How does a loan default affect my credit?

loan default

Nobody takes out a loan expecting to default on it. Despite their best intentions, people sometimes find themselves struggling to pay off their loans. These types of struggles happen for many reasons, including job loss, significant debt, or a medical or personal crisis.

Making late payments or having a loan fall into default can add pressure to other personal struggles. Before finding yourself in a desperate situation, understanding how a loan default can impact your credit is necessary to avoid negative consequences.

30 days late

Missing one payment can further lower your credit score. If you can pay the past due amount plus applicable late fees, you may be able to mitigate the damage to your credit, if you make all other payments as expected.

The trouble starts when you (1) miss a payment, (2) do not pay it at all, and (3) continue to miss subsequent payments. If those actions happen, the loan falls into default.

More than 30 days late

Payments that are more than 30 days past due can trigger increasingly serious consequences:

  • The loan default may appear on your credit reports. It will likely lower your credit score, which most creditors and lenders use to review credit applications.
  • You may receive phone calls and letters from creditors demanding payment.
  • If you still do not pay, the account could be sent to collections. The debt collector seeks payment from you, sometimes using aggressive measures.

Then, the collection account can remain on your credit report for up to seven years. This action can damage your creditworthiness for future loan or credit card applications. Also, it may be a deciding factor when obtaining basic necessities, such as utilities or a mobile phone.

Other ways a default can hurt you

Hurting your credit score is reason enough to avoid a loan default. Some of the other actions creditors can take to collect payment or claim collateral are also quite serious:

  • If you default on a car loan, the creditor can repossess your car.
  • If you default on a mortgage, you could be forced to foreclose on your home.
  • In some cases, you could be sued for payment and have a court judgment entered against you.
  • You could face bankruptcy.

Any of these additional consequences can plague your credit score for years and hinder your efforts to secure your financial future.

How to avoid a loan default

Your options to avoid a loan default depend upon the type of loan you have and the nature of your personal circumstances. For example:

  • For student loans, research deferment or forbearance options. Both options permit you to temporarily stop making payments or pay a lesser amount per month.
  • For a mortgage, ask the lender if a loan modification is available. Changing the loan from an adjustable rate to a fixed rate, or extend the life of the loan so your monthly payments are smaller.

Generally, you can avoid a loan default by exercising common sense: buy only what you need and can afford, keep a steady job that earns enough income to cover your expenses, and keep the rest of your debts low.

Clean up your credit

The hard reality is that defaulting on a loan is unpleasant. It can negatively affect your credit profile for years. Through patience and perseverance, you can repair the damage to your credit and improve your standing over time.

Consulting with a credit repair law firm can help you address these issues and get your credit back on track. At Lexington Law, we offer a free credit report summary and consultation. Call us today at 1-855-255-0139.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Source: lexingtonlaw.com

Does refinancing a mortgage hurt your credit?

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Adding anything new to your credit profile can alter your score a bit, though many of these changes are temporary in nature. Refinancing your mortgage can temporarily lower your score, but how much and for how long depends on a variety of factors. Find out more below about whether refinancing your mortgage will hurt your credit and what you can do to protect your score.

What Is Refinancing?

Refinancing means taking out a new loan to pay off your old one. For example, if you owe $200,000 on a $300,000 home and your credit is good enough, you can get a different mortgage to pay off that $200,000. You then start paying the new mortgage.

Why would someone refinance a mortgage? Reasons can include:

  • To get a better interest rate if their credit or the market is more favorable
  • To get different loan terms that better match their financial goals—for example, they might refinance a 15-year mortgage to a 30-year mortgage to reduce the amount they owe each month
  • To benefit from cash-out equity—if you owe $200,000 on a home valued at $300,000, you could get a loan for more than the $200,000 you owe and get the difference back in cash to help cover a large expense

While refinancing can be beneficial, it’s not something to do lightly. It comes with expenses, such as closing costs, and does have an impact on your credit. Avoid being a serial refinancer, which is someone who is constantly turning over their mortgage into a new one.

How a Mortgage Refinance Can Damage Your Credit

The impact of a mortgage refinance (“refi”) on your credit depends on your situation and where you stand financially. Here are two specific ways refinancing your mortgage can hurt your credit.

Credit Checks

Hard inquiries can occur when someone pulls your credit report for the purpose of evaluating you for a loan. These can drop your score by a bit. The more hard inquiries on your credit report, the more your score drops, especially if the inquiries are spaced out over the course of many weeks.

Plus, a lot of inquiries on your report can make you look like a desperate borrower, which doesn’t endear you to future potential lenders.

Hard inquiries usually stay on your credit report for two years. However, they only impact your credit score for the first 12 months.

Closing a Loan Account

When you pay off your existing mortgage with a refinance, that account is closed. Eventually, it will age off of your credit report.

One of the factors that’s used to determine your credit score is the overall age of your credit. That means the total amount of time you’ve personally had any credit history, as well as the average age of your open accounts. If you refinance a mortgage, you could be losing an account with a good amount of age on it, and that can temporarily drop your score a bit.

Handle Your Refinance Like a Pro

If refinancing is the right choice for you financially, you can’t avoid the impact of closing an account and opening a new one. But there are some things you can do to help reduce the impact on your credit score.

