As a small business owner or someone who is self-employed, you may find yourself in unchartered territory with the current pandemic that’s affecting so many small businesses. Luckily, as of March 27th, the CARES Act – or Coronavirus Aid, Relief, and Economic was signed into law to provide relief and economic aid to individuals and businesses facing financial struggles and instability.
You’ve probably got a lot on your plate and don’t have a lot of time to decipher these loan programs and figure out how they can help you, so we’ve compiled everything you need to know right here so you can figure out which program is right for you.
Paycheck Protection Program (PPP)
The Paycheck Protection Program is a federally guaranteed loan program that helps businesses and nonprofits cover up to 8 weeks of payroll and some other expenses up to $100,000/year per employee. Businesses can apply for 2.5 times their average monthly payroll costs up to $10 million. This number is based off the payroll costs for the previous year.
What Can I Use the Funds For?
Interest on mortgage payments
As long as a business doesn’t lay off any employees or it rehires by June 30, 2020, these loans can be forgiven. Note that loan forgiveness may be decreased if a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees occurs. Loans may not be forgiven if funds are used for other expenses not as outlined above. Whatever amount may not be forgiven will convert to a fixed two-year repayment.
How do I Know if I'm Eligible?
You are eligible to apply for the PPP if you are one of the following:
A small business or nonprofit with less than 500 employees
A sole proprietor
An independent contractor
A gig worker
How Do I Apply?
Applications are just beginning to be accepted. Loans can be applied for by calling your current bank or lender. Here is an example of what you might be able to expect from the application.
Economic Injury Disaster Loan (EIDL)
The EIDL offers both grants and loans, including a $10,000 emergency grant that doesn’t have to be repaid that both business and nonprofits can apply for. This grant will most likely be the fastest way to obtain funds as the SBA states funds will be received within three days of approval. The EIDL also offers low-interest loans that will have to be repaid. Businesses can apply for these loans of up to $2 million in order to cover operating expenses while they experience a lack of revenue. When it comes to repaying the EIDL, the terms are 3.75% for business and 2.75% for nonprofits for up to a 30-year term.
What Can I Use the Funds For?
Unlike the PPP which specifically requires funds to be spent on specific expenses in order to be forgiven, there is more flexibility around what the EIDL funds can be used for. These include expenses such as rent and mortgage, salaries, employee paid leave, and operational expenses. A business cannot, however, use both the PPP and the EIDL for the same purpose.
How Do I Know if I’m Eligible?
The same eligibility for the PPP applies to the EIDL. The applicant also needs to have been in operation on January 31, 2020 and been negatively economically impacted due to COVID-19.
How Do I Apply?
The application for the EIDL is now live and can be found here. While the application is for the loan, there is a spot for you to indicate you also want the $10,000 emergency grant.
How Do I Know Which Program is Right for Me?
First, assess the eligibility requirements described above to determine which program you are eligible for. Bear in mind that the PPP can be entirely forgiven as long as the requirements are met, while the EIDL must be paid back in its entirety except for the $10,000 emergency grant.
You may apply for both programs but remember not to use the funds for the same purpose.
Important Note: Homestead does not grant or finance any of these loans and we have no control over qualification guidelines. This information is merely provided as a guide, as we may feel this could help many of our borrowers and referral partners at this critical time. This information and the details and/or loan availability may change at any time. Please visit sba.gov to find a lender and for up to date information.
Sunday’s emergency rate cut by the Federal Reserve – also known as the Fed - has been widely reported by the media, and many borrowers are inquiring about lower mortgage rates.
In order to better understand what this means for mortgage interest rates, let’s review a few historical facts about previous Fed Rate cuts. This is not the first time the Fed funds rate has fallen drastically. From 2008 through the end of 2015, it fell to zero. During those years, mortgages rates approached our recent lows especially in 2012-2013, but for the most part they fell in the range of 4% and often 5%. This means, there is little evidence showing that the current zero Fed Funds rate would lead to a massive drop in interest rates.
The 10yr Treasury yield used to be widely used as an indication of mortgage rates, but in today’s environment, that is not the case. At least temporarily, that correlation has broken down. Last Thursday, (March 12th) mortgage rates were moving up as the 10yr Treasury yield was dropping significantly. The next day mortgage rates were improving as the 10yr Treasury yield went up. I’m sure this correlation will re-establish at some point, but it is currently irrelevant.
MBS Live indicates the Fed Rate is a Different Animal Compared to Mortgage Rates
The Fed Funds Rate applies to loans with a term of up to 1 day (essentially last-minute money shuffling between banks in order to ensure everyone has the money they need for the day, if the previous day happened to create an imbalance). Mortgages, of course, can be loans of up to 30 years. Quite simply, investor preferences can vary greatly depending on the duration of a loan. It doesn't get any shorter than the Fed Funds Rate nor much longer than mortgage rates. Consequently, they move in opposite directions all the time.
In conclusion, it is impossible to predict the future, but we can share that clients should expect continued volatility. If you are considering a loan with a rate that works for you, the only way to keep it, is to lock in your rate.
