Remember the good old days when new home buyers were out in full force, taking advantage of the nice weather and even nicer mortgage rates? It seems like just months ago…and it was. Then COVID happened, and things paused for a short while.
However, as mortgage lenders and real estate agents begin to make substantive changes to address the new normal, homebuyers — and people looking to refinance their current home — are resurfacing, tempted out of self-isolation by record-low interest rates.
Social distancing: Changing the process
Because of COVID-19, some of the steps in the home loan process just had to be revisited and are now safer, more streamlined, and intended to get you through the home financing process quickly and effectively germ-free. The most significant changes impact home appraisals and loan closings.
What’s changed? Remote appraisals.
Whether buying or refinancing, a home appraisal is a critical component of the transaction. That’s when an authorized, unbiased appraiser visits the property to do a visual inspection. Then, using recent sales of similar properties, current market trends, and things like amenities, lot size, floor plan and square footage, they provide a professional opinion of the home’s value.
But with COVID, in-home appraisals are hard, and for the foreseeable future, possibly unsafe.
In early May, Freddie Mac and Fannie Mae guidelines directed mortgage lenders to rethink the appraisal process. Specifically, they asked whether it’s really necessary for appraisers to enter a home for inspection, especially in states where “shelter-in-place” orders are still the norm, or in areas where non-essential businesses remain closed. So, what are the virtual home appraisal alternatives?
- Desktop appraisals allow appraisers to do everything online — researching local property registries, comparable properties, publicly available floorplans, and MLSs to generate an appraised value.
- Drive-by appraisals allow appraisers to drive a vehicle right up to the property and potentially walk around to view the exterior. This method lets appraisers understand area housing stock and, when combined with online research, come up with a value. While not feasible for condos in highrise buildings, drive-by’s are perfect for homes in suburban and rural markets.
- Curbside appraisals are also gaining in popularity. Here, a homeowner can “virtually showcase” a home’s interior while the appraiser checks out the exterior from a safe distance. The homeowner uses a mobile device or tablet — and an app like Facetime or Skype — to tour the house and answer the appraiser’s questions in real-time.
One thing to note, however, is that non-conforming mortgages, such as FHA loans, may require an in-home appraisal.
What’s changed? Remote notarizations at closings
Whether it’s valid or not, home loan closings have a reputation for being a little stressful. There are plenty of documents to sign and fees to pay before your new mortgage is fully funded. Part of that process requires getting your documents notarized: When a Notary Public acts as a legal witness while you sign everything.
Closings are harder to pull off since coronavirus barged into our lives. Luckily, individuals no longer have to meet in a sealed room to seal the deal as remote notarizations are becoming more widespread.
Some lenders are conducting ‘parking lot’ closings, where borrowers sign closing documents from inside their vehicles and, wearing protective gloves, hand them through the car window to a mask-wearing title agent. The title agent immediately passes the docs to an equally protected notary who has been watching from a neighboring parked car. After notarizing the papers, the notary hands them back. Fees are paid, keys exchanged and everyone safely drives off.
Others are arranging video closings. Think “Zoom Calls,” where laptop cameras are on and everyone has the documentation in front of them. After witnessing the borrower sign, the e-files are delivered to the remote notary, who then notarizes them to validate authenticity.
Electronic notarization — where both the notary and signer are in different locations — is at the heart of the SECURE Notarization Act of 2020. This recently introduced legislation focuses on creative ways to give e-signatures the same legal validity as wet ink signatures. Many states already permit remote notarization, although some still require the original notary for a wet-ink seal before recording. Your lender will let you know if remote closing and remote notarization will be part of your new mortgage or refinancing process.
Other mortgage process changes you may notice
As cities are slowly and sporadically reopening, they may be limiting the number of people who can access local government buildings at the same time. Depending on where you live, that may mean that title searches may take longer than usual. If property recording centers in your community can’t accept and store digital documents yet, they probably will soon.
To close on your loan, a lender will look to verify your employment and salary. If COVID-19 restrictions make it difficult to get a verbal verification, your lender may look to get proof in other ways, like an email, a recent year-to-date pay stub, or a bank statement showing an auto-payroll deposit.
Most homebuyers do a final walk-through of the property before closing to guarantee that the home they are about to buy is in good condition and that requested repairs were made. However, buyers are being more cautious in their walk-through and are trying not to touch doorknobs, faucets and the like. Don’t be surprised if sellers start offering to leave sanitized homes unoccupied for a few days to ensure any trace of coronavirus has dissipated before the walk-through date.
We’re ready when you are!
It’s probably safe to say that remote appraisals, remote notarization, and other social distancing steps in the home loan process will be with us for some time. And maybe that’s a good thing. Speak with your local Movement Mortgage loan officer to discuss what you can expect in your home buying or refinancing process.