Many people have been asking me whether it is a good time to buy a house amid this coronavirus pandemic. My answer to them continues to be that it really depends on several factors and how they pertain to you.
YOUR CURRENT FINANCIAL SITUATION
First of all, ask yourself: Are you affected financially by this current situation? If you are 100% confident that you will continue to be employed and receive a steady income then this would be a great time to buy your home. But, if you feel that you or your spouse might temporarily lose a job, then it is probably best to wait and just continue researching. A number of people have had to cancel their home purchase in the middle of escrow due to a lay off or their businesses losing clients. Also, keep in mind that lending banks are also more careful now due to the unprecedented spike in unemployment. So if you are using a loan to buy your home, be prepared for banks to scrutinize almost every expense in your bank account to make sure that aiding your home purchase will also be a good investment for them.
A client of mine got pre-approved for an $850,000 loan. After that, he wanted to buy a beautiful house he saw for $850,000. It is only natural that most of us get so excited when we get a loan pre-approval and the first thing most people do is look for houses with that amount. In the case of my client, it turned out that loaning $850,000 would mean he would be paying almost $1,000 more than what he is currently comfortable to pay monthly.
It is always best to work out the numbers first. How much will your monthly payments be if you use the whole amount your were pre-approved for? Your monthly payments will often include your loan mortgage payments, home insurance, HOA and property tax. Speak with a good mortgage lender (or several lenders, especially if it is your first time buying a home) and be upfront with them what payment you would be comfortable with. Your lender will tell you what price range you should be searching for based on this. A good thing to ask is what range of rates would be available for you at that moment. Rates change daily and can only be locked as soon as you have an accepted offer to buy a home. So don’t forget to discuss with your lender how the fluctuations in the market can affect your monthly payments. Your credit score also affects what rates will be available to you. If you are presently renting, a good rule of thumb is to see if the amount is more or less the same as your rent. This way you already have that expense factored into your financial budget and there shouldn’t be any major changes to your current lifestyle with this new home purchase.
The good thing with buying during this pandemic is rates are low and homes are historically below market prices. Most real estate investors would actually say they made their best deals during recessions or during periods when the economy is down such as now.
YOUR DREAM HOUSE
One of the major drawbacks of buying a home right now is the lack of inventory. One thing to note is that there are fewer houses currently for sale on the market. Home owners know that home prices have dropped and are holding out to sell until the market goes back up again. It is also more difficult to go out and find another home for their families right now.
Finding your dream home might be a little more difficult compared to say the summer of 2019. But there are homes out there. One good option is to look at new developments. When the Coronavirus pandemic hit, the housing market was in full swing and there were numerous housing developments in most major cities. The real estate industry did not really hit a full stop even through the safe at home orders or quarantines. But there were significantly lower number of buyers out there than what the builders were anticipating for Spring and Summer of 2020. You can definitely use this to your advantage to see if there are special builder discounts that they can throw in as an incentive for prospective buyers.
Given these factors, it’s still good to know that at this time, mortgage rates are really low and house prices are below market value. If you are planning to buy, the most important thing is you should have peace of mind. Work with a realtor that clearly understands your needs. Do your research and drive around those neighborhoods you’re looking at during the day and also at night. Create a checklist of your needs and wants. For a sample checklist, click here.
Home buying has always been an inherently emotional and stressful process. Adding to this the difficulties of searching during a pandemic can definitely amplify your stress level. While this may be true, it’s good to note that home ownership is also one of the most satisfying and rewarding milestone of adult life. It is definitely adulting at its finest. The great financial rewards of investing in real estate also has most homeowners saying they should have done it sooner.
All these being said, should you buy? If all these factors mentioned here are checked off and you still feel at peace with going forward. I would say, go for it! We just did.