Be Smart About the Timing

Limit how many hard inquiries are reported by timing your mortgage applications appropriately. The credit scoring models understand that consumers need to shop around for rates and terms, so they group certain types of inquiries as one event as long as they take place within a certain amount of time.

For example, mortgage applications within the same two-week time frame typically count as one inquiry for any scoring model.

You might also want to try a refinance when you haven’t recently applied for other types of credit, such as a personal loan or credit card. Disparate types of applications are listed as different hard inquiries even if you apply for them all around the same time.

Weigh the Pros and Cons

In many cases, a refinance is a negligible and temporary hit to your credit score, so if you’re going to get a good benefit from the action, you might choose to go forward. Just do your research. Use a mortgage calculator to ensure you’ll save money with a refinance before you commit to a new loan.

Don’t Forget About Refinancing Fees

You may need to pay closing costs or other fees when you refinance, so don’t forget to account for those when you’re weighing the benefits. If a refinance saves you $5,000 over the course of the loan and you’re paying $7,000 in closing costs, it’s likely not a good move.

Continue to Make Payments

Remember that your intent to refinance or even an application for a new mortgage doesn’t mean you’re off the hook for payments on your old mortgage. Don’t stop making timely payments until you’re sure the old loan has been paid off and closed.

Sometimes people don’t make a payment they owe this month because a refi is pending on the current total amount owned. But if you pay late, that can mean your payment is reported late to the credit bureaus, which can be a nasty hit to your credit score.

Don’t worry about overpaying and wasting any money on your old mortgage—if there’s a difference between your payments and the refi amount you overpay, the old mortgage company must refund that difference to you.

Once you’re set up with the new mortgage, ensure you make timely payments on that loan. Payment history is the largest factor in your credit score, so paying your bills on time and consistently is the best way to erase any temporary damage a refinance might have done to your credit score.

Check Your Credit Before and After

Being in the know about your credit score is one of the best ways to protect it, regardless of what financial actions you’re taking. Check your score before you refinance a mortgage to ensure everything’s in order and help you understand what types of mortgage might be right for you.

Check it afterward to keep an eye on things as your credit recovers from any temporary blip that might occur. If you find anything on your credit report that’s wrong or you’re surprised by a lower-than-expected credit score, you might need to do some credit repair work.

Find out more about how Lexington Law can help you address inaccurate negative items on your credit report and work toward a generally more positive credit future.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

How to avoid or remove PMI

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Private mortgage insurance (PMI) has been around for more than 60 years, helping make mortgages more affordable for buyers who can’t afford a 20 percent down payment. Loans with PMI certificates have often accounted for a decent percentage of mortgages issued each year. In fact, in 2019, that number was just below 40 percent.

But PMI does add an expense to your home loan, and you likely want to sidestep it if possible. Find out below if you can avoid PMI, or learn how to remove PMI if you’re already paying it.

What is PMI?

PMI is insurance, but don’t get it confused with homeowner’s insurance—that’s a different product you might need to pay for. PMI is insurance for the lender. It’s meant to be a fail-safe to help a lender recover losses if you default on the loan.

Lenders require that you purchase PMI in cases where you aren’t putting at least 20 percent down on your home. Most commonly, you pay PMI as part of your monthly mortgage payment. In rarer cases, you might pay all of the PMI as a lump sum when you close on the home or pay a partial lump sum and pay the rest in your monthly mortgage payments.

Regardless of how you pay, PMI can be an expensive addition to your mortgage. It’s important to note, however, that PMI works differently with FHA loans and certain other government-backed loans. For example, FHA loans have MIP, which is a mortgage insurance premium, instead of PMI.

What factors affect the cost of my PMI?

According to Freddie Mac, PMI can cost on average between $30 and $70 extra per month for every $100,000 you borrow. So, if you’re borrowing $200,000 for 30 years and you pay PMI for half of that term, you could pay between $60 and $140 per month for 15 years—or 180 months. That’s between $10,800 and $25,200 added to your mortgage.

The exact amount you pay for PMI depends on a variety of factors, including:

  • Size of down payment (the more you pay up front, the less risk there is to the lender because the home has some equity—or profitability—built in)
  • Credit score (the higher your score, the less risky of a borrower you appear to lenders)
  • Loan appreciation potential
  • Borrower occupancy
  • Loan type

How can I avoid PMI?

In today’s mortgage market, it can be difficult to steer clear of PMI altogether. But here are some things you can do, depending on your situation, to avoid this expense.

Make a 20 percent down payment

If you can make a 20 percent down payment, you typically avoid PMI. That’s because PMI kicks in when you owe more than 78 to 80 percent of the value of the home. Assuming the home you’re purchasing is priced at or below its appraisal value, paying 20 percent up front automatically gets you enough equity to not need to pay for PMI.

Get a VA loan

VA loans don’t require a down payment at all, and no matter what, they don’t come with PMI. These loans are reserved for qualifying veterans and their eligible beneficiaries.

Get a piggyback loan

A piggyback loan is a second mortgage or home equity line of credit that you take out at the same time you take out your first mortgage. You use the piggyback loan to fund all or part of your down payment so you can meet the 20 percent requirement. If you consider this option, make sure to do the math to determine which saves you the most money: paying PMI or paying the interest on the second mortgage.

