globe with face mask

If you’re like most Americans, COVID-19 has changed your life in some way. You may be working from home, or have lost some of your income. You might be an essential worker, under more stress at work than ever before.

If you have any children, they may be going to school online or in a hybrid form. You’re juggling a lot of new concerns and trying to adjust your life to a new normal.

In the midst of all these other changes, your housing costs may also have been affected. You may have noticed that mortgage rates have changed in the midst of the Coronavirus pandemic.

Amidst the negative impact of the economic downturn caused by COVID-19, there are some positives that have been made possible by interventions into the mortgage system. 


How Coronavirus Affects Mortgage Rates

The Federal Reserve has taken steps to protect homeowners and the economy by making getting a mortgage and financing in 2020 easier than ever.

There are now lower interest rates available on mortgages and home equity lines of credit. Mortgage rates had already started falling, but then the Federal Reserve made an emergency rate cut on March 3, 2020.

The Fed ended up cutting the rate a full percent, setting a target federal funds rate from a 0% to 0.25% range.

The rate has remained near zero since then, and the Fed has promised not to raise the rate until there is proof of significant and sustained economic recovery.

Part of the process of responding to the COVID-19 crisis included the Fed buying up billions of dollars of mortgage-backed securities, which resulted in a drop in mortgage rates from spring through summer.

Home sellers and buyers were understandably reluctant to make any big changes as the early stages of the coronavirus crisis unfolded. So both buyers and sellers pulled back in the spring. However, as of this summer, sales are beginning to recover. 


It May Be A Great Time To Refinance


mini house on top of coins

With the reduction in rates, now could be the ideal time to refinance your home. Here are some things to consider before making a decision.

Right now lenders are very burdened with a large number of applications, so if you decide to refinance, make sure you give your application a fighting chance by checking the completeness along with having all necessary documentation attached.

If you opt to fill out an application online it will alert you if you’re missing anything before you submit it to the lender. 

Clarify why you’re refinancing so you can get the right kind of loan for your specific needs.

Your goal may be to lower monthly payment, to shorten the term of your loan, to secure a low fixed-rate loan, to replace your adjustable-rate mortgage, to get a cash-out refinance to borrow more than you owe or to get rid of FHA mortgage insurance.

Another important step in the process is to shop around. Don’t go with the first lender you find. If you apply to multiple lenders you’ll put yourself in the position to accept only the best deal you find.

Each lender will give you a loan estimate, which you can then compare to find the best rate possible.


Factors To Consider

In the case of refinancing a home, ordinarily, you would be able to lock in your rate when you apply, but due to the volatility of the market right now, you may have to wait till later in the process to lock in a rate, as they are changing so rapidly.

One note of caution is that this is not a good time to opt for a cash-out refinance, as you may want to keep your house’s equity in case of an emergency, such as possible unemployment. 

If you’re buying a house, be aware that there are fewer houses on the market right now. No matter how much the Fed shores up mortgage rates, they can’t make more houses available.

In the midst of COVID-19, many homeowners are choosing to hunker down and hold on to their existing property. Choices may be more limited no matter what kind of rates you’re able to get for a new mortgage.

It may take time, patience, an eagle eye, and a good realtor to assist you in your search.

Despite the tendency of homeowners to be conservative during a crisis, you may benefit from someone who’s seeking to downsize their primary residence as a response to a change in income, or a desire to streamline and simplify their household. 


Final Thoughts

Despite the uncertainty that COVID-19 has caused for so many homeowners and buyers, there are steps you can take to secure a good initial mortgage rate or refinance your current mortgage.

Megastar Financial Corp is here to answer any questions you may have, and assist you with all aspects of mortgage financing.