COVID 19 AND MORTGAGE RATES
While much of the United States is still seeing the impacts of shelter in place orders, Florida does not have as many restrictions and that means if you want to buy a house now, you certainly can. You might have heard that mortgage rates are going through some interesting trends during Covid-19, and it can be confusing to understand what is actually happening, and decide if now is the best time to buy. Here is a quick guide to help you understand Covid-19 mortgage rates so you can have an informed conversation with your realtor about the best way to go.
Are the rates really that low?
Realtors in Naples, FL and across the United States are also asking themselves this question, and the answer is, yes. Mortgage rates were already low before the coronavirus hit the U.S.: 30-year fixed mortgage rates averaged 3.47% in February 2020, compared with 4.37% in February 2019. In March 2020, the Federal Reserve dropped interest rates to nearly zero. This caused mortgage rates to hit a low of 3.2%. Since March, rates have been bouncing up and down.
What about forbearance?
In May 2020, around 7% of mortgages were in forbearance, due to the highest unemployment rates since the Great Depression and the CARES Act, which allows financially struggling homeowners with government-backed loans to go into forbearance for 180 days during Covid-19. This equals the largest surge in mortgage non-payments in US history — statistics that are worse than lenders anticipated, making it more difficult for buyers to secure home loans.
Can I even get approved for a mortgage right now?
Another result of the collapsing economy and people who can’t afford their mortgage payments is a surge in refinance applications, which has caused some lenders to raise interest rates, and others to temporarily stop accepting applications. That’s because when lenders get more applications than they can handle, they tend to raise rates to try to decrease the demand. In March 2020, in fact, mortgage availability hit a five-year low.
Is it more difficult to get approved for a mortgage during Covid-19?
Because of this forbearance and refinance situation, lenders who are still accepting applications may have stricter guidelines than usual. That means that the hurdles to get a mortgage on your new home could include a high credit score, major down-payment, references, and even proof of steady employment.
What about government-backed mortgages?
While lenders are still issuing government-backed loans and down payment assistance during Covid-19, they are more reluctant to do so. Like conventional loans, the barrier to entry may be higher, making it more challenging to secure this type of financing to make your dream home a reality.
What if i can’t get a mortgage now?
Like other aspects of the economy, the home mortgage industry has been hit by Covid-19. But that is not to say that you can’t secure financing on your dream home right now. If you find that your credit score or finances are not where you’d like them to be, this can be an ideal time to focus on saving and improving that score — as more people stay at home during shelter in place orders across much of the United States, you might even find it is easier to save.
Whatever your financial situation, staying informed about the shifts in the economy and real estate financing can help you focus on your aspirations for your next home, even during a global pandemic.
For more on COVID-19 and the real estate comeback, check out HomeLight’s Top Agent Insight Survey from Q2.