Request lender-paid mortgage insurance

In some cases, the lender might be willing to take on the burden of the PMI cost. They would do so through lender-paid mortgage insurance, or LPMI. Typically, the lender charges a higher rate of interest in exchange for this favor. Again, it’s important to do the math to find out which one is in your best interest.

How can I remove PMI once I have it?

As a homeowner, you have some options for removing PMI once you have it. You can take some of the actions summarized below, but the Consumer Financial Protection Bureau notes that you must also meet four criteria to protect your right. Those are:

  • Asking for the PMI cancellation in writing
  • Being up to date on payments and having a generally solid payment history
  • Certifying, if required, that there are no other liens on your mortgage
  • Providing evidence, if required, that the property value has not fallen below the original value of the home when you purchased it

If you can fulfill these criteria, here are some ways you can cancel your PMI.

Get enough equity in your home

The PMI Cancellation Act, or Homeowners Protection Act, mandates PMI cancellation when your principal mortgage balance reaches 78 percent of the value of the property (or you can also think of it as you reaching 22 percent equity). At that point, lenders must remove PMI. If you want, you can ask for PMI cancellation as soon as you reach 20 percent equity, but lenders aren’t required to remove PMI at that point.

Lenders are also required to tell you when you will reach the point of PMI cancellation if you continue to pay on your loan as agreed. You can calculate where you are in the process at any time by taking your current loan balance and dividing it by the amount the property originally appraised for. For example, if you owe $170,000 and the property appraised for $200,000, you are at 85 percent.

Get halfway through your mortgage term

Values can rise and fall, but you’re not stuck with PMI forever. Lenders must remove PMI when you’re halfway through your mortgage regardless of values. So, if you have a 30-year loan, your PMI should be canceled at the 15-year mark.

Refinance your mortgage

Another way to remove PMI is to remove your mortgage altogether. If you can arrange it so you meet the 78 percent value requirement on a new mortgage, you avoid PMI.

Get a reappraisal

Perhaps your home has gone up in value substantially and you owe much less than 80 percent of the current value. If you can demonstrate this, the lender may remove PMI because there’s less risk involved with the loan.

Remodel your home

If your home hasn’t gone up in value on its own, you might be able to add value with a remodel. Certain types of remodels, such as kitchen upgrades, could add enough value to impact the loan-to-value ratio so you don’t need PMI anymore.

Getting rid of PMI can be a great way to save money on your mortgage, but always remember to follow good personal financial management. Look at all your options and run the numbers to ensure you’re not spending more than you would save. If you’re already considering a home remodel, tossing PMI to the curb is a great perk. But you might not want to put in $30,000 worth of remodel costs just to save $10,000 in PMI, for example.

Finally, while you’re dotting the i’s and crossing the t’s on your mortgage expenses, make sure you don’t lose track of other financial matters. Keep an eye on your credit report, and if you find something that looks wrong, consider working with Lexington Law on credit repair.


Reviewed by Vince R. Mayr, Supervising Attorney of Bankruptcies at Lexington Law Firm. Written by Lexington Law.

Vince has considerable expertise in the field of bankruptcy law. He has represented clients in more than 3,000 bankruptcy matters under chapters 7, 11, 12, and 13 of the U.S. Bankruptcy Code. Vince earned his Bachelor of Science Degree in Government from the University of Maryland. His Masters of Public Administration degree was earned from Golden Gate University School of Public Administration. His Juris Doctor was earned at Golden Gate University School of Law, San Francisco, California. Vince is licensed to practice law in Arizona, Nevada, and Colorado. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

What The 2020 Real Estate Market Could Look Like

Key 2020 Takeaways: 
  • Homeowners that are contemplating selling in the new year can realistically expect a stable market
  • We can expect to see more home buyers capitalize on the relatively low rates in 2020
  • As more homeowners opt to refinance rather than sell, this will play a contributing factor in the inventory shortage
  • Buyers that may have been out of touch with the market for several years, should prepare themselves to experience rejected offers, bidding wars, and longer than anticipated home search times

It’s no secret that the real estate market frequently sees pivots, changes, and even crashes. After surviving the recent recession, many homeowners and investors are paying close attention to the market and its changes. As trends and the economy changes, so does the real estate market, so what can we expect to see in the 2020 real estate market? Freddie Mac, a government-owned entity that backs mortgages, recently released their 2020 market predictions.

Home Sales Will Increase

As with each year post-recession, home sales will continue to increase according to Freddie Mac. Both new construction and existing sales will see an overall rise. In fact, Freddie Mac predicts that home sales will rise from 6 million (2019) to 6.1 million in 2020. Increased home sales are an indicator of a strong real estate market, and homeowners that are contemplating selling in the new year can realistically expect a stable market.

There Will Still Be A Lack Of Inventory

A common real estate theme post-recession is a lack of inventory, and 2020 will be no different. According to Forbes, part of this is fueled by homeowners attempting to recover lost equity from the recession, and another factor is longer homeownership tenures–including Baby Boomers. Of course, the lack of inventory pays a big factor in real estate prices and the fierce buying competition seen in parts of the country.

