We as consumers have plenty to talk about in our current environment. The world overall has shifted into a new existence with many changes affecting our personal, business, and political lives. The mortgage world is no exception. Since March, lenders have seen their pipelines swell with refinance business due to absurdly low interest rates, while the purchase market took a short hiatus. Now that the gradual re-opening of our economies has begun, the purchase market is moving forward at full steam.
There are two main ways to categorize the changes that have occurred since COVID-19 began in the mortgage world: Conventional financing and Jumbo financing. Conventional financing would be loan amounts under $625,500 here in Santa Barbara County for single family homes. These interest rates are in the low 3% range and even dipping into the high 2% range. Buoyed by the government’s purchasing of mortgage-backed securities we have seen rates stabilize and the dramatic price swings we saw in March and April are gone. With no planned ending for the government’s securities purchases, we will likely see rates stay at or below current levels for the rest of the year. If you have not explored a refinance yet, it’s a great time. Furthermore, if you are looking to purchase, your buying power is higher than ever.
The largest changes that occurred in lending due to COVID-19 were in the Jumbo markets. Retail banks tightened guidelines severely. Some simply are not allowing cash-out refinances, some require large deposits on hand to even do a regular refinance. With the fear of mortgage losses in the future due to forbearance and banks’ capital requirements, lending became less and less appealing to them. We also saw non-bank lenders drastically reduce their lending ability, and some simply disappeared. So where does that put us now? We’re in a healthy mortgage world with plenty of options. The fringe products are the ones that went away, not the core products that most borrowers seek. News reports generally paint the negative picture about tougher lending or mortgage availability, but in all honesty, there is still plenty of credit available.
If 2020 is the year you decide to purchase a home or refinance, you are truly in a great position to benefit from low interest rates and save money. Your situation is different than the person next to you, and that is why getting a personalized review or pre-approval is the most important thing a borrower can do. With so many new changes to our lives, I’m happy to say that the mortgage world did see dramatic changes recently, but for the bulk of borrowers out there, you likely won’t notice them.