The need for a home and a place to call your own is essential to every family. Now that most people are working and studying from home, the need to have a spacious and quiet place to call your own becomes much more apparent.
The nesting need became stronger with people spending more time at home. Sharing spaces suddenly became difficult. Everyone suddenly needs enough space for their home office setup.
If you have been preparing to buy a home in 2020 and you already have your down payment ready, you might be wondering if it is the best time to look for the best mortgage rates in your area. The pandemic and the crisis it brought upon worldwide, however, has changed the real estate environment.
If you are still undecided about whether you should go and look for your dream home, here are the things that you should be aware of.
1. Mortgage rates are dropping.
Mortgage rates have been dropping for months. If this is your only basis, then it is the perfect time to purchase a home. Thirty-year mortgages have been seeing some first-time lows in fifty years. Based on mortgage rates, the current real estate market is a buyer’s market. However, lower mortgage rates also presented another problem.
2. People are not so keen on selling their homes.
The demand for homes is high, but there aren’t enough homes in the market. New listings do not meet the number of demands. Fewer people are willing to sell their homes during a pandemic.
New listings for houses have been going down even before the pandemic hit, and it has been going downhill in most states.
3. Ensure your job security.
During these challenging times, uncertainties are everywhere. No one is 100% secured and safe from the wrath and effects of COVID-19. Remember the closures of big retailer names? A year ago, their employees never imagined they would soon be jobless. No one can predict the state of the economy in the next few months. That makes buying a new home during the pandemic a scary decision. However, those who are confident with their income, have enough cash ready, or have new members in their family will continue to look for a home.
Your lender will also be extra cautious when verifying your employment. Additional confirmations and documentation may be required before your application gets approved.
4. Preparedness is the key.
Buying a new home and applying for a mortgage during a pandemic will have its own set of challenges. Banks will have lesser liquidity due to the financial difficulties that the pandemic has brought. The same financial challenges will likely bring more loan applications. The surge of unemployment will also make banks stricter in their loan requirements. Minimum credit score requirements and down payments may rise again.
Before you go home shopping, compare mortgage rates. Research different lenders from different sectors. You can compare various loan products such as fixed-rate loans and mortgages with adjustable rates. Doing research can help you make an informed decision and find a home at the lowest cost possible.
5. It is a buyer’s market, albeit a bit different.
With the crisis pushing affected people to sell their homes due to unemployment, pay cuts, and other possible reasons, selling prices of homes can go lower than usual. Add to that the lower interest rates, and it makes buying a home a reasonable course of action.
One thing that can make the shopping experience different is that home tours are limited. Some will allow tours as long as safety precautions are followed, such as wearing face masks and gloves. If in-person tours are permitted, be ready that not everyone in your family can tag along. You may even have to do it on your own. Other realtors, however, will recommend a digital tour for everyone’s safety. Due to safety distancing protocols, your agent may tour you around the house through Zoom or video call.
6. A higher credit score may be required.
With the risks of the disruptions and uncertainties looming on the horizon, lenders require borrowers a higher credit score than usual. That will differ depending on the lender, so you will need to look closely at different options. Lenders are just not willing to take greater risks.
On top of that, you may also have to pay a higher down payment. Lenders must also protect their businesses, as well as their investors. One form of protection requires borrowers to have at least three months of mortgage payments in their bank accounts.
If you proceed with buying a home during the COVID-19 pandemic, you must prepare yourself for an entirely different experience. Traditional face-to-face transactions may be kept to the minimum, and additional proof that you can pay your mortgage may be required. Some are willing to wait until the pandemic is over, while some are not. If you are one of the latter, be sure to do your research, especially on your local real estate climate.