The COVID pandemic has had a significant impact on every industry in a big or small way, including the mortgage and real estate industry. Lockdowns and work from home has people couped up in their houses, and many people are considering investing in a house or property and look for larger spaces. And with an increasing number of people who show interest in investing in real estate, the government has also passed regulations to dampen the economic damage from the pandemic. When investing in real estate during these times, it is crucial to know how the mortgage process has changed because of the COVID pandemic. With that said, here's what you need to know.
Dip In Interest Rates
One of the steps that was taken to stimulate economy in the real estate industry was to slash interest rates. Starting from March 2020, the rates have been below 3%, and this has encouraged more people to invest in real estate. With dipping interest rates, people can save a significant amount of money on their loans, and this has caused a significant increase in the demand for mortgages.
As opposed to the pre-covid times, the loan process has become more time-taking in the recent times. Lenders have become busier, and loan applications are piling up. Processes that may take a few days might end up taking several weeks. If you have provided a bunch of loan documents to your lender, they might be sitting on their desk for a long time, and you might have to produce these documents again when the lender processes the documents. This is because by the time lenders check your application, many documents might expire, such as bank statements and credit reports, which means you need to again provide them the most recent documents for the process to progress.
However, there can be a solution for this. Lenders can choose to delay appraisals for certain loan applications. And you can get in touch with your lender and figure out if your loan is eligible for a delayed appraisal when you're in a rush to get your loan approved. This also works more smoothly when you outsource mortgaging services to an expert when you're not acquainted with the new federal rules. These service providers can help you with contactless closings, wherein you can depend on them for the entire process without having to go anywhere. There is also provision for online notarizations, which eliminates the need to go to the notary office and you can sign the documents at your home.
New Mortgage Refinancing Fees
There have been great economical repercussions from dipping interest rates, and the Federal Housing Finance Agency has updated the refinancing fees to deal with the market meltdown. Starting December 1, 2020, several refinance transactions face a new fee of 0.5%. This affects the refinance borrowers as they are forced to pay the 0.5% fee that is intended to compensate for the COVID pandemic market downturn. While 0.5% may not seem like a significant amount, it adds up and increases the closing costs. However, this fee is for applicable for mortgages for purchasing a home.
Cheaper Discount Points
As per the new mortgage rules, while there isn't much of a significant change in the required fees, there is a provision to buy discount points. One can pay some additional fees to the lender and buy discount points, which helps lower the interest rates. While it may seem like lenders incur losses from cheap discount points, it actually helps minimize risks. When people opt for refinancing when it's less than a year, lenders have to put up with losses. The chances of losses during the unpredictable COVID times can be minimized using such measures. When people get cheaper discount rates, the chances of refinancing looking for lower rates. This creates a win-win situation as the lender is less likely to incur losses from quick refinancing while the borrower is incentivized to get discount points for lower rates.
Most of these changes make things tricky for lenders. Whether it is increased mortgage demands or reduced interest rates, it can be quite a task for lenders to have a profitable business despite increase in demand during the COVID times. This is when outsourcing mortgage services to an experienced company can help a great deal. You can minimize the time required to process loan applications when expert service providers help out in collating and organizing the loan documents. Outsourcing these services also eliminates the need to hire someone, which reduces fixed, overhead costs when closing mortgages.
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