{"id":16477,"date":"2020-05-06T08:54:57","date_gmt":"2020-05-06T15:54:57","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=16477"},"modified":"2025-09-30T19:37:39","modified_gmt":"2025-10-01T02:37:39","slug":"buyer-coronavirus-government-home-loans","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-coronavirus-government-home-loans\/","title":{"rendered":"Can I Still Get a Government-Backed Mortgage Loan During Coronavirus?"},"content":{"rendered":"

Let\u2019s start with the facts about how the pandemic<\/a> has affected the mortgage market<\/a>: In a word, it\u2019s a lot<\/i>. Given the coronavirus crisis and its enormous economic fallout, all borrowers with existing government-backed mortgages<\/a> or loans supported by government-sponsored enterprises (Fannie Mae and Freddie Mac) are permitted to delay monthly payments by at least 90 days (and possibly up to a year)<\/a> \u2014\u00a0with no questions asked, as required by law through the CARES Act<\/a>.<\/p>\n

Naturally, under these circumstances, requests from borrowers for the federal mortgage forbearance program are flooding in on a massive scale.<\/p>\n

So given the massive hit to the mortgage market and existing borrowers, hopeful new borrowers are wondering: Can I still get a government-backed mortgage loan during coronavirus?<\/p>\n

The good news is \u2014\u00a0yes, lenders are still issuing government-backed loans\u2026 \u201creluctantly,\u201d according to Dale Mattison<\/a>, a top-selling agent based in Maryland. \u201cAs it stands right now, you can get an FHA or VA loan. The requirements for them have tightened up \u2014 meaning the minimum credit score is higher \u2014\u00a0although I have heard rumors that there are still lenders that will still use the old credit score parameters when issuing those kinds of loans.\u201d<\/p>\n

So there\u2019s optimistic news to be found even at such an uncertain time. Here\u2019s a primer on what you need to know about getting a new government-backed mortgage loan right now \u2014\u00a0and making it to the closing table \u2014\u00a0with expert-backed tips and intel.<\/p>\n

\"A<\/a>
<\/a> Source: (Caleb Fisher \/ Unsplash)<\/figcaption><\/figure>\n

What\u2019s a government-backed mortgage?<\/h2>\n

First, let\u2019s start with the basics. A government loan<\/a> is one that is backed up, or ensured, by the federal government. That means the lender is protected if you default on your loan.<\/p>\n

Government-backed mortgage loans include an FHA loan, backed by the Federal Housing Administration, and are generally the best option for people who have low savings or a credit score that needs work. Under normal circumstances, you can qualify for FHA loans for as little as 3.5% down if you have a credit score of 580 or more, and they\u2019ll accept a credit score as low as 500 with a higher down payment.<\/p>\n

A USDA loan from the U.S. The Department of Agriculture<\/a> applies to rural areas and offers loans with 0% down and very low interest rates; subsidies can take them as low as 1%.<\/p>\n

A VA Loan<\/a> is backed by the U.S. Department of Veterans Affairs, and it\u2019s available only to service members, veterans, and surviving spouses. No down payment or mortgage insurance is required.<\/p>\n

So again, in the cases of these agencies\u2019 loans, the FHA, USDA, or VA is guaranteeing the loan for the lender, who will be more protected if you as the borrower happen to default. And this allows the lender to make a loan that might be considered too risky according to conventional loan standards.<\/p>\n

Usually, you\u2019d pursue a loan option like this if your credit score or down payment isn\u2019t high enough to qualify for a conventional loan. If that\u2019s the case and you don\u2019t have 20% down, you\u2019ll pay mortgage insurance on the loan.<\/p>\n

But are lenders still issuing these government-backed loans?<\/h2>\n

As Mattison said, the short answer is, yes \u2014\u00a0lenders are still issuing government-backed mortgage loans. But they are increasing the standards for those loans.<\/p>\n

Credit score requirements are going well above official FHA minimums<\/a>, and interest rates are rocketing sky-high for borrowers with lower credit. In short, it\u2019s an especially tough time for would-be buyers without flawless credit.<\/p>\n

Consider that some lenders have increased the minimum credit score from 580 to 660. Others are pricing government-backed loans higher for buyers with poor credit scores; one lender is requiring buyers with a 580 FICO score to pay a whopping 10% above the market interest rate for an FHA loan<\/a>, according to HousingWire.<\/p>\n

