A Quick Guide to Mortgage Applications During a Crisis

man filling a mortgage application

Applying for a mortgage loan is a difficult process. At a minimum, you will need to present good credit scores, prove stable sources of income, and have enough cash on hand for equity on a property. Securing all of these can be even more difficult and complicated amid a global pandemic.

The coronavirus pandemic has put a stop to many things–going on vacations, buying big-ticket items, and even job opportunities. Having an income and being able to pay for your mortgage is no longer guaranteed. While the government was able to provide initial safety nets for renters and landlords, the economy is bracing for the inevitable fallout as these protections expire. Renters are not going to be able to pay rent, and property owners may default on their loans.

Understandably, lenders are exercising more restraint in approving mortgage applications. Prevailing lending regulations are responding to the uncertainty and volatility of the current world situation. Some major banks are tightening their requirements for mortgage applications. Large private institutions like Chase, for example, announced recently that they now require at least a credit score of 700 and 20% equity to apply for home loans. Fortunately, there are still plenty of lenders who are willing to loan money at less stringent terms.

If you are looking for financing options because you have enough cash for a business venture, you want to fund a fix-and-flip, or you have enough equity, it is still very possible to get approved for a mortgage loan during this crisis.  Here are a few things you should keep in mind:

Check the timing

With the world situation continually changing, lending regulations are changing by the week. Recently, some lenders have been releasing strict guidelines only to pull back on them two weeks later. If you feel that there are too many overlays, or additional requirements lenders place over lending terms, you may want to consider waiting a few weeks to see if the situation improves.

Single-digit deposits are still possible, but with higher interest rates

Interest rates are still generally reasonable, but with the current situation, there is a lot of uncertainty in liquidity. The higher the amount of equity you put in, the lower the interest rates you will pay over the term of your loan. Consider also keeping your interest rates fixed for a short period. You may be able to refinance your mortgage for lower rates down the line.

Shop around for good deals

Housing prices may not be at the same levels they were two months ago. Some people might be looking to generate cash quickly and are willing to undervalue their property just to liquidate it immediately. Try negotiating harder for the house you have in mind to see if you can get lower prices. It may mean less money that you will have to borrow.

The bottom line

Mortgage applications are still being approved, albeit with tighter belts. Speak to a mortgage broker who might have access to better deals, or who will be up-to-date on the latest lending overlays or guidelines. If you have been able to maintain an excellent credit score, a stable supply of income, and enough equity for a home loan, you will still have a good chance at securing a loan. Not only will you be able to obtain a mortgage, but you can also count yourself amongst one of the incredibly lucky ones.

Do you need assistance with mortgage loans in Colorado? We offer low rates and expert financial advice so you can get the refinance or purchase loans you need to make your dreams come true. Contact us today!