Home Prices Will Increase

Although many argue home prices are already outside the affordable range, Freddie Mac predicts an increase of 2.8% in home prices. While this may be unwelcome news for home buyers, this increase is less than Freddie Mac’s prediction for 2019 of 3.3%. As the inventory of available homes remains tight, the prices will tend to increase. In summary, the common factor of supply and demand will affect pricing in 2020.

Interest Rates Will Increase…But Slightly

The real estate market is already experiencing low-interest rates which has helped to spur activity in the market. And while Freddie Mac predicts interest rates will slightly increase to around 3.8%, this still remains within the realm of appealing interest rates. The increase is still a far cry from the days of 19% in the early 1980s, and it’s almost less than half of the highest interest rate pre-recession in 2006. Having lived through the recession, most home buyers are more cognizant of the power of a good interest rate, so we can expect to see more home buyers capitalize on the relatively low rates in 2020.

More Homeowners Will Refinance

According to Freddie Mac, approximately $789 billion refinance originations occurred in 2019. As interest rates remained low, homeowners, especially those experiencing high-interest rates from the pre-recession era, opted to refinance their current mortgages and stay in place. This will remain true for 2020; however, there will be slightly less in totally refinances originations for a total of $785 billion. Of course, as more homeowners opt to refinance rather than sell, this will play a contributing factor in the inventory shortage. If you or someone you know is looking to refinance in 2020, check out the Homes.com Mortgage Hub which has information on prequalifying or applying for a mortgage as well as a mortgage calculator. 

It’s Still All About The Millennials

Just about every industry is reiterating the power of millennials, and real estate is no exception. In fact, more than 25% of millennials, the nation’s largest generation, stated they want to purchase a home in 2020. As more millennials drive the market, the demand may be greater than the supply, therefore, increasing prices and competition. Sellers in 2020 would be wise to cater to the home buying demands of this generation as they’ve proven they’re willing to pay up for certain amenities and features in a home.

What This Means For Sellers

While low-interest rates, increasing demand, and limited inventory may all sound like great news for sellers, it’s important to remember one thing: you buy into the market you sell into. While a homeowner may be able to sell over list price due to increased demand and competition, they may also experience the same thing as a buyer. Buyers that may have been out of touch with the market for several years, should prepare themselves to experience rejected offers, bidding wars, and longer than anticipated home search times. Utilizing a licensed Realtor or real estate agent, however, can greatly ease this burden and make the process seamless. Madeline Smallwood, Realtor at Keller Williams Market Pro Realty in Bentonville, Arkansas advises buyers that, “I think a shortage is going to continue into 2020 with prices rising. Buyers will need to come into the market planning to make solid and clean offers…That shouldn’t scare them away from buying in 2020 as long as they have an experienced agent on their side who can help them make an informed decision.” Find your perfect agent on Homes.com with our Find an Agent tab. 


Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

Source: homes.com

Staying Prepared in a Recession | Tips for Financially Protecting Your Home

It was one for the history books, second only to the Great Depression, the Great Recession saw countless homes foreclosed, numerous bankruptcies, and overall catastrophic distress in the housing & financial markets. In fact, during the 10 years that spanned the Great Recession, 7.8 million foreclosures happened. For those that lived through the financial turmoil, there is fear and hesitancy of history repeating itself. The real estate market has certainly recovered; however, there is chatter that a looming correction could be on the horizon. Whether it’s just an adjustment in the housing market or a full-blown recession, there are steps you can take now to hedge your bets and place you in the best place financially.

African male holding piece of paper while paying gas and electricity bills online on notebook pc. Young family calculating their expenses, planning domestic budget, sitting in kitchen interiorAfrican male holding piece of paper while paying gas and electricity bills online on notebook pc. Young family calculating their expenses, planning domestic budget, sitting in kitchen interior

Take Advantage Of Current Low Interest Rates

For much of 2019, interest rates have been low. One of the contributing factors to foreclosures during the recession were extreme or variable interest rates. There are two ways to take advantage of low interest rates to protect yourself in case of another recession:

  1. Buy A Home. Arguably one of the best ways to hedge your bets is to have affordable housing that can sustain an economic downtown. Locking in a mortgage with a low interest rate helps a buyer experience more affordable monthly payments & more money applied to the principal balance.
  2. Refinance Your Mortgage. If your original home mortgage was secured pre-recession, you probably know the impact of variable rates, interest-only loans, & balloon payments. Even if your mortgage was secured after the recession, mortgage rates have since declined and your home equity could have increased. By refinancing your current mortgage, you can lower your overall monthly payment. Decreasing your overall monthly housing budget is a critical step in recession-proofing your finances.

Create Multiple Streams Of Income

While the housing market took a downtown during the recession, the rental market remained steady and one of the ways to withstand an economic downturn is to have multiple streams of income. While demand may be less from buyers due to a recession, the demand by renters typically increases. By purchasing rental properties with lower interest rates, the additional stream of income can be a vital asset during a recession. While strategies may vary in how to acquire a cash-flowing rental property, the math is still the same: purchase low with a 20% down payment and a low interest rate will help an investor to not only maintain but cash flow the rental.

