state-by-state and region-by-region. Home sales will pick back up and we’ll probably see an uptick of homes for sale after years of very tight housing inventory. However, new home buyers looking to get a mortgage loan will still be facing these stricter qualification standards for quite awhile.
Working with a Mortgage Broker
This recent article on cnbc.com talks about one solution that can help borrowers right now—whether you are looking to refinance at a lower rate or secure a good rate on a new home loan. Their suggestion is to work with a mortgage broker, rather than directly with lending institutions. This allows you to shop around and lock in the best terms. Now is not the time to just go to your normal bank because that’s who you’ve always done business with. Seek out an independent mortgage broker who will help you explore the most possible options.
“For consumers looking to buy a home or, more likely, to refinance, he recommends stepping out of their comfort zones. A lot of borrowers tend to refinance with their local bank, where they have their accounts, or with the same lender several times because they know them. This may not be the time for that.”
How Can a Mortgage Broker Help?
Brokers can make a difference for borrowers because most lenders and megabanks are near capacity right now. They are not really needing to offer lower interest rates. They may have staff working from home and limited resources compared to normal. Plus, there is such high demand for refinancing right now with some furloughed homeowners concerned about paying bills and almost everyone looking for ways to cut their budgets during these uncertain times. Lenders also want to minimize their risk as much as possible, which is why the requirements are becoming more and more stringent. Higher rates and more demanding qualifying standards help weed out the less serious borrowers.
As a mortgage broker, we at Transparent Mortgage are not tied directly to these megabanks and we are able to shop around on behalf of our clients. We can see what’s out there, look into different mortgage products and help find solutions that make the most sense. We understand that not everyone has perfect credit and a ton of cash to put down, but there are almost always more options than you might realize.
Homeowners looking to refinance may be able to tap into their equity to buy down their new rate or qualify for a cash-out refinance or HELOC (home equity line of credit). New borrowers might still qualify for a non-traditional mortgage loan depending on various factors, though it is important to be realistic in your expectations with tougher qualification requirements across the board. The point is, working with a mortgage broker will likely open more doors than a big lender who is (at least temporarily) limited in their willingness and ability to work with just anyone.
If you are looking to refinance or apply for a new home loan in San Diego or the surrounding Southern California communities, call Transparent Mortgage today at (858) 761-7795 or fill out or online contact form to have one of our top mortgage professionals get in touch with you.