Curve

How to close on a mortgage during the COVID-19 pandemic

Peter Warden
The Mortgage Reports editor

It’s become easier to close during the pandemic

Are you dreading having to close on a mortgage during the pandemic?

Closing is hard enough during normal times, with the sheer amount of paperwork, people, and money involved.

But in this case, there’s positive news for borrowers.

Lenders and mortgage authorities have made huge changes to their pre-closing requirements to allow buyers and refinancers to proceed through lockdowns.

In fact, it may be easier to close during the pandemic than ever.

Verify your new rate (Oct 25th, 2020)

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Ask your mortgage lender about its process

Since COVID-19 arrived, everyone’s been making new rules. The ones that apply to your transaction can depend on:

  • Your lender
  • The type of mortgage you want (Fannie, Freddie, FHA, VA, USDA, Jumbo loan, etc.)
  • Your title insurer
  • The state where you live and local lock-down rules

Your lender is the most important of those factors.

Fannie Mae, Freddie Mac, and the federal government have already relaxed their requirements for closings. But your lender is free to ignore those and introduce its own.

Luckily, few lenders have chosen to do that. Most will go along with the new rules that apply to the type of loan you want.

But, if you have any concerns about how you will close during the pandemic, you should check your lender’s website or speak to your loan officer.

While rules can vary by lender, there are some major changes that could affect the majority of refinancers and home buyers. These are described below.

Changes to home appraisals

An appraisal is a professional opinion of your home’s value. A professional comes up with a number by comparing your home to recent sales in the area.

In a normal world, that involves the appraiser physically entering your home. That’s not ideal during this time.

So many are discontinuing home visits. Instead, appraisals may be based on:

  1. Drive-by appraisals — The appraiser views your home from the curb and (by appointment) may wander around your yard and peer in some windows
  2. Video tours — You show the appraiser around your home using a smartphone, tablet, or laptop
  3. Desktop research — The appraiser never leaves their home. Instead, they research comparable property values in your neighborhood, look at the home’s current and past listings, and maybe check it out on Google Street View — all online

For some refinances and purchases (especially those with big down payments) it’s now possible in some circumstances to skip appraisals altogether.

Want more info about the new appraisal process? The Appraisal Foundation has an FAQ webpage that might help answer your questions.

Appraisals for renovation projects

If you need a mortgage to fund a renovation project, your loan agreement may require inspections as work reaches agreed milestones.

Only after one of these inspections can you normally receive the stage payment (or “draw”) that you probably need to move onto the next phase of your project.

During the pandemic, lenders are commonly skipping these inspections and still making payments.

However, they will almost certainly still want documented proof that the work has been completed up to standard. So you may be asked for photos, videos, and receipts from contractors and suppliers of materials.

Employment and income verification

You’ll likely still have to provide supporting documentation that lenders require to process a loan.

Lenders need to monitor your credit report and score, including a last-minute check before closing. They will also verify continuing income and employment right up until you close.

>> Related: How to apply for a mortgage: Your documentation checklist

Unfortunately, furlough pay and unemployment income do not count toward your income for mortgage qualifying.

However, there’s one way in which documentation requirements have become easier.

Lenders generally recognize that, with many managers now working from home and lacking access to paper files, it’s not always easy to document your employment status.

So most are willing to accept a phone call or video chat with your boss or HR representative as proof you’re still in work.

Remote closing during the pandemic

Some states accept e-signatures and online notarizations but not all. You may find you can take advantage of these, so that no part of your closing needs to happen in person.

To do so, your notary will have to view you e-signing the document. So you’ll need a device that allows video conferencing. And the notary will verify your identity using public records.

Socially distanced notarizations

If that’s not yet possible where you are, you may be able to arrange socially distanced notarization. When The Washington Post looked into this in June 2020, its readers reported their experiences.

One 75-year-old person had a notary visit her home and conduct the document finalizations on a card table in her garage. She’d planned to do so on her porch but the wind was too strong.

Another Post reader’s lender refused to supply a notary owing to COVID-19. So the borrower made an appointment with his local UPS Store. That got over one obstacle, but didn’t address social distancing. So you may want to take your own pen, fresh gloves, and a newly laundered mask along if you wish to remain as safe as possible.

Most title insurance companies, which often host closings, are implementing new COVID-19 safety measures to protect clients and staff.

And, as the Post pointed out, a “UPS Store, currency exchanges, many banks, many attorneys and accountants, and even some property managers can notarize documents for you.”

But only some can do so remotely. So, if you want to find one who does, do an online search.

Possible title issues when you close

Another closing obstacle may prove more difficult to surmount. Many county recording offices have been closed or have modified their procedures and processes.

And, without access to the title searches and deed filings those provide, some purchases and refinancings may stall. The industry is working to overcome this obstacle. But its response is patchy, as legal website JD Supra reported:

“Title insurance companies have issued underwriting bulletins confirming they will provide title insurance coverage for transactions that occur when recording offices will not accept documents for recording. Each title company has its own requirements and limitations, so it is important to confirm those requirements on a closing-by-closing basis.”

If you’re affected, talk with your loan officer, attorney, or real estate agent. Don’t know if you’re affected? The American Land Title Association has a searchable map on its website.

>> Related: Title insurance and owner’s title insurance explained

The bottom line: Closing on a mortgage is still possible

It’s good to see lenders and real estate professionals ready to help homebuyers, sellers, and those refinancing to close during the pandemic easily and safely.

There may be some extra hoops to jump through. But many borrowers will also enjoy the convenience of e-signing and remote closing from home.

Verify your new rate (Oct 25th, 2020)

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