Pay Down Your Mortgage

Whether you choose to refinance your current mortgage or not, paying down your existing mortgage will not only build equity but provide freedom in the next recession. By utilizing programs such as Bi-Saver, homeowners can experience flexibility in mortgage payment schedules as well as increased equity. Programs like Bi-Saver act as a third party that collects the mortgage bi-weekly throughout the life of the loan– by the end of each year at least one additional mortgage payment is applied to the loan. This process can erase years off the life of the loan. By combining a low interest rate and additional mortgage payments each year, homeowners have the ability to experience some breathing room in their finances.

While nobody knows if, or when, the next recession will be, it’s important to make cautious and wise financial decision now that your future-self will thank you for. By taking advantage of lower interest rates, creating multiple streams of passive income, and paying down your mortgage will help you to hedge your bets!


Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

Source: homes.com

COVID-19 And Its Impact On The Real Estate Market

As thousands across the globe struggle with the impacts of the Coronavirus (COVID-19), there are few industries left untouched. The U.S. real estate market is among many that have implemented changes, navigated a new normal, and worked to find solutions in this ever-changing COVID-19 climate. As investors and home buyers are re-evaluating and sellers remain unsure of what’s next, it’s important to understand how the Coronavirus has impacted the industry, but also how real estate professionals are working to mitigate the impacts.

Increased Interest Rates

As the stock market continues to fluctuate and unemployment claims rise due to layoffs and furloughs, interest rates have been ticking upwards. As interest rates affect buying power, this has the potential to impact the upcoming spring housing market which is typically the busiest time of year for real estate professionals. Lindsey Mahoney, Realtor with The Rigali Group With Danberry Realtors in Toledo, Ohio, says buyers are “more curious about their interest rates and how that will affect them.”

One of the most important keys to securing the best rate possible is to begin working with a lender now. Working with a seasoned and professional mortgage lender, as well providing all necessary documentation to the lender, allows you to lock-in a great rate when the rates dip again. Request that your lender stay in daily contact with you to apprise you of the daily rates and how it affects your buying power.

taxmortgage couple on computertaxmortgage couple on computer

Decreased Buyers In The Market

According to a National Association of Realtors March 2020 survey, nearly half of Realtors responded that “home buyer interest has decreased due to the Coronavirus outbreak.” Decreased buyer activity can be attributed to economic fears, furloughs, and social distancing. However, there are methods that real estate professionals can implement to calm buyer fears and promote a safe environment:

  • At the direction of NAR, provide virtual open houses rather than in-person
  • Do not drive clients to showings per NAR Coronavirus safety guidelines
  • Disinfect all surfaces- doors, handles, lockboxes, countertops, etc., before and after every showing
  • Provide disposable gloves and masks for clients to utilize during showings
  • Offer virtual tours, electronic signing, wire transfers, etc.

Tenants Unable To Pay Rent

As furloughs and layoffs continue, many hitting hourly and seasonal workers, landlords may find themselves in a situation with a tenant unable to pay rent. Lindsey Mahoney, who also owns a rental property in Toledo, says that while her tenants have not contacted her yet regarding rent, she has procedures in place to work with them. Mahoney suggests “giving a month free” to tenants and then “come up with a solution.” If landlords can’t provide a free month, she suggests coming up with a solution where tenants just pay the mortgage amount- rather than any increased cash flow amount. Other alternatives landlords should consider:

  • Remove late penalty fees
  • Allow tenants to pay in increments
  • Discuss delaying payments
  • Any changes to the lease should be put into writing

Significantly Increased Airbnb Cancellation Rates

Due to travel bans, social distancing, and fear of the pandemic spreading, many are choosing to stay at home rather than travel. For investors like Sarah Karakaian, who owns six Airbnbs and manages 20 others in the Columbus, Ohio area, this has caused a major disruption in her livelihood. The co-host of the short-term rental podcast, Thanks for Visiting, says, “Our Airbnb business has absolutely been impacted. We’ve seen about a 90% cancellation rate between March 13th and April 15th, 2020. Our occupancy rate went from 80% to 10%.”  As Airbnb issued a blanket refund policy to travelers, many hosts are concerned about what is next for their investment. Karakaian says, “Because Airbnb issued a blanket refund policy that absolutely favors the travelers, I’m thinking travelers will now trust Airbnb more than ever. When the sun comes out and everyone starts traveling again, I believe travelers will look to Airbnb to help them book their stay knowing that Airbnb had their back when times were tough. That would be excellent for hosts in the future.”

Galveston, Texas USA - November 3, 2019: The Silk Stocking Residential Historic District contains beautifully restored vintage homes of the Queen Anne architecture style.Galveston, Texas USA - November 3, 2019: The Silk Stocking Residential Historic District contains beautifully restored vintage homes of the Queen Anne architecture style.

