Lending FAQs During 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, it’s a really great time to refinance.
You can either refinance to lower your monthly payment or do a cash-out refinance to pull some equity out of your home. You may need that money for other things right now, including paying down your debts, making home renovations or making other investments. Please note that there’s recently been a large demand for refinancing transactions across the nation, so longer than usual closing times are to be expected.
Q: Interest rates have dropped. Is this a good time to buy a home in Hawaii?
Historically, there’s seldom been a bad time to purchase a home in Hawaii. Home values in Hawaii have continued to appreciate over time, and tend to hold relatively steady, even during 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 a desire to purchase, now is a great time to buy.
Q: Have mortgage loan qualifications or lending restrictions changed since Covid-19?
Since March, we have seen quite a few changes and adaptations in the lending industry, and we continue to get new information daily.
COVID has resulted in adaptations to appraisal requirements, employment verifications and additional third-party verifications. These changes remain in place and the team at Element Mortage has seen some additional requirements hit the board, specifically to self-employed borrowers. For example, some lenders are requiring YTD Profit & Loss statements with bank statements to verify the client’s consistency of deposits.
In mid-April, Element Mortgage noted that some lenders had raised the FICO requirements for all loan products to 660 or even 700. While Element Mortgage had not yet had to follow suit with their clients as of April, it appeared that more and more lenders were tightening their guidelines at that time.
Also by mid-April, most lenders had increased their minimum FICO for government loans to 640, so there were definitely some changes occurring as investors lost their appetite for riskier products. VA financing experienced a drastic credit score qualification change. While the VA does not have a published minimum FICO score, most lenders had it capped anywhere from 540-620. The minimum FICO is currently 640.
As of mid-July, temporary increases in minimum FICO requirements, increased asset reserves requirements, and lower loan-to-value caps remain in effect with certain lenders, but Element Mortgage has been able to drop the temporary minimum FICO requirement from 640 to 600 on government loans. They have not added any new restrictions to assets or loan-to-value as of this writing (on July 13, 2020).
By April, non-QM* lenders had abruptly put all business on hold due to liquidity issues, but Element’s team is now seeing some of the non-QM lenders come back within the first few weeks of July. “It’s a good sign in the sense that this means liquidity is returning to the market, which signals a move towards stability back in this market,” says Meena Na at Element Mortage.
*(Non-QM stands for a non-qualified mortgage. These are the out-of-box loan types)
Q: Have other upfront costs changed for homebuyers in Hawaii?
There have been no changes to upfront costs to obtain a mortgage, to date.
Q: How are appraisals and escrow paperwork being handled in our new reality?
While drive-by appraisals are still being allowed in certain situations and loan types, full appraisals are still in full swing for purchases, and cash-out refinances. The team at Element Mortage is putting a lot of emphasis on trying to obtain a Property Inspection Waiver (PIW – an appraisal waiver), whenever possible. A PIW avoids the need for an appraisal, saving the borrower the cost and extra step of an appraisal. PIW’s are only given in very specific situations, but buyers should make sure their Loan Officer is looking for and trying to obtain one, in the right circumstances.
Mobile notaries are conducting the vast majority of closings, and most Hawaii title/escrow companies are still closed to the public.
Q: How have the steps to secure financing for a Hawaii home purchase changed due to the social distancing?
This varies from loan officer to loan officer. At Element Mortgage, we have been fortunate to work for a company that prides itself on using digital technology, so we haven’t experienced much of a disruption to the process. Our mortgage applications can be easily completed online. Obtaining the required documents electronically and using our mobile app, is a breeze.
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.
Some lenders may have been 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.
Q: Are lenders requiring larger down payments now because the economy has been volatile and the job market uncertain?
To date, there has been no indication that current down payment requirements will change.
Q: Where can I find additional resources for buyers in Hawaii?
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