Given these new overlays<\/a>, it\u2019s important for buyers to arm themselves with as much information as early as they possibly can in the process to avoid surprises. The Department of Housing and Urban Development (HUD) has a resource center<\/a> to guide your research. And rely on your lender to inform you early as to overlays you need to know about \u2014\u00a0and buy yourself time to take additional action if need be.<\/p>\n

\u201cIf you\u2019re looking for a government-backed loan, you really need to know the requirements of the lender you\u2019re using, and in most cases, they\u2019re going to be upfront with that when talking to you for the first time,\u201d Mattison says. \u201cSo it really shouldn\u2019t create any issues with getting to the closing table<\/a> given you meet those guidelines.\u201d<\/p>\n

\"\"<\/a>
<\/a> Source: (Kelly Sikkema \/ Unsplash)<\/figcaption><\/figure>\n

How can I protect my home purchase?<\/h2>\n

There are a few things you should know about how to protect your home purchase at this uncertain time.<\/p>\n

First, be aware that the tightened guidelines are universal in a global time of crisis: The challenges facing the mortgage-lending market in the time of coronavirus aren\u2019t just an issue for government-backed loans. \u201cAll loan products are acting in a very volatile environment,\u201d Mattison says. \u201cThings are sometimes different day to day.\u201d<\/p>\n

Second, be smart: If you\u2019re shopping for a home at the very top of your price range, your mortgage could be in danger before you close due to new lender overlays. Shop toward the lower end of your price range.<\/p>\n

Third, save as much cash as you can: Another requirement besides a higher credit score could be a bigger down payment<\/a>, and you\u2019ll still want money for an emergency. Do whatever you can to save up all you can right now to make your purchase possible.<\/p>\n

Fourth, offer smart: Even if this is the home of your dreams, and your offer price is solidly at the lower end of your price range, don\u2019t offer more than the house is worth<\/a>, especially right now. You don\u2019t want (and probably can\u2019t afford) any issues with the appraisal.<\/p>\n

\u201cIt\u2019s always<\/i> prudent to act fiscally responsible,\u201d Mattison says. \u201cSometimes people will try to push to the very limit of their qualifications, and that may be fine when everything is fine \u2014\u00a0but when a crisis arises or a sickness occurs, or when somebody temporarily loses a job, there\u2019s nothing worse than sitting there with a responsibility that\u2019s above your means versus being in a position of comfort. I try to caution people to live within their means.\u201d<\/p>\n

Should I consider switching lenders?<\/h2>\n

This should be a last-resort step, but if you\u2019re concerned that your lender is going to cut your loan out from under you and a different loan is starting to look awfully appealing, talk to your real estate agent about your options.<\/p>\n

The important thing is to \u201csurround yourself with a team of quality professionals<\/a>: the Realtor, the lender, the title company, and any other participants,\u201d Mattison says. \u201cWhen you\u2019re working with quality people, they\u2019re going to aid you in making it down the path without stumbling.<\/p>\n

\u201cOftentimes you\u2019ll hear opportunities from potential participants that sound too good to be true \u2014 and I think of the old adage, \u2018If it sounds too good to be true, it is.\u2019\u201d<\/p>\n

In other words, if you\u2019re tempted to switch lenders, make sure you do your homework. \u201cI would caution buyers to be leery of people who tell you they can do something outside of the norm,\u201d Mattison says.<\/p>\n

\u201cIf you do switch lenders, you want to do so with caution and verification and documentation and ask for some references to ensure you\u2019re working with somebody reputable who will actually be able to perform. There\u2019s nothing worse than getting to the settlement table, and the loan you thought was going to be there is no longer there.\u201d<\/p><\/blockquote>\n

If this all feels a bit daunting while the pandemic plays out, consider some encouraging tidbits.<\/p>\n

First, if you are able to get into that government-backed loan right now, it comes with a key advantage: Having one qualifies you for mortgage relief through the CARES Act, which could come in handy if you lose your job after you move in.<\/p>\n

And consider this encouraging news for the near-term future from the Maryland agent Mattison: \u201cAs we deal with any crisis kind of situation, there\u2019s always an alarm at the offset. And as we work through the issues, things mellow out.\u201d<\/p>\n

So if your credit score is posing a challenge right now, relief might soon be on the way as restrictions ease.<\/p>\n

Header Image Source: (Windows \/ Unsplash)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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