COVID-19 & Mortgage Application:
The Need for Information and
Documentation is Amplified
The weekend is often our family's opportunity to tackle errands. That was true again this weekend.
My wife had to stop at a store to pick up just one item. The task was supposedly to be a short one, so I opted to wait it out in the car. I found a bit of shade, parked the car, and rolled down the window.
The car parked next to mine also had their windows rolled down. There was a man and woman inside. The woman was on her cell conversing with someone fairly loudly. At first, her conversation was just background noise for me. But then she mentioned the word "mortgage".
As you would suspect, that word caught my attention and caused my mortgage lender ears to perk up.
Evidently, this couple was hoping to buy a home and were in the hunt for a mortgage. Whomever they were speaking to was hearing a rundown on their finances and financial situation. I suspected it was a realtor.
The information they were sharing was quite personal in nature and pretty detailed. I marveled that they felt no compunction sharing the info in such a public place as a parking lot where they could so easily be overheard.
It was obvious from the info shared that the couple was presently facing some real financial troubles. Late payments, high credit card bills, poor credit scores were all mentioned during the overheard conversation.
Over and over I heard the woman attempt to dismiss and explain all the financial issues away with one phrase, "COVID-19". According to her telling, the virus was to blame for everything bad that had happened.
Now, before we move forward ... that may be true. I have no way of knowing whether this couple's financial troubles and challenges started pre-COVID or were a result of COVID.
But I did know one thing for sure. Any mortgage lender hoping to assist them was going to request and require an in-depth review and analysis be conducted of their finances prior to providing a Pre-Approval Letter to them.
Pre-Approval Letters have become pretty much a mandatory requirement and standard for those wanting to view and bid on homes these days. Realtors assisting buyers in transactions typically want to know if they've been pre-approved (and to what amount they've been approved) prior to showing homes.
And Sellers want to know that anyone viewing, entering, or bidding on their home has verifiably proven their ability to buy it. Again, a buyer proves that to a Seller via a Pre-Approval Letter.
The couple in the car next to mine was hoping to view homes right away. With all the credit "dings", "challenges", and financial damages they were referring to during their conversation, I'm doubting that was going to happen.
However, one thing was obvious when hearing this conversation. This couple thought that mentioning "COVID-19" was some sort of magical code.
It was a code that would somehow provide them a "pass" regarding their ailing financial status and aid them greatly come application time.
To them, it was like holding a "Get Out of Jail Free Card" in a Monopoly game. No harm ... no foul. Just mention the word COVID and you aren't accountable for anything.
The need to explain their significant debt and bad credit would instantly disappear. They would be held blameless.
Voila'!
This isn't the first time I've heard this sentiment. I've had to dispel this misperception quite a few times over the last few weeks. Unfortunately, it's just not that simple. It doesn't work that way.
Mortgage lenders will certainly require explanation and proof of what an applicant's financial status was prior to any COVID-related challenges occurring. They'll also need a thorough explanation and understanding of what lead to their current financial woes.
A lender will also need to know the applicant's current employment status:
- Did COVID alter their employment status?
- If so, how?
- If they lost a job or were put on hiatus or reduced hours, do they remain that way currently?
- If the applicant has returned to work, the lender will need to know if it is a return to their prior position/type of employment or if a new position is held?
- The lender will also need to know just how stable that employment is, both in the short and long term?
What mortgage applicants need to know and understand at this time regarding COVID-related financial challenges:
- Lenders will definitely request thorough information and supporting documentation outlining your finances
- Mortgage lenders will need proof of what your financial challenges are
- A lender will need to know how your financial challenges were/are being addressed
- They'll need proof that the challenges faced are behind you
- A mortgage lender's need for information is only amplified during this crucial and challenging time
- There is no free "pass" or "Get Out Of Jail Free Card" awarded based upon COVID-related issues
- Verification and documentation still rules and determines the outcome of any application
I suspect, the couple in the car next to me was about to find that out ...
I do not relate this to discourage hopeful buyers (or those refinancing) from their goals. I share it to shed a light on the great importance and need for having a conversation with a mortgage lender.
Only through that conversation will you discover what options and opportunities you have for buying and financing a home now ... or at some point in the future. That conversation will also reveal and help you layout the best (and quickest) path to successfully do so. Your future mortgage application will go much more smoothly too.
So if home buying is something you ever hope to do ... reach out now. Get the facts as they pertain to YOU, your finances, your goals, your desires. Contact me today ...
Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf. I'm easily found at:
Gene Mundt
Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI #216987
American Portfolio Mortgage Corp
NMLS #175656
Direct: 815.524.2280
Cell: 708.921.6331
eFax: 815.524.2281
Gene Mundt, Mortgage Originator, an Originator with 40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:
#Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in
#Chicago and the greater Chicagoland region, including:
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