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How the coronavirus may affect your mortgage

Dropping interest rates have left lenders overwhelmed with applications.

Updated

Multiple industries have been affected by the spread of the coronavirus, social distancing and city lockdowns. But the borrowing and lending industries have seen a recent boost in activity. Homeowners are examining their mortgage options as interest rates drop in hopes of long-term benefits.

The effect of COVID-19 on mortgage rates

In the midst of the coronavirus and economic uncertainty, mortgage rates have dropped. According to Freddie Mac, the average fixed-rate interest on 30-year mortgages at the beginning of March was 3.29%. While rates are expected to increase slightly, mortgage rates are at 50-year record lows.

What low rates mean for homeowners

Many homeowners are weighing options to potentially capitalize on dropping rates by refinancing their mortgages. Even a quarter of a percentage difference in your interest rate could spell thousands in interest savings over the life of your loan.

According to the Mortgage Bankers Association, the week ending March 6, 2020, saw the highest number of homeowners applying for refinancing since April 2009, with application rates 479% higher than the same week in 2019. If you still owe money on your mortgage, it might be a good idea to lock in lower interest while rates are in your favor.

What low rates mean for homebuyers

It’s a good time to buy on paper, but the economic climate as COVID-19 spreads nationwide has left some potential homebuyers uneasy. For one, many people are nervous about steady employment. And both buyers and sellers are cautious about attending open houses in fear of spreading germs.

Despite that, the Mortgage Bankers Association also reports an increase in mortgage applications — the highest numbers since April 2009. Compare current mortgage rates.

The effect of COVID-19 on lenders

Lenders report difficulty in keeping up with the influx of applications from borrowers looking to refinance their mortgages. Despite government mandates that require lenders to close branches and employee transitions to work from home, lenders like Quicken Loans are going on hiring sprees to accommodate the demand.

What demand means for homeowners and buyers

With lenders operating at capacity, some are refusing applications altogether. For lenders that are accepting applications, reps report delays of up to two hours by phone just to talk to a loan officer.

If you’re planning to buy or refinance, build in more time than usual for application approvals, returned calls and other business transactions. And with many government tax and other offices shuttered for the foreseeable future, expect closing to come more slowly as well.

What if a lender turns me away?

If a lender doesn’t accept your application, shop around for another bank, credit union or mortgage servicer. Especially as lenders struggle to return phone calls.

Take care with applying with too many lenders at once, however. Each application requires a hard pull on your credit, which can temporarily chip away at your credit score. Instead, keep your applications within a 45-day window so that all credit checks can count as one inquiry on your report.

Should I sell my house?

Maybe not. During the economic fallout of the coronavirus, fewer people are expected to hunt for houses, and borrowers are waiting in long lines to get a mortgage. A March 16 flash survey from the National Association of Realtors found that 48% of members saw a drop in buyer interest due to the coronavirus. Many sellers — as well as real estate firms like Redfin — are canceling open houses.

Still, many sellers are opting for virtual tours to keep business going. And with signs pointing to a buyer’s market, if you’re set on selling your house, a lower asking price may keep your home competitive.

Compare mortgage lenders

Name Product Loans offered State availability Min. credit score
Axos Bank
Conventional, Refinance, Jumbo, Home Equity, Fixed, Adjustable, FHA, VA, USDA
Available in all states
620
Explore a full suite of home loan options with this direct online lender.
Morty
Morty
Conventional
AL, AR, CA, CO, CT, DC, DE, FL, GA, IA, ID, IL, IN, KS, KY, MD, ME, MI, MN, MS, MT, NC, NE, NJ, NM, OH, OK, OR, PA, SC, TN, VA, WA, WI, WV
680
Requires minimum credit score of 680 for conventional loans above $100,000 only. Not currently offering FHA, VA, USDA, Jumbo, or certain types of refinancing. A short online form presents you with multiple loan options and terms to choose from. Not available in every state: make sure you live in a qualifying state before applying.
Rocket Mortgage
Conventional, Refinance, Jumbo, FHA, VA, USDA
Available in all states
620
Streamline your mortgage from quote to final payment — all from your computer or phone.
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Compare up to 4 providers

Bottom line

As interest rates drop in the wake of COVID-19, it may be a good time to consider refinancing your mortgage. But with so many people looking to save where they can, expect long wait times for approval, calls and closing.

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