What have you always wondered about the economy? Tell Us
COVID-19

Mortgages are still cheap, if you can get one

Amy Scott Apr 20, 2020
HTML EMBED:
COPY
Borrowers are finding it harder to qualify for a mortgage. Joe Raedle/Getty Images
COVID-19

Mortgages are still cheap, if you can get one

Amy Scott Apr 20, 2020
Borrowers are finding it harder to qualify for a mortgage. Joe Raedle/Getty Images
HTML EMBED:
COPY

Millie Ruiz-Wagner is a mortgage lender in the Chicago area. Just weeks ago, a 580 credit score, out of a maximum 850, was good enough to qualify for a mortgage. These days she’s not seeing many loans approved under 640.

“I got caught with people who were preapproved with credit scores under 640, and I had to stop, regroup, help them fix their credit so they can get back in the buying market,” she said.

People do still want to buy homes, and even more people want to refinance existing mortgages, to take advantage of near-record-low interest rates. As of last week, the average interest rate on a 30-year mortgage was 3.31%, according to Freddie Mac.

But Joel Kan, an economic forecaster at the Mortgage Bankers Association, said that’s getting harder to do. The group’s Mortgage Credit Availability Index fell last month to its lowest level in five years, and it’s likely to get worse.

“The March numbers were really only a reflection of tightening in the last two weeks of the month,” Kan said. “With the gloomier economic outlook and a full month’s worth of data in April, I think we can expect more conservative lending and thus a decline in credit supply.”

According to data firm Black Knight, nearly 3 million borrowers have delayed their mortgage payments through COVID-19-related forbearance plans. That leaves lenders with less money — and less confidence — to make new loans, said Michael Neal, a senior research associate with the Urban Institute.

For potential borrowers, he said, “You’re less able to secure a mortgage, and if you are, you’re going to pay a much higher mortgage rate.” That could especially hurt minority and younger borrowers “because they typically have lower credit scores.”

It’s not just credit scores getting a closer look, said Lana Jern, a broker at Uptown Mortgage in Denver. Lenders are rejecting certain sources of income and asking for additional documentation, she said. One lender recently required a client to prove that his tenants had paid their rent in March and April, something Jern had never seen.

“It’s their prerogative, of course, but some of it I think is a little overreactive,” she said. “Then again, it’s not my money.”

Tighter credit standards are likely to further slow home sales, already under strain from stay-at-home orders and mounting job losses. Maryland-based builder Jeff Caruso, owner of Caruso Homes, said some of his clients have run into trouble getting financing.

“I would say 8 to 10 percent now are looking at credit issues, trying to increase their credit scores because of these new requirements,” he said. “That’s definitely affecting our homes under construction and our new home sales.”

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

Read More

Collapse

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.