The COVID-19 pandemic has wreaked havoc on Americans’ ability to afford their basic monthly expenses. Many Americans who own their apartments have had to contact their mortgage loan servicers to discuss alternative options, and people who were looking to buy apartments as the pandemic upended everyday life have faced their fair share of obstacles, too. The pandemic has already drastically altered the mortgage rates that prospective new apartment buyers can expect to encounter, and this effect may continue into the foreseeable future. There are plenty of other ways that COVID-19 is affecting mortgages, too.
COVID-19 and mortgage rates
Following the initial confusion of the COVID-19 pandemic, mortgage rates have returned to recent lows. Housing market experts have noted that the overall volume of people looking to buy apartments has decreased since the pandemic, but there are still many people continuing to search for the perfect new apartment. The pandemic has, at least for now, made new mortgage loans much more difficult to obtain, and similarly, current apartment owners may struggle to obtain mortgage refinancing deals.
Prior to the outset of the pandemic, experts noted that mortgage credit availability had plummeted to its lowest level since 2015. This observation follows a rare move by Wells Fargo, the largest American mortgage lender by volume: The organization enacted a temporary suspension of mortgage loan purchasing due to what a company spokesperson described as “unprecedented market conditions.” Wells Fargo, like many leading mortgage lenders, is cutting back on retail originations of mortgage-related prospects such as nonconforming refinances and conforming high-balance loans.
COVID-19 and mortgage eligibility
Wells Fargo hasn’t been the only mortgage lender to change its policies in response to the COVID-19 pandemic. JPMorgan Chase recently updated its mortgage underwriting guidelines for new mortgage applicants to better address the unique challenges of the pandemic. Under these new guidelines, anybody applying for a new mortgage will need a FICO credit score of at least 700. Additionally, mortgages through JPMorgan Chase will require a 20 percent down payment.
Fannie Mae and Freddie Mac, two leading names in the American mortgage market, have also changed their underwriting guidelines. Prior to the COVID-19 pandemic, mortgage applicants could present income and asset documentation generated up to 120 days before submitting their applications. Now, that time period has been shortened to 60 days for full-time workers. For self-employed workers, that time period has been reduced to merely 10 days, during which the lender must verify the existence and operation of the self-employed person’s business.
What’s the big picture?
Prior to the pandemic, refinancing deals were in high demand, and mortgage rates sunk to lows unseen in several years. Thus, many people seeking new apartments applied for mortgages, but in the wake of the pandemic, many applications will be denied. And for people who plan to apply for new mortgages during the pandemic, the obstacles they would normally face will now be significantly higher.
What if I already have a mortgage and can’t pay for it?
If you’re struggling to keep up with your current payments at the mortgage rates you agreed to before the pandemic arrived, you have options. Read more about special COVID-19 waivers, individual bank programs, and last-resort forbearance options here.