As we are now in the heart of the Fall real estate season, there are some changes in the mortgage business that will affect the ease, cost and timing of a mortgage loan. Due to the refinance boom this year, all lenders are extremely busy and backed-up. As a result, the lending environment, which is always challenging, is even more so at this point.
Refinances are taking 45-90 days to close, depending on your lender, and purchases can easily take 60 days. So, if you are a real estate agent negotiating a contract or a purchaser looking to buy a home and want to avoid timing issues, please be aware of this. When recommending a closing date (i.e. for real estate agents) or planning a move, do not expect a 30 day close since it's extremely unlikely that this will occur. And, it will just create undue stress and unnecessary uncertainty.
Another big change relates to the cost of a refinance. For no good reason, other than (i) that the government needs money and (ii) that they can, Fannie Mae and Freddie Mac are instituting a .50% fee on all new refinances. This fee will be added as a closing cost on all new refinances and will increase either the cost or the rate of the refinance (e.g. if the fee gets built into the rate). In an example of extremely poor judgment and even worse timing, the two GSEs (i.e. Fannie and Freddie) will be charging borrowers more to refinance. This will reduce the savings for all and potentially remove the impetus to refinance at all for others. Doing this during a pandemic is unbelievably short-sighted and counter-productive when people can really use the savings from the lower mortgage payments.
Finally, also due to Covid-19 and the economic devastation to so many small businesses, the GSEs are requiring significant additional documentation on self-employed borrowers. So, if you own your own business, be prepared to undergo the mortgage equivalent of a colonoscopy (albeit, without anesthesia)! These additional documents will include: year-to-date financial statements, tax transcripts from the IRS website and two month's of corporate bank account statements. This is in addition to the "standard" business and personal tax returns and self-employed letter from your accountant.
Notwithstanding the above, some lenders, mostly smaller ones like Classic Mortgage, are doing a much better job than the big banks with processing and closing loans. Our guidelines are also more expansive. So, if you are looking for a better experience on your purchase loan or refinance, do not look towards to the large institutions at this time. As always, if I can assist with anything relating to real estate of lending, please let me know.
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