As the COVID-19 crisis continues, we have seen ups and downs in the financial market. Interest rates, which are still low, have changed more in the last few months than in the past year. Buyers are left wondering if they can get the financing they need to purchase a new home.
To speak to these concerns, our partners at Guaranteed Rate have provided answers to most commonly asked questions to help our clients understand and gain certainty in the current market.
How have rates been affected by the COVID-19 crisis?
The spring market was well underway in February, and with a drop in rates at the end of the month, the mortgage industry saw a refinance boom. Buyers were out taking advantage of both the rates and the favorable weather. With the growing concerns about COVID-19 in early March, the financial markets experienced wild movement and the Fed cut the federal funds rate to zero. This didn’t help mortgage interest rates though; in fact, the 30-year fixed rate jumped nearly a percentage point. In the last week of March, rates moved back to the mid 3% range, easing borrower concerns. We will continue to see ups and downs, however rates are still at historic lows, making it an ideal time to refinance or purchase a home.
To learn more about recent rate movement, you can read the Guaranteed Rate blog post.
Can I still get a mortgage?
Absolutely. Guaranteed Rate employees may be working remotely but are still diligently closing loans. Through their proprietary technology, they are able to complete their mortgage processing digitally. Get more details on this groundbreaking technology.
Do buyers need a pre-approval?
Getting pre-approved is now more important than ever. Sellers need to know that they are working with serious buyers, especially if they are letting them into their home. A pre-approval also benefits the buyer too; by understanding how much home they can afford, at a range of mortgage rates, they can best focus their search parameters.
What is the best way to secure a mortgage rate?
Due to market volatility, borrowers can expect rates to change from the time they apply to the time they lock in a rate. Unlike in the past when buyers could “wait and see” how rates moved prior to locking, it’s best to secure your rate right away.
Will the COVID-19 crisis delay my closing?
While delays could happen due to issues with management companies, attorneys or other parties involved in the transaction, the closing will not be delayed by Guaranteed Rate. They have first and foremost prioritized the underwriting of purchase loans before refinances. Purchases are still closing in less than 30 days.
How will my safety be ensured?
Five years ago, Guaranteed Rate developed revolutionary technology called “Flash Close” to create a system of signing 95% of the necessary documents remotely. The documents are sent days before the closing so the borrower can review, as well as share them with their family members and attorney to review. On the day of the closing, the documents become live and can be signed. Through their e-closing technology, Guaranteed Rate is able to make the entire closing virtual, as long as changes are not made to the closing statement on the same day and the closing happens prior to noon, to ensure time for the funds to transfer.
Is there a bigger difference between conforming and jumbo loans?
For all Fannie Mae and Freddie Mac conforming loans, $510,400 or below, Guaranteed Rate can complete an e-closing with zero human contact. This accounts for at least 80% of all loans.
As for jumbo loans above $510,400, guidelines have tightened. Because the liquidity of the secondary market has changed, jumbo loans are less attractive. Simply put, mortgage-backed securities with jumbo loans are not being purchased right now due to their potential volatility. For this reason, guidelines require borrowers applying for jumbo mortgages to have a minimum credit score of 700 and 20% down.
Can I still buy an investment property?
Yes. Investment property mortgages are rate-driven. While rates are always higher on investments by .375-.500%, they are now closer to 1.50% higher. Lenders are also now requiring an origination fee for these loans, which adds to the bottom line. If you are buying an investment property, you may need to take this into account when looking at affordability.
Can I still refinance?
Yes. This past month, Guaranteed Rate locked a record high of $10 billion in loans and closed $4.4 billion. Rates are still low and accessible. Lenders are typically securing refinance loans with a 90-day lock to make sure purchases are prioritized first. The entire process can be completed digitally.
What long-term affect will COVID-19 have on the mortgage industry?
On a positive note, social distancing has helped advance technology for the mortgage industry light years ahead. Gone are the days of the three-hour closings and stacks of paperwork. Lenders, title companies, appraisers and attorneys have stepped up to find innovative ways to use technology to create new streamlined processes.
If you’re thinking of buying, refinancing or have more questions on the future of lending, talk to one of our experts at Guaranteed Rate. And if you’re ready to begin the search for your next home, start by using one of the industry’s most powerful search engines today.