If you’re planning to become a homeowner this year, you may be curious about how to proceed during these strange times. The COVID-19 pandemic has had widespread and unprecedented effects on the global economy, and many Americans have found themselves affected by job loss or reduction of hours. Whether or not you’ve been impacted by the pandemic, it’s helpful to have an idea of what requirements your lender may have and what to expect before closing. Here, I share guidelines and tips to help you navigate the process of obtaining a mortgage in the time of COVID-19.
Demonstrate your ability to pay
Although lenders have always expected applicants to show proof of employment, it’s especially crucial to demonstrate your ability to pay your mortgage in the current climate. Keep in mind that even if you’ve experienced a reduction in hours, this doesn’t necessarily disqualify you from obtaining a loan. However, you will need to demonstrate that you have the means to cover your payments by providing proof of income and certifying that you can make the payments.
Some lenders may require a higher credit score
In this time of economic uncertainty, many lenders have raised credit score requirements in order to qualify for a loan. For example, some lenders who previously accepted scores of 580 for FHA loans have pivoted to require a minimum score of 620. Requirements vary by lender, so be sure to explore your options and ask questions before applying. In the meantime, it’s wise to work on paying down debt to boost your score and optimize your debt-to-income ratio.
Expect a more complicated process
When your credit score is in good shape and you can prove that you’re able to make the payments on your new loan, you’ll be well on your way to closing. However, the process of finalizing your mortgage may be more complicated for the time being. Social distancing requirements may make it challenging for lenders to work with third-party partners such as county offices, appraisal firms and title companies. As the industry finds new ways to adapt to the current circumstances, the process may become more streamlined. Curbside closings have become the norm in some cities, so be on the lookout for innovative ways to move through the mortgage application and closing process.
Although the COVID-19 pandemic has affected virtually every facet of life, those who are in a good place to buy should feel confident in moving forward with obtaining a mortgage. Rates are historically low, and it may be a great time to apply for those who have a reliable income and the means to certify their ability to pay.
By Michaela Phillips. Michaela is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.443.6292, e-mail [email protected] or visit michaelaphillips.com. NMLS: 312874.