What to Expect When Applying for a Mortgage During the Pandemic

A couple looks over their closing documents on their new home.
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While the COVID-19 pandemic has caused widespread economic damage, it hasn’t been all bad. For many who didn’t lose their jobs, the financial crisis made the prospect of buying a home all that more tempting, with already low mortgage rates plummeting to eye-popping levels as the government stepped in to try alleviate the pain.

Of course, the irresistible rates also come with a recognition of the increased risk for lenders. Getting a mortgage isn’t as easy as it used to be.

Key Takeaways

  • Mortgage rates continue to drop, setting new record lows. 
  • Amid the pandemic, lenders have tightened their lending standards.
  • Lenders are cutting back on the non-qualifying mortgages they offer.
  • Lending guidelines may allow for appraisers to estimate home values without entering the property, and, in some cases, waive appraisals.
  • Some lenders are allowing curbside closings instead of traditional in-office closings.

 “With so much uncertainty in the air, mortgage companies are hedging their bets with tightened lending guidelines and increased rates for those carrying any kind of financial risk,” Amber Taufen, managing editor of HomeLight’s Buyer Resource Center, wrote in an email.

If you are one of the millions of Americans looking to buy a home during the age of coronavirus, here’s what you can expect.

How Has COVID-19 Changed Mortgages?

The COVID-19 pandemic has had a massive economic impact on the country—and its people and businesses. As such, it’s had quite the effect on the mortgage industry as well. 

Interest Rates Keep Setting New Record Lows

In an effort to stimulate the struggling economy and make mortgages more available to homeowners and businesses, the Federal Reserve in early 2020 lowered its benchmark interest rate and increased its purchases of mortgage-backed securities—a type of investment bond made up of groups of mortgage loans. 

What’s followed has been an unprecedented descent in mortgage rates that were already quite low, historically speaking. In fact, according to Freddie Mac, mortgage rates hit record lows 16 times in 2020. As of Jan. 7, the average rate on a 30-year, fixed-rate mortgage was a record low of 2.65%—down from 3.64% a year earlier.

Though the best rates are reserved for those with the highest credit scores, other borrowers can get decent rates as well. Borrowers with “fair” credit scores averaged a rate of 3.89% on 30-year, fixed-rate mortgages the first week of January, an average that was better than the overall average mortgage rate from late October 2017 to May 2019, according to data from myFICO.

Lenders Have Become More Cautious

Overall, the pandemic has made mortgage lenders more cautious about who they’ll lend money to. Many have raised their credit score minimums since the outbreak began, and some have required higher down payments as well. 

“Lenders are requiring higher credit scores and strong evidence of career stability before they’ll fork over a loan,” Taufen wrote.

Lending standards are significantly tighter than they were  before the pandemic, according to the Mortgage Bankers Association. In November 2020, for example, the MBA’s Mortgage Credit Availability Index was 35% lower than a year earlier, even after a couple of months of slight upticks. Declines in the index indicate lending standards are becoming stricter.


“Lenders are doing more business than ever, so borrowers with lower credit scores may find it more challenging to get the loan they want,” Danielle Samalin, CEO of Framework Homeownership, wrote in an email.

Some Loan Products Aren’t as Widely Available

Certain types of mortgage loans are particularly difficult to find in today’s market, according to Anthony Sherman, CEO of digital mortgage marketplace Simplist. This includes jumbo loans—often used for higher-priced homes—and non-qualifying mortgage loans, which are used by self-employed borrowers, investors, and other non-traditional income earners.

“Certain types of mortgage products have become less widely available this year,” Sherman said in an email. “Jumbo loans...have been much more difficult to find and are employing more rigorous standards than before. Many non-qualifying mortgage products, which are those not backed by government entities, have all but disappeared from the market.”

Cash-out refinances have been harder—and more expensive—to come by as well. Cash-outs accounted for just 27% of all refinancing activity in the third quarter of 2020, the lowest share since 2013, according to Black Knight, a mortgage analytics and software firm.

Appraisals Aren’t Always Done in Person—or at All

Appraisals, which are used to verify the value of a home, have long been a part of the mortgage process. But during the pandemic—with sellers uneasy to let appraisers into their homes, and appraisers equally as leery of the exposure—things have changed a bit. 

Fannie Mae sent out a letter in March to lenders announcing “temporary flexibilities” in their appraisal guidelines, allowing for exterior-only appraisals, desktop appraisals that use a data-based approach to determine a home’s value, and even appraisal waivers—which allow the lender to skip the appraisal entirely. 

