Mortgage Relief Consequences, Refinancing and Home Prices
Updated: Jun 24, 2020
Let me dispel a myth before we begin. Freddie Mac WILL NOT require any borrower to make up missed payments in a lump sum. They have made that very clear in an announcement April 27th. It is an option but not a requirement. Other options include a repayment plan, a deferral that increases the length of your mortgage but keeps the payments the same, or a loan modification to reduce the payment moving forward. If you are facing financial hardship call your servicer immediately. Communication is your greatest way to a positive solution.
A forbearance is NOT FREE, and it is NOT a “mortgage vacation.” If you are NOT in trouble, attempting to take advantage of this will come back to hurt you. Will your credit be affected? That has not yet been determined. Experian answers the question ambiguously, “It may”. While in forbearance the answer is no, but afterwards depends on what options are selected.
Anyone that is still working but concerned about upcoming payments should reach out to their loan officer first to discuss a simple refinance. The option to avoid mortgage payments for two months, receive up to $2,000 back at closing plus a refund of your current escrow balance that results in a lower monthly payment is your best bet. Mortgage rates are at all time lows. Make that your first call.
What Impact Might COVID-19 Have on Home Values? The lack of inventory has had a significant impact on home prices, down by 70 percent from the previous year by the third week of April. Keep in mind, that is VOLUME of homes sold, not VALUE of homes. Based on the low supply, it is no wonder that home seller profits were still significant despite Coronavirus impact. Many economists expect home price appreciation to slow, but remain positive (meaning still going up, not down). Part of the reason demand is staying strong is due to the low cost of financing. Mortgage rates are hovering around 3%, over 1% lower than one year ago. A 1% drop in rate has a 10% impact on home purchasing power. That means a buyer looking at homes in the $450,000 price range (and monthly payment) last year could buy a $495,000 home this year with the same monthly payment. What does an extra $50,000 mean? An extra bedroom? A third garage? A finished basement?
~ Article by Todd Gehrke.
Todd Gehrke is a published author, public speaker & a Sr. Loan Officer with New American Funding in Greenwood Village. He can be reached at firstname.lastname@example.org (720) 608-0013.