If hosts are looking to recoup lost revenue, Karakaian suggests:

  • Updating cleaning procedures and informing guests
  • Include a picture of the cleaning team and cleaning products so guests can feel assured
  • Caption photos with what you are doing to keep the space sanitary
  • Diversify your advertising outside of Airbnb. Make use of social media, VRBO, Facebook, etc.
  • Consider providing cleaning materials for guests to utilize during their stay
  • Offer discounted prices or incentives

Disrupted Business-as-Usual for Banks

As many banks are locking their doors, they are having to get creative in meeting the needs of consumers and the real estate industry, while keeping people safe and healthy. Natalie Bartholomew, Chief Administrative Officer at Grand Savings Bank in Northwest Arkansas and the voice behind The Girl Banker says, “We are in uncharted territory and we’ve been preparing for the impending threat of the coronavirus for several weeks. We closed all branch lobbies on March 17th.” Even as the pandemic continues to sweep across the globe, the banking world doesn’t stop. When asked how COVID-19 might affect the mortgage loan process, Bartholomew says “Depending on the impact to staffing, third parties such as appraisers, title companies, etc., delays are highly likely as this situation progresses.” She assures borrowers that lenders are working to do their part to help: “We have created a payment deferral program for our consumer installment borrowers and in-house home mortgage borrowers and are willing to revisit as the situation progresses.”

The situation with COVID-19 is fluid and changes daily, if not hourly. As more shelter-in-place mandates are issued, the impact on the real estate industry may continue to grow. And while the unknown may be overwhelming, it’s important to remember whether you’re buying, selling or investing that the real estate industry is prepared. Blair Ballin, a real estate agent with Conway Real Estate in Phoenix says “We will get through this. Yes, there will be losses (employment) but that does not mean the real estate market will crash.”

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Be safe, everyone! Stay tuned for more helpful tips from your resource for all things home.


Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

Source: homes.com

The Housing Affordability Crisis and Proposed Changes That Can Help

If you ask just about anyone trying to buy a home, they’ll probably tell you homes aren’t affordable. This is especially true in highly competitive markets where we have seen double digit price growth in one quarter alone which leads to housing affordability declines in many areas. It’s not uncommon for buyers to experience multiple-offer situations that spur bidding wars and over-appraisal purchase prices, and with over 15 million millennials experiencing monumental student loan debt, the combination of rising home prices and debt has created a housing affordability crisis that many have taken note of across the nation.

In fact, Lawrence Yun, Chief Economist for the National Association of Realtors expresses his concern“If homeownership isn’t rising, the wealth divide will expand between the haves and have-nots and if [the homeownership rate] continues to lag behind historical norms one has to wonder, ‘Are we turning into a renter nation?” Yun said. As more and more homebuyers struggle to compete in today’s market, many are urging solutions that will curb the crisis and provide relief for many first-time homebuyers.

houses in a neighborhoodhouses in a neighborhood

Proposed Changes To Ease The Affordability Crisis

The recent policy forum from NAR focused solely on the housing affordability crisis and their suggestions were aimed at easing the burden on first-time homebuyers. Many of these proposed changes require government intervention, but NAR believes there would be widespread relief from their proposals.

Yes, In My Backyard Movement

NAR supports the incentivization of ‘Yes in My Backyard’ markets to encourage states and localities receiving federal dollars to reform high-density zoning.” By promoting “YIMBY,” real estate developers can offer a critical solution that helps neighborhood growth as well as redesigning under-performing or unused real estate. Multi-family housing, such as condos, can be a more affordable entry into homeownership for some, and an emphasis on such developments can be one method to easing the housing affordability crisis.

Improved FHA Underwriting Criteria

Almost 1 in 5 homebuyers utilized an FHA loan in 2019 and for many first-time homebuyers, an FHA loan is a popular choice if you get approved because of its minimal down payment. The National Association of Realtors continues to champion for improved FHA underwriting which would allow more future homebuyers to get FHA loan approval. In fact, due in large part to NAR’s advocacy, HUD announced in the 4th quarter of 2019 that they have improved FHA loan regulations for condo purchases. However, NAR continues to advocate for even more improved FHA underwriting, including for single-family home purchases.

Additional Community Development Block Grants

While the federal government can create legislation that promotes and eases homeownership, some of the existing challenges are specific to the municipal level and require unique solutions. This is where HUD has created the Community Development Block Grant program. While there are currently several programs under the CDBG umbrella, NAR believes more incentive programs will help spur homeownership at the local level while also solving complex or unique community hurdles. These programs focus on providing grants that will specifically help “the most vulnerable in our communities,” the group potentially most in jeopardy of never being able to afford a home.

More Investors Utilizing The Opportunity Zone Program

A semi-new program created by the government, Opportunity Zones, offers tax incentives to real estate investors that revitalize in designated distressed areas. The goal of the Opportunity Zone program is “to spur economic development and job creation in distressed communities” which could increase buying power among residents in those designated zones. While this program was created in 2017, some investors may still be unaware of potential tax benefits associated with this program. As always, it’s important to consult a tax professional to learn more about this program.

Current Options Available To Homebuyers

If you’re finding yourself experiencing this housing affordability crisis, there are existing programs and options available. From programs that help with down payments,  options designated for veterans, to programs that assist with closing costs. To learn more about programs that are available near you, find a Realtor in your area and consult a loan officer to better explore your options.

If you’re looking to buy, sell, or rent, visit Homes.com where there’s free, step-by-step guides that will walk you through the entire process. You can also visit our blog for any questions you might have about being a homeowner, renter, or seller.


Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

Source: homes.com

How Low Mortgage Rates are Making Housing Shortages Even Worse

Perhaps the most damaging aspect of the chronic drought of homes for sale is the destructive way shortages are concentrated on the least expensive properties on the market– the starter homes that are the gateways to homeownership.

When I worked at the National Association of Realtors, I learned about the homeownership ladder.  Here’s how it works: First-time buyers purchase the least expensive homes on the market; this transaction makes it possible for a young, growing move up to the next price level. The proceeds from the sale of their starter home get a good start on a more expensive home with a sizeable down payment, then the ladder continues until the kids are on their own and a large family home costs too much to maintain. Then it’s time for the retiring couple to sell, cash in their equity and either purchase or rent a retirement home. This phenomenon continues as the family moves from one town to another.

At each rung of the housing ladder, except the first and the last, each family moving up the ladder generates two transactions, a sale, and a purchase. Should large numbers of owners get stuck at a certain level and they do not move up, the housing ladder slows down. This creates problems for homeowners that are above and below the problematic level to suffer.

buyers marketbuyers market

The housing ladder works best when all generations are roughly the same size, housing inventories at all levels remain constant, and new home construction replace tear-downs. At local levels, many events ranging from natural disasters, economic disasters, exceptional growth or population decline may cause local housing to break down. At the national level, only events that impact large numbers of the nation, like national disasters, recessions, depressions, crises that cripple the nation’s housing finance system, significant changes in the nationwide housing inventory or substantial changes in the sizes of generations.

Today several of these factors are creating a chronic national crisis in inventories of homes for sale. Housing ladders are slowing down as problems affecting one level impact others.

These problems are:

  • The successive coming of age of two of the largest generations in history, the Millennials followed by Generation Z;
  • The conversion of 6 million of the lowest-level homes into rentals;
  • The inability of new home construction to relieve these shortages;
  • New construction cannot meet the demand from first-time buyers, about one out of three buyers,
  • Prices generated by shortages of homes for sale are creating widespread unaffordability at lower levels of the housing ladder; and
  • The generation at the top level of the housing ladder is choosing to age in place rather than sell their homes.

The housing ladder makes it easier to understand how an event that impacts one tier will also affect adjoining tiers. For example, the decision by millions of Boomers to “age in place” is reducing the available inventories today but will increase supplies as Boomers die off in the next decade. Prices of large homes will drop, encouraging move-up buyers. The increase in Boomer homes for sale will work down the hosing ladder and may eventually increase the number of homes available to move-up buyers and reduce prices.

HousingWire reported that last December, the inventory of mid-tier housing houses priced below $200,000 declined 18.1% year-over-year. In the next tier, houses priced between $200,000 and $750,000 fell 10.2%. Listings of homes priced over $1 million shrank by 4.4% year over year. The shortfall originated at the entry-level and worked its way up the housing ladder from bottom to top, declining in strength at each level like an echo.

However, an event at one level may not produce the expected result at the next. Mark Fleming, the Chief Economist at First American, recently suggested that falling mortgage rates can incentivize homeowners to sell their home and buy a different one, but persistently low mortgage rates can have the opposite effect.

“While historically low rates increase buying power and make it more affordable for potential buyers to purchase a home, they also discourage many existing homeowners from selling,” he wrote.

“There is little to no house-buying power benefit for homeowners with an already low mortgage rate, so the only way existing homeowners can increase their house-buying power is through household income growth. This helps explain why more and more homeowners have decided to stay put, reducing the inventory of homes for sale and increasing the length of their tenure,” he said.

While historically low rates increase buying power and make it more affordable for potential buyers to purchase a home, they also discourage many existing homeowners from selling. This helps explain why more and more homeowners have decided to “stay put,” reducing the inventory of homes for sale.


Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.

Source: homes.com

Why It’s Suddenly Harder to Get a Mortgage

With COVID-19 making it incredibly difficult to buy a home, or even to get a mortgage, home buyers and homeowners trying to refinance their mortgage have something new to keep them awake at night.
In response to increased risk to lenders from the coronavirus, in mid-April, JPMorgan Chase raised standards for mortgages and stopped approving mortgages with down payments lower than 20%. It also increased its minimum FICO credit score to 700.

Lenders Raise Scores

Flagstar raised its minimum credit score for new Federal Housing Administration (FHA), Veterans Affairs (VA), and U.S. Department of Agriculture (USDA) purchase loans to 680. For cash-out refinances, the bank now requires that borrowers have at least a minimum credit score of 700.

US Bank and Wells Fargo both raised their minimum credit score to 680 for FHA, VA, and USDA loans, and 640 for conventional loans. LoanDepot requires 620 minimum FICO score for VA and FHA loans and a higher score, 660+, for cash-out or streamline refinancing. Now, the bank requires borrowers to have a minimum FICO score of 700 with a maximum debt-to-income (DTI) ratio of 43% when any funds used for closing costs or down payment are not borrower’s funds or gift funds, according to HousingWire.