Loan Approvals Are Taking Longer

Borrowers are also facing extended closing timelines, according to Andrew Postell, vice president of mortgage lending at Guaranteed Rate.

“Anything from appraisers being booked solid for the next three months to government departments being closed or working from home is making the whole process more difficult,” Postell said in an email.

High demand from both homebuyers and homeowners looking to refinance is causing a delay for some lenders, too. According to Navy Federal Credit Union Assistant Vice President of Field Mortgage Rashalon Hayes, the company saw application volume jump significantly early in 2020.

“There was basically four times more work for our team between purchases and refinances,” Hayes wrote in an email. “We warn our members that there can be longer-than-normal wait times due to the COVID-19 pandemic, but lenders have adapted well to the increased volume since the beginning of the pandemic.”

What to Expect If You Apply for a Mortgage During COVID-19

With all the changes noted above—plus the dangers of COVID-19 itself—the mortgage process is quite different. If you do apply for a loan, you can expect the following.

Your Application Process May Be Entirely Online

You probably won’t be going into a bank branch to apply for your mortgage loan these days (if your bank is even open for walk-in business). In most cases, the process is completed online, using online shopping tools, online applications, and secure portals with which you’ll upload financial documents.

“Before the pandemic, the mortgage industry was moving toward the age of the all-digital mortgage—meaning the entire mortgage process, from application to closing, will ultimately be completed entirely online,” Samalin said. “COVID has only accelerated that process.”

You might also work with your loan officer over the phone, via email, or through a proprietary platform or app.

You May Need to Provide More Extensive Employment and Income Documentation

Job and income losses amid the pandemic have made lenders extra-careful in evaluating borrowers’ income and employment status. Specifically, they want to be sure that a borrower has the financial stability and consistency to make their payments—not just now, but down the line, too.

As such, some lenders added extra layers of employment verification early on in the pandemic. They also may require more documentation regarding your finances and income.

“Despite the booming housing market, unemployment remains high, and lenders are taking a hard look at incomes to make sure you can make your payments,” Samalin said. “Don’t be surprised if you’re asked for more documentation of employment and income than usual. Self-employment income, in particular, is being scrutinized more thoroughly.”

Your Closing Might Take Place Remotely or Curbside

Your mortgage application might not be the only thing virtual along the way. In some cases, you might even close on your loan virtually, too.

“Depending on where you live, you may see lenders accepting remote online notaries and other digital processes to replace the traditional pen-and-ink execution of legal documents,” Samalin said.

If virtual closings aren’t available in your area or with your lender, you might find yourself closing on your loan curbside with papers passed through windows.

Tips for Applying for Mortgages During COVID-19

According to the experts, there are several things you can do to improve your chances of approval when applying for a mortgage during the pandemic.

Get Your Documentation in Order 

Give yourself a head start by gathering and organizing ahead of time the documents your loan officer will ask you for during the closing process.

“Anticipate your underwriting team’s needs and make sure you have the necessary paperwork at the ready,” Sherman said. “For W-2 employees, this will involve your two most recent pay stubs, your previous two years of W-2 forms, and your past two federal tax returns.”

Assets and liabilities may be a factor in your application, too. 

“Your lender will likely want to see the last two-three months of statements for any checking, savings, brokerage, and retirement accounts,” Sherman said. “Additionally, you'll need to gather statements for your auto, student, and personal loans, if applicable, as well as paperwork for any credit cards and existing mortgages.”

Make a Bigger Down Payment

Offering a bigger down payment minimizes the lender’s risk, making you a more attractive borrower. 

“While it's not necessary to put 20% down for a home loan and you could put down as little as 3%, borrowers are more likely to get a mortgage loan if they do, because banks typically prefer minimizing their lending risk,”  Jess Kennedy, CCO at Beeline Loans, wrote in an email.

Be Responsive 

Answering your lender’s questions as fast as possible will help expedite your mortgage application. 

“The key to getting through the process quickly is to be hyper-responsive with the lender and to provide all the requested information and paperwork as quickly as possible,” Simplist’s Sherman said. “Simply put: If it takes you six days to send in your bank statements, then the process will take six days longer.”

Ask How Long Your Lender Will Take

It’s natural to judge a lender by the rates they offer, but Postell said that borrowers should ask about loan turnaround times, too.

“Make sure you speak with your lender about their turn times—how long it takes to get a loan from start to finish,” Postell said, adding that turnaround times of 60 days may be reasonable in some markets.