Is the Corona Virus Causing mortgage lenders to be more flexible?

Question

Hi guys! I'm a super newbie in real estate investing, haven't invested in one property actually. I've been studying real estate on my own for about a year now and I know how difficult it can be to get approved by a mortgage lender. I've been interested in house hacking for as long as I can remember.

I'm 22 years old, have a credit score of 620, and will have a co-signer with solid income and 700+ credit score, I have a shaky work history though. I've had 2 different jobs last year, and one solid job for 3 years before that. I'm going to use a FHA loan so I can take advantage of 3.5% down payment. But I was wondering due to the circumstances with fewer people buying houses, if lenders are being more flexible when it comes to pay stubs and job requirements?

I have one friend I know personally who is 21 years old who was looking for a place to stay last week, purchase a home yesterday haha! I know it's something you have to prepare for, especially in Massachusetts so this made me curious of the flexibility right now.

AND FOR THOSE WHO CHOSE TO READ THIS AND RESPOND THANK YOU FOR YOUR TIME!!! VERY MUCH APPRECIATED.

Jonathan Bombaci · Answer

Commercial and portfolio lending tightened up a lot during covid. it’s starting to open back up a little. We can find lenders for our clients but we lost a lot of leverage when it comes to negotiating terms and exceptions.

On the residential side conventional and jumbo loans still have some funding issues but FHA is alive and well. It overnight became the best most reliable product and some lenders are still able to issue fha loans at 620+ credit scores.

Since you’re looking to househack I’d say talk to a lender about the FHA loan, it’s still pretty easy to qualify for that product. I think you’ll be surprised just how easy.

Let me know if you have any questions or if you’d like me to introduce you to an investor friendly fha lender.

Best,

Jon

Filipe Pereira · Answer

Hi Debora,

Very much the opposite, actually. Many lenders are tightening up their requirements due to times of uncertainty in the market. Speak with a couple of lenders before starting your search. I'm not sure where you are shopping in MA, but if it's near the CT border I'd be happy to give you a couple of referals that are licensed in both.

Have fun!

Debora Docarmo · Answer

@William Scharf Thank you so much! I'm gonna wait it out then, I'm almost in a year at my current job, I'll wait another year and just save up.

@Filipe Pereira Thank you! had no idea, and I'm actually looking to buy in Mass but thanks for trying to help!

William Scharf · Answer

Hi debora.

Congrats on being 22 and thinking this way. Most of us don't start until way later.

Regarding lenders, in our experience it is the opposite. Lenders pulling back on their products, putting overlays (heightened qualifications and standards), and raising their min credit scores. We were going to do a portfolio refi, but our bank put a pause on all those products because of the 'Rona. Most non QM products have evaporated, just like 2009. This is our experience, others may have different input. If you're able to find something, great, but you may want to wait a bit until both of your scores are up and your job history stabilizes.

Be wary of using a cosigner, esp if it is family. You will be financially married to this person for the life of the loan, and if things get dicey, you may lose that relationship.

Also be mindful of your FHA loan. It will have PMI, which is expensive. You want to find one on which you can cancel PMI after you reach a specified equity position. otherwise you will be stuck with PMI for the life of your loan, or until you refinance. Be sure to ask about this when you are kicking lender tires.

Is the Corona Virus Causing mortgage lenders to be more flexible?

Is the Corona Virus Causing mortgage lenders to be more flexible?

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