5 Things to Be Optimistic About if You're Looking to Buy a Home Now
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Mortgage rates are low. Real low. This is due to the United States trying to navigate through a pandemic which has left most industries in turmoil. So, how is the housing market holding up? We have some positive news to share and are optimistic about what the future holds as we are seeing evidence of home buyers returning to the real estate market.
If you are financially stable with a secure job, buying a home right now has a lot of advantages. Here’s the good news:
1) Economists are expecting mortgage rates to stay low during the typical peak home buying season (spring and summer) which helps make your monthly payments more affordable. As states have started to loosen shelter-in-place restrictions, the amount of mortgage applications to purchase a home are increasing (up 41% from April 2020 and only down 1.5% from a year ago according to the Mortgage Bankers Association). States leading the pack right now are New York, Illinois, Florida, Georgia, California, and North Carolina. *
Quick Tip: If you see advertisements for ridiculously low rates, be careful of misleading ads! These advertised rates come at a price and can actually cost you money in the long run. Some lenders are charging mortgage points to lure you in and fool you.
2) All markets have peaks and valleys, but purchasing a home is one of the few investments you can make that has an overall upward trend. This upward trend is because a mortgage is backed by a major asset (your house). Unlike renting, you are building wealth when you choose to purchase a home.
3) With today’s technology you can still find a home to buy while staying safe and socially distant:
- You can start the process by searching for available homes online through a mobile app, like HomeScout®.
- Real estate agents are showing homes online by means of 3D home tours (which is almost like a video game) and remote live presentations. Some states are allowing in-person showings with special precautions in place.
- You can meet with a Home Loan Specialist (while remaining socially distant) or by phone to walk through how much house you can afford. It is also essential to know your loan options and to have a mortgage expert explain the process step-by-step so there are no surprises along the way.
- When you’re ready to purchase, appraisers (who may not be able to walk through homes in person) are now connecting to home buyers via FaceTime or Zoom conference calls for home appraisals.
- Closing day can now be done remotely or by signing documents in a drive-through closing from your car to keep you from cramming into a crowded conference room to sign papers.
4) Although some loan programs have changed throughout the pandemic, there are still down payment assistance and other homeownership programs available to help you make your home purchase (especially if you are a first-time home buyer). Many of these programs are tied to local and state government budgets across the U.S., and can be utilized with federally-backed mortgage program like an FHA loan. Note: Income requirements still need to be met with these programs.
5) It’s always a good time to buy if you can afford a home. There are really only two bad times to buy a home: The first is when it is beyond your financial means. This includes factoring in your down payment, closing costs, and keeping money in the bank for an emergency fund. A general good rule of thumb is to make sure your mortgage payment does not take up more than 25% of your gross income. So, if you are bringing home $7,000 a month, it is safe to shoot for a monthly mortgage payment of $1,750 or less for a 30-year loan term.
The second is when there is a housing bubble. A housing bubble can occur in a certain region or spread to the entire United States and is almost always bad news for everyone. Housing bubbles affect the real estate market but also personal wealth and the economy at large too. A housing bubble can cause a lack of affordability which drives people to look for mortgage programs that may not be in their best interest.
After the housing bubble pops, it has been a common occurrence for homeowners to lose their homes and/or savings. The tricky part is trying to identify the bubble because it is often not discovered until after it pops. But it usually can be spotted when there is an extreme increase of housing supply alongside decreasing demand. The most important takeaway to protect yourself from a housing bubble is to only borrow an amount you are comfortable spending and to choose a house you can afford.
Quick Tip: Stay on top of your credit score now more than ever. During this time, many lenders are requiring higher credit scores and down payments to get a mortgage (compared to before the pandemic). But that should not stop you if you are prepared!
While things may look different in the housing market due to the coronavirus pandemic, there is a light at the end of the tunnel. This newfound focus on technology, innovation, and change in the housing industry is positive and leads us toward a bright future in real estate.