By Susan Tompoor

Detroit Free Press

The very low mortgage rates, which fell in early April, now surprisingly extend into the summer, giving those who have not yet refinanced a second chance.

“The 30-year average fixed mortgage rate is 3.56%, close to a record low of 3.50%,” said Greg McBride, chief financial analyst at Bankrate.com.

Essentially, mortgage rates have hovered below 3.6% since the U.S. economy was rocked by widespread shutdowns to stem the spread of COVID-19, especially in major subways such as Detroit and New York.

The 30-year average rate was 3.9% in December and 4.54% at the end of February 2019.

What is possible: Mortgage rates could stay quite low for several weeks or months.

“I expect fixed mortgage rates to stay between 3% and 3.5% over the coming year,” said Mark Zandi, chief economist at Moody’s.

The catch, if you will, is that many bargain rates will be available primarily for borrowers with good credit, proof of income, and enough equity in their home, as lenders try to limit their losses if a recession lasts much longer than many would expect. .

What If Your Credit Score Is Below 700?

Higher barriers and stricter lending standards could prove to be a barrier for some who would like to take advantage of lower rates, including small business owners and others who may have difficulty documenting their income.

“Credit has tightened especially for borrowers with credit scores below 700, those looking for cash refinancing or for jumbo fixed rate mortgages,” McBride said.

Jumbo loans, which often require larger down payments, apply to mortgages over $ 510,400.

“Jumbo cash and fixed rate mortgages are still available, but much less and at a higher mark-up compared to compliant, rate and term refinancing. “

If you are looking to refinance or take out a new mortgage, it is increasingly important to make sure that you have checked your credit report for free on AnnualCreditReport.com, pay off your credit card debt, and avoid opening new ones. credit card. . You want to make sure you pay on time every month.

Slowdown makes lenders cautious

More than 40 million American workers have filed unemployment claims since mid-March as restaurants, factories, stores and other places of business began to close in an attempt to limit social contact and the spread of the virus.

These high unemployment rates – and the expectation that home values ​​fall or soften in the future – are prompting some lenders to take a more cautious approach, according to Keith Gumbinger, mortgage expert and vice president of HSH.com. website.

“Certainly with risks on the upside,” Gumbinger said, “it is to be expected that at least some lenders will try to limit their exposure to potential future losses.”

Even so, not all lenders react the same. “So,” he continued, “if a consumer can’t find a loan answer they need from one side of town, they’ll have to keep looking.”

JPMorgan Chase, for example, now requires clients applying for a new mortgage to have a credit score of at least 700 and make a down payment equal to 20% of the value of the home. Chase has also stopped approving new home equity lines of credit.

Still, there are a few exceptions: “We’re still very committed to affordable loans,” said Charlene Lule, a spokesperson for Chase. “Our DreaMaker product was exempt from the temporary changes in lending standards. This allows for as little as 3% off, wider credit score ranges, additional education incentives, and homebuyer subsidies.

“Due to the economic uncertainty, we are making temporary changes that will allow us to focus more narrowly on serving our existing customers,” said Lule.

Wells Fargo has stopped refinancing cash and is no longer accepting applications for new home equity lines of credit.

Steve Carlson, vice president of corporate communications at Wells Fargo, said the changes serve long-term customer interests, while addressing health and safety concerns, as well as credit risk. and market.

Wells Fargo, he said, has taken into account “current market conditions and uncertainty about the timing and extent of the expected economic recovery.”

“For example, we have stopped most indoor assessments in an effort to protect the health and safety of our customers, team members, service providers and communities,” he said.

Shopping around can be essential

Tony Abate, the Rochester branch manager at Ross Mortgage, said loan refinancing is “definitely alive and well.” But he cautions that some consumers can expect a few hurdles.

“Due to the pandemic, certain types of mortgage financing have become a little more difficult to obtain,” he said.

“A homeowner looking to take money out of their home equity may find that fewer lenders are willing to allow it, or they may face more restrictive requirements. However, this is not universal with all lenders.

Therefore, it may be even more important to check with more than one mortgage lender when exploring options.

Mark Heppard, senior loan officer for Supreme Lending in Farmington Hills, said some restrictions could be eased somewhat. But homeowners who want to tap into the equity they’ve built up in their home will need to recognize that some lenders aren’t doing these transactions now. And you could face an even higher interest rate than normal.

In general, he said, the loan market could improve slightly and reverse from just a month ago.

“In fact, we are now in a position to re-grant FHA loans to people with scores as low as 620, although the minimums dropped from 580 to 640 just a few weeks ago,” Heppard said.

Zandi, of Moody’s, said mortgage lending standards are currently even stricter than they were before the crisis, but noted that they are now only a modest obstacle to home sales.

“The mortgage market has weathered the crisis with relative grace, in large part because it is heavily supported by the federal government,” Zandi said.

“Two-thirds of single-family mortgage origination is done by government-backed institutions including Fannie Mae, Freddie Mac, FHA, VA and USDA. These institutions have not significantly tightened their underwriting.

“And while the lenders who sell their loans to these institutions have done so, it has been marginal. The other third of loans from banks and non-bank financial institutions have been more disrupted, but even here conditions are improving rapidly, ”Zandi said.