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Real Estate Matters:
Buying or Refinancing a Home? How Covid-19 is Affecting Loans
By John E. Baer, SRES, SRS
The coronavirus outbreak is challenging the real estate market while Westchester is still in an active home buying season. Housing demand continues to be incredibly strong, driven by record low interest rates and a pandemic-induced need to nest in larger homes with space for work and schooling. This is why it is essential you do your homework with respect to arranging for a mortgage.
For New Home Buyers
I spoke to Dean Curtis, Sales Manager at Loan Depot. Here are important tips he made:
• Credit score requirements are rising among some lenders. You will want to know your score is the best it can be right now. Excellent credit scores can make a difference in getting a better rate. Rates might be low for a long time, so working on improving your credit score might be better for you in the end.
• Before you apply for a mortgage, if your credit is frozen, unfreeze it before applying. This can avoid multiple credit inquiries.
• Minimum down payments are also increasing. Be prepared to have extra money in savings.
• If during Covid-19, you opted for a forbearance or a deferment, this will need to be completed and your mortgage will need to be current before you can close. Depending on the situation, and when the pandemic has ended, you might have to wait up to three months to close. Be prepared upfront when discussing this with your lender.
• Due to Covid-19, self-employed borrowers might be required to submit more paperwork than in the past. Lenders will need to see how the business may be impacted by Covid-19 and if it is still a viable business. If you are prepared in the beginning, you should have a smoother process.
• Compare rates with other lenders, because they can vary. Also, compare the difference in changing the term not just the rate. Some lenders are slowing or completely pausing the issuance of loans. That is also a good reason to shop more than one lender.
For Homeowners Considering Refinancing
When you refinance, you get a new mortgage to pay off your existing mortgage. Refinancing works just like getting a mortgage to buy a house. You will be free from the stress of home buying and moving, though, and there is less pressure to close by a certain date. Further, if you regret your decision, you have until midnight of the third business day after your loan closes to cancel the transaction. Refinancing can lower your monthly mortgage payment by reducing your interest rate or increasing your loan term. Refinancing also can lower your long-run interest costs through a lower mortgage rate, shorter loan term or both. It also can help you get rid of mortgage insurance. Refinancing closing costs will range from 2% to 6% of the amount you are borrowing.
Dean Curtis told me that most lenders who are offering refinances are near capacity for processing applications due to the high volume associated with the record low rates, thus it might take longer than normal. Be prepared to have to update documents that might expire along the way. The long-term savings should be worth the wait though.
John E. Baer, SRES, SRS is a NYS licensed real estate salesperson associated with Berkshire Hathaway HomeServices Westchester Properties of Scarsdale and Larchmont. In the last two years he earned the “Top Selling Award” seven times in the Scarsdale office. He can be reached for questions at 914/844-2059. His website is www.WestchesterHomes.info.