One of the hottest conversations nowadays is about forbearance and whether or not you should be missing a mortgage payment.
I have also been getting a number of questions from people about current interest rates, finances etc. I might not have answers to all the questions, I am doing my best to keep you updated during this COVID-19 situation.
What Is Forbearance? Should You Take Advantage Of It?
My special guest today is Johan Alavrez from Guaranteed Rate. I asked Johan about forbearance and what could people who have mortgages but not able to make their payments do in our current situation. He suggested that they should contact their officer immediately and explore their options with them. My next question was about missing the April payment and whether that would affect the qualification process. Johan mentions that they have not received any direction for that scenario and may have more information down the line. I am advising you to be cautious and do not take any risks until there is something certain.
You can find more information about forbearance here: https://www.consumerfinance.gov/coronavirus/
Does that have anything to do with forbearance, unemployment or other factors? Johan explains that since the default rates have increased due to rise in unemployment, lending companies like Guaranteed rate have increased their minimum credit score to 620 from 580. I follow up with another question about the situation where people have already been approved loans with the earlier guidelines and how this would affect them. Johan says that people whose loan has been approved would not be affected by this change and only people who are still home shopping or in their pre-approval stage need to be concerned. He again advises those people to reach out to their lending officers and make sure that their program is still in place because some companies have started suspending some of their programs. I extend on this topic by saying that since things are changing, people with lower credit scores might not be eligible for programs as they did three months ago and they should shop around lending companies and banks to make sure that they find the best option for them.
What About Interest Rates?
He says that rates are volatile at the moment and since a lot of employees are working from home, they are keeping the rates high in order to manage the people coming into the system. I would like to emphasize that rates differ for each person depending on the situation. I ask him the zero percent down payment scheme available in North Carolina and how to qualify for it while having a low credit score. Johan mentions that the North Carolina Housing is still taking applications and their requirement to qualify is to have a minimum credit score of 640. Johan explains that they are offering multiple programs ranging from the $8000 down payment assistance program to the 3.5 percent FHA programs. He strongly advises people to have some kind of savings to deal with the current situation. He also says they are busy helping people with refinancing and purchase of homes. One of the viewers watching the stream has a question about the FHA Streamline Refinance for someone with a 748 credit score. Johan says that they can qualify for that scheme but advises to check with lending companies before making a decision. Are there any delays during the appraisal process? Johan explains if the house is empty then the turnaround is quicker. But if the house is occupied, there are delays because the appraisers are afraid to meet in person with the sellers due to the COVID-19 situation. There are also delays due to the sheer amount of people looking to refinance their homes. He advises negotiating a longer due diligence time period because the attorneys also have their hands full with a number of requests.
What About First Time Home Buyer Programs?
There are several options to choose from:
- 3 percent conventional down payment program,
- 3.5 percent FHA program, and
- Down payment assistance program with North Carolina housing.
He believes that the first two are probably the best options (with a minimum credit score of 620) and advises them to start applying right away so that they can have a pre-approval letter. For people looking to improve their credit score, he advises them to look at their credit report and make sure that there is nothing abnormal. My next question to him is whether the credit score drops when lenders pull the credit report. He replies that lenders always do a hard pull when they check the credit report and asks to be mindful about the number of pulls being done in a short span of time because it might affect the credit score. I ask him what is the perfect time to apply for refinancing. He replies that it depends on the situation and explains with an example saying that if your interest rate is high and you want to sell your home, then it is not the right option to go for refinancing since there are a lot of costs involved with closures. I ask him if there is a minimum amount for refinancing loans and he replies that there is no set minimum for refinancing. One of the viewers wanted to know if NC Home Advantage Mortgage programs apply to the Move-Up Home Buyer and Johan says it does and asks to check the interest rates on the North Carolina Housing finance agency website which is updated every day.
What About Investors?
It looks like investors have an increased requirement for assets. They are required to show more money in their savings to get a loan. Especially if they are self-employed and looking to improve their portfolio of homes. They also need to make at least a 20 percent down payment vs 15 percent that was a requirement four months ago. He advises that if you want to withdraw money, you should schedule an appointment with the bank since they are allowing one or only a few people inside at a time. Johan also mentions holding on to the documents related to money orders including receipts. I suggest you take a picture of the receipt and upload it in your Google drive or iCloud so that you don’t lose it.
Is forbearance for you? Should you miss your mortgage payment if you can actually pay it? I will let you decide!
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