The pandemic has changed everything about our lives, how we work, how we socialize, and how we interact in our daily lives. Below is some of the ways the mortgage industry has changed.
Prior to the pandemic, electronic signatures were a big no-no for lenders even though the purchase contract was signed that way.Many of our lenders are now accepting electronic signatures. They still want something that is signed by the client. Essentially, they want an actual signature, not for you to type your name in cursive. This has been huge since it eliminates the need to physically meet with clients for signing.
Not all lawyers/notaries are open to this, but some have met clients virtually and have done the paperwork for purchases and refinances without physically meeting clients.
With unemployment on the rise verifying employment has become even more crucial than it was before. One of the first questions I ask my clients is IF/HOW income has been affected.
Clients that are still working may be on a temporary leave, have reduced hours, or be on a temporary pay reduction. Self-employed clients may also have a harder time. Usually we use a 2-year average but if the business is closed or operating with reduced hours, the salary used will be reflected.
All of these factors are important for the mortgage as current income that is guaranteed determines qualification.
A Lot More Paperwork
If you have ever applied for credit whether it’s a loan, mortgage, or a new credit card, you are no stranger to paperwork. The required paperwork got a lot more extensive since the pandemic started.
Aside from the general income, down payment, property information, and assets, there is more pressure on providing confirmation that the borrowers are still receiving rental income. I have had lenders ask for the last 3 months rental deposit in addition to the current lease to make sure that they are still receiving rent for their properties.
If you decided to defer your payments, it might be harder for you to pull equity out of your home. It’s hard to make a compelling statement for a larger loan if you are not currently making your payments.
No Contact Appraisals
Some lenders have stepped up their game to allow for a higher limit on the automatic appraisers. If the value automatically comes in, no appraisal is needed, and the client pays a small administrative fee which is reduced from the mortgage at funding.
Automatic appraisals cannot always be done for a variety of reasons including no recent comparison, value of the home, or the mortgage product. When the value does not automatically come in an appraiser needs to assess the value and provide the lender with a report showing how they came up with that value with adjustments and comparisons.
For a while appraisers were not going into properties to flatten the curve and protect the occupants. They inspected the property from the outside and worked with the realtor/occupant to get a virtual tour of inside.
Things are starting to change, and we are seeing more appraisers go into properties, but it has not become the norm again.
A New Normal
Like any loan, there are multiple aspects that will be analyzed when the lender decides on the approval. We have seen positive outcomes with temporally reduced income, and even a temporary layoff. It’s important to speak with your mortgage broker and notify them of changes as soon as possible so that we can come up with a suitable solution.
We’ve all had to make changes to the way we do things from going to the grocery store, getting our hair cut, and even how we dine out. Getting a mortgage now may require a little more paperwork, but just be patient. Lenders are assessing their risk and triple checking to make sure they are not funding fraudulent files.