Coronavirus: What it means for your Home Loan

Erica Wright Real Estate Leave a Comment

COVID 19 is impacting human life and that matters more than anything else in this world.

As far as mortgage lending, we will continue to see the tightening of credit in the coming weeks that will impact the lender processing. Some mortgage companies will or have suspended certain types of lending, the biggest example being Wells Fargo exiting the Jumbo market this past Thursday. More Jumbo lenders will follow. Non-QM mortgage lending is done as there is no market to securitize those mortgages. Lenders will tighten up on government products such as FHA, VA, and USDA by placing underwriting overlays on top of the respective guidelines. Below are some bullets on how lenders are handling business going forward on new loans and locks.

Job Loss or income reduction: If a borrower lost their job or experienced a reduction in income below qualifying levels, the loan may not be able to proceed. This will be reviewed on a case by case basis. If the borrower can provide evidence they will return fulltime to work within 60 days the lender may proceed with the application once work commences. Under no circumstance should a buyer rely upon forbearance upon or shortly after closing, that would be irresponsible of the lender and harmful to them.

Credit/Underwriting overlays:

 

FHA

FICO 620-639

AUS Approve/Eligible Required

Max DTI 43%

2 months PITI reserves from borrower’s own liquid funds (no gifts)

No gifts or DPAs – all funds must be borrower’s own

Scores lower than 620 are not allowed

FICO 640-679

AUS Approve/Eligible Required

Max DTI 45%

DTI 45.01-50.0% requires 2 months PITI reserves from borrower’s own liquid funds (no gifts)

FICO 680+

AUS Approve/Eligible Required

No additional requirements

 

VA

FICO 620-639

AUS Approve/Eligible Required

Max DTI 43%

2 months PITI reserves from borrower’s own liquid funds (no gifts)

No gifts or DPAs, all funds must be borrower’s own

Scores lower than 620 are not allowed

FICO 640-679

AUS Approve/Eligible Required

Max DTI 45%

DTI 45.01-50.0% requires 2 months PITI reserves from borrower’s own liquid funds (no gifts)

FICO 680+

AUS Approve Eligible Required

No additional requirements

 

USDA

FICO 620-639 Minimum 620, maybe higher if Investor is more restrictive

2 months PITI reserves from borrower’s own liquid funds (no gifts)

No gifts or DPAs, all funds must be borrower’s own

Scores lower than 620 are not allowed

FICO 640+ No additional requirements

 

NJHMFA and PHFA

Minimum FICO 680 4 months PITI reserves from borrower’s own liquid funds

No gifts other than DPA/Grant

 

Most conventional borrowers will not be affected.  FHA, VA, USDA, and Bond program preapprovals need to be reviewed and go through the preapproval process.  Please reach out to your lender if you are currently preapproved for one of these programs.

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Erica Wright