Five ways that COVID-19 is impacting Lenders
This is a rapidly shifting environment with effects on just about every industry imaginable, worldwide. This includes the banking sector and mortgage lenders. Below are five ways that lenders are being impacted by the pandemic.
Higher credit score requirements: In an uncertain time, lenders are forced to increase their minimum credit score requirements as they issue mortgages. If you've already engaged with a lender, it is worth checking in with them to see if their minimums have changed.
Overall tightening of lending standards: As markets shift lending standards change. For the time being, you may find that higher down payment requirements, lower debt-to-income requirements, and less “outside-the-box” situations will be approved (including self-employed borrowers). This is especially applicable to FHA, VA, MassHousing, renovation loans, and Jumbo loan programs. Conventional financing will be the least impacted.
Refinance volume impacting rates: Typically, we might see rates declining in this environment to stimulate economic growth and encourage borrowing and investing. Instead, some lenders are being forced to increase rates during this time as a result of pervasive uncertainty and unprecedented number of homeowners refinancing.
Standard 45 day close is shifting: Lenders and their teams are strained and many are having to adapt their timelines In the past, a 30 day close was possible in many cases. Most recently, we've heard that many banks are at a minimum 45 day close.
As a buyer, the type of lender you are working with matters now more than ever: Small and mid-size banks are going to struggle with this market shift, so be sure to include a reasonable closing timeline in your offer. Mortgage brokers are struggling as many of their partners are pulling back during this time of risk and uncertainty. Many big banks can absorb the shock of our current environment, but they are raising rates and extending their closing times.