Serious millennial man using laptop sitting at cafe table, looking up mortgage related resourcesSerious millennial man using laptop sitting at cafe table, looking up mortgage related resources

Fannie Mae and Freddie Mac are adding to the new hurdles facing borrowers by asking lenders to take additional steps to verify employment status. Instead of verbal verification, lenders may obtain an email directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment, a year-to-date pay stub from the period that immediately precedes the note date. When a borrower is using self-employment income to qualify, the lender must verify the existence of the borrower’s business within 120 calendar days before the note date from a third party, such as a CPA, regulatory agency, or the applicable licensing bureau, if possible.

Homeowners Rush to Refinance

With millions of breadwinners out of work and unemployment payments delayed, a surge of applications for home equity loans and lines of credit jumped 30% or more from a year earlier in recent weeks before stay-at-home orders cut application volumes.

Happy adult man having a video call with a laptopHappy adult man having a video call with a laptop

Bank of America significantly tightened its standards for loans to homeowners wanting to borrow against their equity, ratcheting up an internal gauge that measures market conditions from the company’s lowest level to its highest. Its minimal credit score is now 720, up from 660.

Wells Fargo cut the maximum amount homeowners can borrow and reduced how much the bank will lend relative to a property’s value. The bank is applying stingier valuations to homes due to a lack of inspections and appraisals resulting from the pandemic.

Mortgage Credit Supply is Low

With mortgage rates at a historically low level and applications to refinance exploding, the Mortgage Bankers Association reported that the supply of available mortgage credit fell 16% in March, reaching the lowest level it has been since June of 2015.
“Mortgage credit supply decreased 16% in March to the lowest level since June 2015, with declines in availability across all loan types. There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

If you’re looking for more resources as a homeowner, renter, or seller during the coronavirus outbreak then visit our COVID-19 Resources page where you can find everything from DIY projects to tackle during a weekend to seller and buyer tips during the pandemic.


Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.

Source: homes.com

Why It’s Suddenly Harder to Get a Mortgage

With COVID-19 making it incredibly difficult to buy a home, or even to get a mortgage, home buyers and homeowners trying to refinance their mortgage have something new to keep them awake at night.
In response to increased risk to lenders from the coronavirus, in mid-April, JPMorgan Chase raised standards for mortgages and stopped approving mortgages with down payments lower than 20%. It also increased its minimum FICO credit score to 700.

Lenders Raise Scores

Flagstar raised its minimum credit score for new Federal Housing Administration (FHA), Veterans Affairs (VA), and U.S. Department of Agriculture (USDA) purchase loans to 680. For cash-out refinances, the bank now requires that borrowers have at least a minimum credit score of 700.

US Bank and Wells Fargo both raised their minimum credit score to 680 for FHA, VA, and USDA loans, and 640 for conventional loans. LoanDepot requires 620 minimum FICO score for VA and FHA loans and a higher score, 660+, for cash-out or streamline refinancing. Now, the bank requires borrowers to have a minimum FICO score of 700 with a maximum debt-to-income (DTI) ratio of 43% when any funds used for closing costs or down payment are not borrower’s funds or gift funds, according to HousingWire.

Serious millennial man using laptop sitting at cafe table, looking up mortgage related resourcesSerious millennial man using laptop sitting at cafe table, looking up mortgage related resources

Fannie Mae and Freddie Mac are adding to the new hurdles facing borrowers by asking lenders to take additional steps to verify employment status. Instead of verbal verification, lenders may obtain an email directly from the employer’s work email address that identifies the name and title of the verifier and the borrower’s name and current employment, a year-to-date pay stub from the period that immediately precedes the note date. When a borrower is using self-employment income to qualify, the lender must verify the existence of the borrower’s business within 120 calendar days before the note date from a third party, such as a CPA, regulatory agency, or the applicable licensing bureau, if possible.

Homeowners Rush to Refinance

With millions of breadwinners out of work and unemployment payments delayed, a surge of applications for home equity loans and lines of credit jumped 30% or more from a year earlier in recent weeks before stay-at-home orders cut application volumes.

Happy adult man having a video call with a laptopHappy adult man having a video call with a laptop

Bank of America significantly tightened its standards for loans to homeowners wanting to borrow against their equity, ratcheting up an internal gauge that measures market conditions from the company’s lowest level to its highest. Its minimal credit score is now 720, up from 660.

Wells Fargo cut the maximum amount homeowners can borrow and reduced how much the bank will lend relative to a property’s value. The bank is applying stingier valuations to homes due to a lack of inspections and appraisals resulting from the pandemic.

Mortgage Credit Supply is Low

With mortgage rates at a historically low level and applications to refinance exploding, the Mortgage Bankers Association reported that the supply of available mortgage credit fell 16% in March, reaching the lowest level it has been since June of 2015.
“Mortgage credit supply decreased 16% in March to the lowest level since June 2015, with declines in availability across all loan types. There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

If you’re looking for more resources as a homeowner, renter, or seller during the coronavirus outbreak then visit our COVID-19 Resources page where you can find everything from DIY projects to tackle during a weekend to seller and buyer tips during the pandemic.


Steve Cook is the editor of the Down Payment Report and provides public relations consulting services to leading companies and non-profits in residential real estate and housing finance. He has been vice president of public affairs for the National Association of Realtors, senior vice president of Edelman Worldwide and press secretary to two members of Congress.

Source: homes.com