I don’t need to tell you that these are trying times. Times that almost none of us have ever experienced before. All of the things that we have taken for granted — going to a movie, eating at our favorite restaurant or even taking a walk in the neighborhood park — are now prized. If things as commonplace as these are now gone, how do you run a business during so much turmoil? Let’s take a look at the mortgage business.
A mortgage loan by definition is used either by purchasers of real property to buy real estate, or alternatively by existing property owners to raise funds for any purpose by placing a lien on their home. The loan is secured on the borrower’s property putting into place a legal mechanism that allows the lender to take possession and to sell the property in the event that the borrower defaults.
The word “mortgage” is derived from an old French law word meaning “death pledge.” Meaning that the obligation is fulfilled by the loan being paid off, or by the property being taken in a foreclosure action and subsequently sold.
If you analyze the above paragraph, it’s pretty easy to see that lenders are looking for repayment through one of two sources – from you or from your house, which is their collateral. When a lender looks at you for repayment, it analyzes your income, assets and credit. Is your income stable? Is your income increasing or decreasing — and why? What is the probability of your income continuing at its present amount? And what is your probability of continued employment?
Lenders look at your liquid assets in your bank accounts and your retirement assets in 401(k)s and IRAs. And they look at the all important credit report, because in today’s digital age it is used as an accurate predictor of your intent to repay your mortgage with timely payments. When a lender looks at your house as a source of recovering their loan, it obtains an appraisal that defines the current value of your home.
Fast forward to today — and imagine operating a mortgage company in these uncertain times. How do you determine probability of continued employment? Is your income going to stay the same? And, if your home’s current value is set as of today, what is that value going to be in three months from now, or six months, or in a year? It’s pretty easy to see that these are tough times for underwriters at mortgage companies.
If you’re considering purchasing a home or refinancing, all of this probably sounds all too familiar to you. But my advice is: Do not give the past the power to define your future. This too shall pass.
It is more difficult to get a home loan during this crisis — but it’s not impossible. The mortgage industry is one that is incredibly well-adapted to the social distancing era. Virtually, your entire loan process can be done electronically. And the escrow and title companies also have adapted with electronic signatures and mobile notaries.
If you’re considering purchasing a home, I would recommend to do that. Supply and demand will determine future values. If you have thought about refinancing — do it now! Interest rates are at historic lows, and you can either reduce your monthly payment or pull out some cash for needed expenses.
My advice is to contact a reputable and well-known lender. Then determine the loan officer that’s the right fit for you. He or she will walk you through the maze of issues that you will need to navigate and when the pandemic passes, which it will, you will be set to embrace the world of tomorrow.
Rick Piette is the regional sales manager for All Western Mortgage. He has been a Las Vegas resident and mortgage expert for many years. Contact him at rickp@allwestern.com.
