Here’s how lending guidelines have changed during the pandemic.

Underwriting guidelines have changed since the COVID-19 lockdown began, but how?

Lenders are dropping programs that previously allowed borrowers to both qualify with a much lower FICO score and put down a smaller down payment. They’re now raising the minimum FICO score borrowers need to qualify. For example, Chase Bank recently raised their minimum qualifying score to 720 and now require a down payment of at least 20%. 

Jumbo loans, in particular, are tightening up. They’re very hard to find and cost more—if you can even get one. FHA and VA loans have tightened a bit but not by the standard at which we’re seeing conventional loans tighten. Conventional loans are still available, but they cost borrowers more. 

Lenders are doing this because they’ve watched millions of people lose their jobs or get furloughed, and this has resulted in missed mortgage payments. Many borrowers have opted to take the forbearance route, which leaves the lender holding the loss. They’re concerned that they may fund a loan one day, only to see the borrower lose their job shortly thereafter and stop making their mortgage payments. 

“Don’t open any new lines of credit during the loan process.”

The good news is, there are just a few simple tips to remember if you want to ensure that you still qualify for a loan. If you qualify now, you might just do so at the lowest interest rate you’ve ever seen. 

First, maintain a high FICO score by reducing your debt as much as possible and making your payments on time. Second, work with an experienced lender who’ll communicate with you throughout the loan process so you know exactly what’s needed and you can provide them with what they ask for promptly. 

Finally—and most importantly—don’t open any new lines of credit during the loan process. This can skew everything and possibly cost you your loan. After you close on your home and are handed the keys, then you can go shopping. 

As always, if you have questions about this or any real estate topic, don’t hesitate to reach out to me. I’m happy to help.