Is it the right time to buy a house? Last year - or even the beginning of this year - you may have thought you had the answers all figured out. And then… the coronavirus pandemic reared its ugly head. Suddenly, it seemed as if everything was in doubt. To say we were thrown into a state of chaos is an understatement. Does this mean that you should hold off? Or is it actually a great time to move forward?
While many of us were hunkering down at home during coronavirus, there was a flood of people looking for one. In 2020, interest rates plunged and even went below the “floor” of 3%. This has led to an increase in demand for homes and a shrinking inventory; it is certainly a seller’s market.
That does not mean it can’t be your market. With these tips for buying a home, you could be fulfilling your American dream this year.
Many of the tips for buying a home in “normal” times apply to our current circumstances. In fact, some of the fundamentals are even more important than ever:
Let’s say your credit score is 680. Good. Last year, that would have been fine. However, many lenders have raised their minimum credit score. To secure a mortgage, especially with favorable rates, you need it to be great. For most mortgage lenders, you must have at least a 700 today.
Take Action: Get one of your three free credit reports ASAP by visiting http://annualcreditreort.com. Are there any outstanding debts you can clear? Any debts you can dispute? Do so now so you can put yourself in the strongest position possible.
Make Sure You Have 20%
In the past, you could get away with a 10% down payment, or even 5% in some circumstances. Many major lenders are requiring 20% down. While interest rates are low, lenders are not giving out mortgages haphazardly; in fact, they are doubling-down on efforts to mitigate their risk as uncertainty around coronavirus continues.
Take Action: Amp up your efforts to add money to your savings.
How much house can you afford? This is an essential question to answer, regardless of the market or timing. Many experts advise you to use three times your income as a starting point. So, if you have an income of $100,000 between you and your partner, $300,000 is a good ballpark figure.
But make sure. Speak with lenders to see what you can get approved for before you start house hunting.
Take Action: Shop around with different lenders, and when you find one who can offer good terms, get pre-approved. This strengthens your position as a buyer and cuts down on delays, and aggravation, as you maneuver through the process.
During the pandemic, many sellers are taking their homes off the market, which shrinks a limited inventory even more. Depending on your specific area and price point, this can lead to intense competition for available homes.
Take Action: Make sure your finances are in order, you have a 20% down payment, and you are pre-approved for a mortgage. This will put you ahead of those who do not have these details taken care of at this point.
Do not bid more than you can realistically afford or more than your pre-approval amount. This will put you in a tight spot.
COVID has brought in many changes to the housing market. You will likely see fewer open houses - or no open houses, depending on your area. Walk-throughs and tours will be conducted virtually, which can be to your advantage as you can schedule appointments without dealing with logistical issues (e.g. driving time, etc.).
You will also likely run into delays in several areas, such as home inspections and appraisals. Additional restrictions and guidelines have changed the way these processes are handled. Likewise, legal and mortgage loan processing may take longer. Your real estate agent can guide you through so you know what to expect.
Take Action: Do as much of the legwork as you can before you even start your search. This includes building your savings and gaining pre-approval for a mortgage. You can conduct a great deal of research online, and real estate professionals have moved swiftly and agiley to online solutions for many of your needs.
Coronavirus may have brought great uncertainty to the world, but if you are certain that you want to buy a house, you still can. Start your research - and search - with Homes & Land. We have everything you need to proceed with confidence.