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Were you considering buying a home before social distancing and other restrictions became our current reality? Are you still thinking about it?
Buying a home has always required balancing the economic landscape, overall housing market, and your personal and financial expectations and limitations. The coronavirus pandemic hasn’t changed that. These elements are still relevant, if not more relevant, when you’re considering a new home.
Interest rates are lower than ever, which means you could potentially get a great deal, if you’re able to get a mortgage and find the right home.
While Covid-19 has brought new challenges, there can be significant benefits to buying a house during coronavirus for savvy homebuyers.
Benefits to Buying a Home During Coronavirus
The coronavirus pandemic has impacted the homebuying process. But if you can find the right home and have been pre-approved for a mortgage, buying a house during coronavirus can be beneficial.
Although there are fewer sellers in the market, there are also fewer buyers. Sellers are likely keen to close house purchases quickly, which can mean they’re more motivated to negotiate with you.
With sellers nervous about having strangers wandering through their house, virtual tours, live stream walkthroughs, and Docusign (replacing signing documents in person) are becoming the new real estate normal and provide convenience for making the process go smoothly.
Those who may worry about whether they will qualify for a mortgage may rely on federally-backed loans, such as FHA or VA loans. Whether one of these loans or a conventional mortgage is right for you, historically low interest rates set you up for success so that you can afford your home well into the future.
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What Can You Really Afford Before, During, or After COVID-19?
Historically-low interest rates are desirable when considering how much money you could save if you buy a house during coronavirus. But you’ll need to consider what you can really afford now, throughout the pandemic, and after it.
Standard industry recommendations state that prospective homebuyers should not get a mortgage for more than 30% of their gross income. Falling interest rates will mean that you spend less and save more.
This can lead to some homebuyers assuming that they can purchase a more expensive home. However, overreaching financially can lead to some hard to manage issues down the road.
Consider this scenario:
If your monthly income is $4,000, a mortgage totaling 30% of your income will come out to a monthly rate of $1,200. This leaves $2,800 for monthly expenditures.
If, because of the lower rates, you jump to spending 50% of your income, your monthly mortgage payment jumps $2000, leaving you just $2,000 for other expenses each month.
If you have an adjustable-rate mortgage and rates climb, you could wind up struggling to live on significantly less than $2,000.
While many first-time homebuyers are content to get a mortgage with the minimum 5% down payment, this can leave you with a hefty monthly payment for the lifetime of the loan. Anyone considering buying a home during the uncertainties of the coronavirus pandemic would benefit from a higher down payment, such as 20%.
Yes, 20% is a lot, but you’ll not only get the best possible interest rate, but you’ll also skip having to pay mortgage insurance, which can save you thousands over the life of your mortgage. This sets you up for success in your future by safeguarding you from some of the economic uncertainties ahead.
If the perfect house is still outside of your financial comfort zone, it’s not necessarily a “no go.”
Consider ways to either increase your income or reduce your expenses.
- Are you able to work toward getting promoted at your current job?
- Can you rent out a room or convert the basement of your new home into a separate apartment? Doing so can help you lower the monthly mortgage amount you have to pay.
- Can you work additional hours or start a work-from-home side hustle? Working from home can not only increase your overall income, but you’ll be pleased to know you can lower some of the tax you’ll have to pay, as the IRS allows tax deductions for home office expenses.*
These are just a couple of ideas to get you thinking about how you can strengthen your finances and buy a house during coronavirus that you can afford for many years to come.
*This article does not constitute tax advice. Please consult a tax advisor regarding your specific situation.
Safety Precautions For Viewing Homes
Covid-19 has changed how we view, inspect, and complete the process of buying a house. Even though things might be different, you can still buy a house without putting yourself or your family in harm’s way.
Traditionally, mortgage paperwork requires a physical signature, but COVID-19 has made Docusign a popular, safe alternative. Review documents online and type in your name to sign documents from anywhere.
Viewing a potential home is arguably one of the most exciting aspects of buying a new house. Walking through the rooms, you begin to imagine how your furniture might look, what you will cook in the new kitchen, or whether your bed will fit in the master bedroom. It’s during the walkthrough that many potential homeowners make up their minds about buying a house.
If you’re in an area where actual walkthroughs are possible, protection becomes your best defense:
- Wear a mask.
- Consider wearing gloves or take hand sanitizer with you.
- Implement proper social distancing protocols and make sure the house residents are not present while you are there.
If a walkthrough isn’t possible, don’t worry, you can still virtually walk through the home. Your real estate agent can give you a live stream look inside rooms, cupboards and cabinets, around windows, and any other areas of concern or interest that you might have. Your agent will be acting as your eyes in the house, so communication is key.
It’s crucial to accept the reality that you may have to purchase a home without physically setting foot in it until you own it. So take the virtual tour seriously and take your time.
Securing a Mortgage During Covid
Getting mortgage pre-approval** before you start looking at houses in earnest can be a great asset. You’ll not only know how much you can safely afford, but you’ll also be able to spring into action once you find your perfect house.
We can help you through the mortgage loan application process, evaluate your credit, income, and assets. We can also help you calculate your best price range for houses.
We’ll give you a letter confirming your mortgage pre-approval, which you can show to realtors. This helps you streamline the homebuying process and puts you in a favorable position when submitting an offer on the house.
Should you apply for a conventional mortgage, or would an FHA*** loan be better for your family? Are you concerned about buying a house during coronavirus? Homefinity can help you.
From determining what documents you need to qualify for a mortgage, to which mortgage products will be best for you and your family, we’re here to walk you through the complete process, from your first inquiry to buying your home.
If you’re ready to start the process of buying a house during coronavirus, get in touch with us. We want to help you find your way home.
**Pre-approval is based on a preliminary review of credit information provided to Homefinity which has not been reviewed by Underwriting. Final loan approval is subject to a full Underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.
***Homefinity is not affiliated with any government agencies. These materials are not from HUD or FHA, and were not approved by HUD or FHA, or any other government agency.
Image by Paul Brennan from Pixabay