COVID-19 has touched pretty much every aspect of the New York City real estate market, and financing, of course, is no exception.
I took some time to speak with a few local mortgage professionals to gather more insights as to how the home lending landscape has changed in the city over the past six months.
Down payment requirements have changed, depending on the loan amount.
Smaller loan sizes – less than $765,600 in New York City – are considered non-jumbo, and mortgage pros haven’t seen many changes to non-jumbo down payment requirements.
But, they have seen increases in down payment requirements for jumbo loans – a loan type which is used frequently in the city, due to higher price points.
While some lenders haven’t made many changes in either the non-jumbo or jumbo space for the time being, they might in the near future if they continue to perceive a lot of risk in the lending environment (which is highly likely, due to prevailing economic factors).
So if you’re hoping to get a jumbo loan with less than 20% down, you might find it more difficult to find a lender willing to do a mortgage for you.
Again, in the non-jumbo sector of lending, things have largely remained the same when it comes to qualifications.
But, according to the mortgage pros, it’s a different story in the jumbo sector.
First – the reserve requirements (i.e. savings, investments, etc.) have increased. Second – self employed borrowers now have some additional requirements they have to fulfill.
The reason? Risk management.
Banks typically don’t sell jumbo loans. So, banks have to limit risk with respect to defaults, and the way to do that is by tightening up borrower financial requirements.
A lot of loans are still getting done in the same time frame as before. But if a lender has a big volume of loans in a certain segment or if there’s anything unusual about your deal, then it could take longer than usual. With rates so low, many lenders may be slower than usual, so don’t be surprised if your mortgage process takes a bit of extra time.
According to mortgage pros, underwriters are doing more diligence surrounding employment and income to more thoroughly assess the likelihood that a borrower will still be able to pay in the future. And, as mentioned previously, there’s additional verification needed for self-employed folks. More banks are also checking to see if people are in forbearance on their rent or a current mortgage – they want to make sure potential buyers are still making payments. So, if you’ve stopped making payments, that could raise a yellow (or red) flag to a lender.
Have more questions about home lending in NYC? I can put you in touch with some great mortgage professionals. Contact me!
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