Interest rates are hovering near record lows, but getting a mortgage is tougher for many borrowers due to the COVID-19 economic fallout.
More lenders, uncertain about the economy, record unemployment and future losses due to mortgage forbearances or payment suspensions, are requiring higher credit scores and down payments.
Banks and other mortgage lenders also are pulling back on some loans including home-equity lines, requiring more employment documentation and not allowing borrowers to lock in on the current low rates.
Obtaining a mortgage hasn’t been this difficult since 2015, according to the Mortgage Bankers Association’s latest home loan Credit Availability Index.
The pullback by lenders comes as 30-year mortgage rates hover around 3.3%.
“Watching the mortgage market right now is like creating a new reality show called ‘Unintended Consequences … COVID-19 Edition,’” said mortgage expert Amy Swaney, who is branch manager of Phoenix’s Citywide Home Loans.
She said besides economic uncertainty and swings in the stock market, losses due to a rise in low-rate refinancing and the federally required forbearances for borrowers hurt by COVID-19 during the past month have the mortgage market “changing daily for borrowers.”
The number of U.S. homeowners receiving forbearance help that suspends their mortgage payments for up 12 months due to lost income or jobs during the coronavirus crisis climbed to 3 million last week.
Here's a rundown of the new lending conditions for borrowers who want to buy and homeowners who want to refinance or tap their equity.
“The fall in employment and the increase in bank mortgage standards means fewer people will be able to qualify for mortgages, at least for a while,” said Scottsdale HomeSmart real estate agent and economic data tracker John Wake. “But if you can still qualify for a mortgage right now, you'll have a bit less competition from other homebuyers.”
Mortgage applications climbed 7% last week, according to the Mortgage Bankers Association. That includes loans for buying a home, refinancing and taking out a line of equity. Here are four tips from the experts:
“What could happen and did happen to many in the last 45 days, is there has been so many program changes that many people lost any opportunity to refinance or buy,” he said. “My advice would be to strike while the iron is hot and capture the savings with lower rates.”
Reach the reporter at [email protected] or 602-444-8040. Follow her on Twitter @Catherinereagor.
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