Mortgage advisors say while COVID-19 has prompted many lenders to tighten their requirements, all lenders are not the same. Each has different strengths and requirements, so borrowers should always check with more than one lender.
Lisa Wendl, a mortgage broker with General Mortgage Capital Corp. and an affiliate of the Silicon Valley Association of Realtors, says COVID-19 has squeezed credit availability and reduced the availability of loans for borrowers with lower credit scores and higher loan-to-value (LTV) ratios. Due to a drop in liquidity, there has been a large pullback from jumbo loans and non-Qualified Mortgage (QM) loans.
While the CARES Act let millions of Americans take advantage of the ability to claim forbearance from their mortgage payments, Wendl reminds homeowners, "Forbearance is not forgiveness, it merely suspends payments for up to 12 months."
Wendl explains being in a forbearance will impact a borrower's credit and could disqualify a homeowner from certain types of loans. She advises Realtors to caution clients about seeking mortgage forbearance if they do not have to, as this may impact a borrower's credit.
At a virtual program hosted by the Silicon Valley Association of Realtors Young Professionals Network, Nikki Phan, Wells Fargo home mortgage consultant, said the lender has temporarily suspended cash-out refinancing and HELOCs - home equity lines of credit. Those self-employed seeking loans must show proof that their business is still operating within 10 days of closing on a loan. Rental income does not qualify because of potential risk of rental income. Mortgages and rents cannot be in forbearance at the time of closing.
According to home loan advisor Jamie Myers, Golden 1 Credit Union allows rental income to qualify for a loan, but with certain restrictions. The credit union also has competitive jumbo loan rates. Standard guidelines allow higher debt-to-income ratios and lower reserves than most retail banks. Myers told Silicon Valley Realtors just from May to July, she will be closing five loans that were pre-approved at a time when buyers could not get financing from their lender after going into contract. Four of the five loans that were approved had no contingencies.
Myers added appraisals are taking longer to complete due to the volume of refinances. Some appraisers are not doing interior inspections.
Michael Houghton, Academy Mortgage Los Gatos branch manager, describes his office is a one-stop shop, able to complete the entire loan process in-house, including all loan processing, underwriting, closings, and funding. With 150 appraisers employed in-house, appraisal delays are not likely. Academy Mortgage also partners with down payment assistance programs.
The mortgage advisors are optimistic about Silicon Valley's housing market. "Rates are as low as they have ever been in the history of mortgage financing. It looks like they will stay flat or even decline," said Houghton. "We have not seen a decline in home values. Values are still strong. Rates are still strong."
Every lender is mitigating risk and rules can change any time. The mortgage advisors tell Realtors to advise their clients to check with their lender often to make sure changes do not affect their loan.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.