As the concern for the Coronavirus (COVID-19) continues to grow, we want to inform you of the measures Homestead has taken to keep our borrowers and employees safe. As of today, we have deployed nearly 75% of our staff to work remotely from their homes. Our current plan is to keep our offices open with a reduced staff, making it a safer environment for those who remain. With that in mind, should you need to come into our offices please know we have installed nano-enhanced disinfectants as well as continuing to use only commercial grade sanitizers.
If you are concerned about your health or the health of those around you and do not wish to come to our offices, there are other options so we can continue to serve you.
- If you have a loan in process, you can still get in touch with your Loan Originators via phone, email or skype.
- If you are interested in applying for a new mortgage you can go to our website where you can fill out an on-line application, and in most cases, upload all of your documentation right from your computer.
Should you have any additional questions, please feel free to contact us. We will do our best to keep our customers updated should anything change in the coming days.
Stay healthy and be safe everyone!
Getting a mortgage can seem intimidating. You’re excited to buy your dream house, but you’re nervous about the daunting process of financing it. Luckily, local lenders like Homestead are here to give you the ideal experience. From offering a personalized experience, longer hours of availabilty, on time closings, and in depth knowledge of the local markets we serves, working with us is perfect for enjoying a simpler mortgage experience.
You Enjoy a Personalized Experience
Is talking to a robot on the phone your favorite thing when you’re looking for help getting a mortgage? Didn’t think so. Working with a local lender means that when you call, you talk to real, helpful people. Most of our Loan Orinigators provide their borrowers with their cell phone number so you can call or text at any time for help.
Plus, working with a local lender like us means we focus on getting to know you and your specific situation. We take the time to understand your unique goals. After listening to your individual needs, we customize and personalize your experience to meet and exceed your expectations.You won’t get that kind of service from a big bank.
Longer, More Convenient Hours Available
Another great aspect of working with a local lender is you enjoy support when it is convenient for you – no useless bank hours! In many cases, you will have access to a loan originator 7 days a week. This means you may be able to ask that burning question on your time table, and you’ll feel a lot more comfortable with the process when you have all that support.
You Can Close Quickly
Working with a local lender along with local realtors and attorneys makes the process efficient. Since everyone is in close proximity and on the same page, it’s easier to make all the pieces of the puzzle come together faster. Plus, local lenders like Homestead do the entire process in-house which means that loans are able to close quicker than lenders who do not have in-house operations.
Your Lender is Knowledgeable About Your Local Market
No one knows the local market like your local mortgage lender does. Our local Loan Originators live here too, so they truly know the tiniest details about buying a home in your area. Our Loan Originators have a better understanding of the local economy and property values, so they’re better equipped to handle your unique situation.
At Homestead, we truly care about our community and each of our customer’s specific needs. Unlike big banks, you aren’t just another number. Instead, you’re a valued member of the community we love, and we want to make sure you achieve your goals. Call us today to find out how we can help you!
Hearing that we’re in the middle of a seller’s market might scare people from buying houses. Factors like concerns about job stability, the state of the economy, and high home prices are responsible for hesitation to purchase homes. However, we are seeing a change in sentiment, thanks to recent trends and forecasts in the market. Freddie Mac’s chief economist, Sam Khater, said, "The combination of very low mortgage rates, a strong economy, and more positive financial market sentiment all point to home purchase demand continuing to rise over the next few months."
Mortgage Rates Are Down and Expected to Stay Down
Source: Freddie Mac
According to a recent survey by TD Bank, 68% of respondents said that now is a good time to purchase a home. Mortgage rates are down significantly, making it the ideal moment to snag a low rate and save money. Even if home prices are high, you could save more money since a lower priced home with a higher rate could actually end up costing more.
The Supply of Homes is Increasing
Within the last year, there was a shortage of inventory of homes for sale, affecting first time buyers especially. However, this year more entry-level inventory is expected to become available. This means that if you were worried about finding a home, you may have better luck discovering the perfect house now that supply is increasing.
Job Security is Increasing
Many of those who aren’t sure about purchasing a home cite anxiety over job security as a reason. In fact, a TD Bank study showed that 51% of respondents stated they had concerns over their job stability. But with the growing economy and job security increasing, this sentiment is changing. More and more, people are becoming more confident in the stability of their job, allowing them to consider buying a home more seriously.
The Economy is Strong
The economy has been and is expected to continue to be strong, creating a favorable environment for purchasing a home. While there is always some fear about its stability, forecasts say the economy will continue to grow. Fannie Mae describes the economy as resilient, overcoming challenges and making it a better atmosphere for home buying.
Buying a Home in 2020
Low mortgage rates, a growing supply of homes, more job security, and a strong economy all indicate good conditions for buying a home. But if you’re still nervous after hearing that we’re in a seller’s market, take it from chief operating officer at Ellie Mae, Joe Tyrell, who said, “…Overall the market is still favorable for homeowners looking to refinance and millennials considering purchasing their first home."
If you’re ready to take advantage of these unique conditions, contact us today to find out which mortgage product is right for you.
Source: National Mortgage News