Answers to your lending questions amidst Covid-19
- Lending FAQs
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Q: Interest rates have dropped. Is this a good time to refinance my Hawaii home?
Absolutely. With interest rates being at historical lows (no, they’re not at 0%), it’s a really a great time to refinance. You can either refinance to lower your monthly payment or do a cash-out refinance to pull out some of the equity to use for other things like debt payoff, those home renovations you’ve been putting off, or for other investments like purchasing another home. That said, there has been a large influx of refinancing transactions across the nation, so longer than usual closing times for refinances are to be expected.
Q: Lending rates have dropped (and since stabilized). Is this a good time to buy a home in Hawaii?
Historically speaking, there’s seldom been a bad time to purchase a home in Hawaii. Home values have continued to appreciate over time and tend to hold relatively steady during the times when the rest of the national housing market sees a dip. We are hoping to see a little more inventory come on the market in the coming months, and it’s likely to be a buyers’ market for the foreseeable future. If you have the job stability and desire to purchase, I think right now is a great time to buy.
Q: Have mortgage loan qualifications or lending restrictions changed since Covid-19? Have other upfront costs changed for homebuyers in Hawaii?
Since Covid-19 started, we have seen quite a few changes and adaptations in the lending industry, and we continue to get new information daily. The non-QM* lenders have abruptly put all business on hold due to liquidity issues. Also, government loans have increased their minimum FICO to 640, so there are definitely some changes occurring as investors lose their appetite for riskier products.
Update: As of April 16, 2020, we are now seeing some lenders raise the FICO requirements for all loan products to 660 or even 700. Element Mortgage has not had to do this (yet), but it appears more and more lenders are tightening their guidelines.
Other adaptations to requirements related to appraisals, employment verifications, and additional third-party verifications have made their way into the process as well. There have been no changes to upfront costs to obtain a mortgage currently.
VA financing has experienced a drastic credit score qualification change. While the VA does not have a published minimum FICO score, most lenders have it capped anywhere from 540-620. The current minimum FICO is 640.
*(Non-QM stands for a non-qualified mortgage. These are the out-of-box loan types)
Q: How are appraisals and escrow paperwork being handled in our new reality?
Beginning in mid-April, Fannie Mae and Freddie Mac are allowing “drive-by” appraisals for refinance transactions, where the loan is currently backed by Fannie or Freddie. In the event that Element Mortgage needs a full appraisal, it is taking much longer to complete.
The appraiser comes to the house and asks the residents to open all doors and windows then has them wait outside the home while they complete their inspection.
For closings, title/escrow companies are conducting drive-up closings in some areas. The borrower parks at the title office, and the escrow officer hands the client their documents through the window. The escrow officer then goes inside and calls the borrower to walk them through the documents they are signing.
In general, as an industry, we are being forced to adapt and have been successful so far.
Q: How have the steps to secure financing for a Hawaii home purchase changed due to the social distancing?
I think this will largely vary from loan officer to loan officer depending on how they “normally” conduct business. We at Element Mortgage have been fortunate enough to work for a company that prides itself on the heavy use of digital technology, so we haven’t experienced much of a disruption to the process. Applications can be easily completed online. Obtaining the required documents electronically, using our mobile app, is a breeze. I imagine there are some lenders out there that have been much more heavily impacted by the results of social distancing. For example, a loan officer for a depository bank may rely on foot traffic in the branch to see new clients. It’s honestly very easy and straightforward, in today’s world, to complete an entire home buying process virtually, with the exception of the signing of final loan documents, which may be moving virtual in the near future, as well.
Q: Are lenders requiring larger down payments now because the economy has been volatile and the job market uncertain?
As of today (April 13, 2020), there has been no indication that current down payment requirements are going to change.
Q: Where can I find additional resources for buyers in Hawaii?
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