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Maybe you were gearing up to buy your first home, or had started looking into bigger houses for your growing family. Whatever your pre-COVID goals were, chances are they changed.
While the entire economy seemed to be holding its breath at the start of the outbreak, we’re now several weeks in and have learned a thing or two about what to expect.
We spoke with real estate agents from all over the country to find out what you need to know about buying a home during the COVID-19 pandemic. Here are four things to keep in mind as you and your family decide if it’s still the right time to buy.
In the grand scheme of things, buying a new home hasn’t changed that much. After all, you’ll still want to make sure you can actually afford a new home before making a bid on it. This doesn’t just mean mortgage payments and closing costs, but also moving expenses and all the other stress and chaos that goes into making a major life change (during a pandemic, no less).
If someone in your family is still recovering from the virus or considered to be at-risk, you might just want to hold off until things calm down.
Similarly, if the last few weeks of the pandemic have negatively impacted your income, then you should carefully consider whether or not taking on a new financial responsibility makes sense right now— especially if you were planning on applying for a mortgage. Some things have changed in recent weeks, making mortgages a lot less accessible than they used to be.
“Mortgage lending right now is a big time issue,” said Ryan Fitzgerald, owner of Raleigh Realty.
Fitzgerald says Wells Fargo recently stopped all VA loans that aren’t for new construction properties, and FHA loan guidelines are much tighter than they were even 60 days ago.
“Some of those FHA guidelines set by mortgage lenders are so ridiculously absurd they may as well not offer FHA loans at all,” he said. “They’re requiring credit scores in the 700s with down payments that are the same as conventional loans.”
With FHA credit score minimums formerly hovering around 580, that’s a pretty big jump for most buyers. And it’s not just the VA and FHA loans that are harder to secure these days.
Many lenders are being especially cautious when it comes to approving new mortgages right now, particularly as the number of people filing for unemployment continues to increase every week.
So what do those extra precautions look like? For one thing, higher down payments. Last month, JPMorgan Chase announced it was increasing its minimum lending requirements so that nearly all borrowers would need to make down payments of at least 20% — which is a huge increase over the 12% considered average for buyers in 2019.
Another way lenders are being cautious is by guaranteeing more updated income and asset reports, such as documentation that’s been dated within 60 days of the initial application, as opposed to the previous 120-day standard.
These new stipulations, combined with other requirements (like credit scores and debt-to-income ratios), may make it harder than ever to secure a mortgage anytime soon.
COVID-19 isn’t all bad news for buyers. After all, interest rates on mortgages are at an all-time low, making some mortgages way more affordable.
“With interest rates very close to 3% and slightly less competition, today feels like a perfect time to begin house hunting,” says Jason Lerner of George Mason Mortgage LLC. “It’s impossible to time the bottom of the market, but once the economy stabilizes, there will be a pent up demand for housing and increasing competition among buyers — all of which will push home prices up.”
Translation? If you’ve been saving up for a down payment, have income stability and a decent credit score, now might still be the perfect moment to buy.
“Any savings that could be realized by waiting for home prices to drop will most likely be less than the savings on interest payments over the life of the mortgage by locking into today’s all time low rates,” Lerner said. “And because the current downturn is different from previous downturns caused by housing or other traditional economic factors, it’s anticipated that housing will stay stable and rebound quickly.”
Before you jump headlong into buying a new home, take some time to get to know your local real estate market. After hearing from real estate agents from all over the country, it’s apparent that now more than ever, location matters — particularly if your city was hit hard by coronavirus.
While real estate markets like those in and around New York City are at a standstill, other markets are up and running in surprising ways.
“We’re no longer in a sellers’ market,” said Ron Abta of Polaris Realty in San Francisco. “It’s begun to favor the buyer. Right now, I’m consistently seeing buyers obtain discounts of approximately 5%.”
“Performance is really dependent on the job market right now,” says Scott Campbell of RE/MAX United in Cedarburg, Wis. “The housing market has definitely slowed down, but some markets are doing better than others.”
Depending on how your city has been affected, the housing market might just be operating in your favor. Reach out to local real estate agents to find out how your market is performing, and if it makes sense to jump in as a buyer.
Although no one can perfectly predict what the future holds for real estate, it’s still possible to make an informed decision about whether or not now is the right time for you to buy a home.
With interest rates at an all-time low, now might be a great time to pull the trigger, particularly if you can get your finances in a state to qualify for those rates.
On the other hand, if your family has fallen on hard times since the start of the outbreak, now might be the time to hit the pause button on making any major changes.
Whatever you decide, take the time necessary to look at your financial situation and the market you find yourself in. At some point, we’ll all bounce back from this pandemic. But until then? Do what’s best for you, and keep financial wellness (and physical wellness) a top priority.
Larissa Runkle is a contributor to Codetic.