The coronavirus pandemic has brought unprecedented challenges to all of us. For many, COVID-19 has interrupted our long-term plans, and we may be feeling frustrated at needing to put our goals on hold. If one of your goals is buying a home, keep in mind that it is possible to move forward with the home buying process even as COVID-19 restrictions continue.
Read on for a rundown of what you need to know if you’re considering buying a new home during the pandemic.
Timing Is Everything
As always, the first step in the home buying process is to ask: Is now the right time to buy? It’s important to consider current market conditions, including housing prices and housing inventory. Home supply has undoubtedly dropped amidst the coronavirus pandemic, but we are now seeing a rising demand for homes – especially with record-low mortgage rates.
While sellers are not yet rushing back into the market, now is still a strong time for buyers to consider purchasing a home, as lending terms and rates remain favorable.
Selecting the Right Real Estate Agent
Pandemic or not, there are a number of considerations when selecting a real estate agent, at whatever moment you’re looking to buy a home. You’ll want an agent who is experienced, knowledgeable, and working in their position full-time. Someone who’s based in the community will also have the best information about housing trends and where the best location is for you.
Aim to work with what’s known as a “buyer’s agent”, which means someone who is looking out for your best interests and can guide you through the entire home buying transaction. A buyer’s agent can help you to find the right property, negotiate the offer, and refer you to other professionals you might need in the home buying process, such as home inspectors or real estate attorneys. This person will also have access to the best home search resources and technologies, to ensure you’re getting the best possible choices in your hunt for a new home. Agents will ask you to sign a contract for them to be your Buyer’s Agent. Before signing a contract with an agent to be your buyer’s agent, spend some time with that realtor to be sure you want to work with them exclusively.
Starting the Search
There are a few must-dos when searching for a home. Firstly, make clear to your agent your list of absolute wants and needs. It’s especially important to make this list and stick to it right now, as the current drop in property availability due to COVID-19 could sway you to consider a home that doesn’t truly match up to your key requirements.
One great way to nail down your wants and needs, as well as likes and dislikes, is to ask your agent to do an analysis of recently sold properties in your price range which can be determined by contacting a mortgage loan originator and reviewing your income and assets. This will help to establish a range of value within which to negotiate and objectively review properties’ positive and negatives points, in a realistic manner that’s consistent with your budget and core needs.
Location, Location, Location
You can repaint your shutters, replace your roof or re-do your bathroom, but you can’t change the location of your home! This is why choosing the right neighborhood is so essential during the home buying process.
When selecting a community, consider what you want today and in the future. You can visit the Massachusetts State Department of Education to learn more about school districts, and review articles in Boston Magazine to get a better idea of what area might be the right fit for you and your family. Commuting may also be a concern, in which case you can visit MBTA online to estimate how much time it will take to commute and what the best route will be to and from your potential new home.
Navigating the Financials
How much should you plan to spend on your new home? Financial considerations are on many home buyers’ minds as the coronavirus pandemic has brought new money pressures into our lives. The best place to start answering this question is with your credit score, which will play a big role in determining what kind of loan or interest rate you may be able to get. Visit annualcreditreport.com to check your FICO score, which should be at least 720 in order to qualify for the best rates.
You can also visit HUECU.org/pre-approval and speak with an experienced and licensed Mortgage Loan Originator, who can walk you through your financial options and your credit history.
In general, aim for a housing payment – including principal, interest, homeowner association fees and insurance –that does not exceed 36% of your gross monthly income before taxes.
Which Loan Is Right for You?
With COVID-19 causing financial uncertainties, many home buyers will need to take a closer look at what kind of loan is right for them.
A home loan can either be fixed rate, or adjustable rate. A fixed rate loan means that your interest rate and loan terms do not change over the life of the loan. An adjustable rate will usually give you a lower initial interest rate, which will then change over time depending on changes in the larger economic market.
In general, an adjustable rate loan is most appropriate only for buyers who anticipate substantial pay increases in the future, or who don’t plan to be in their home long-term.
The coronavirus pandemic is making it more difficult to conduct the normal steps of a home buying process in person, but there are plenty of resources online to help guide you through it. Visit huecu.org/GreenPath to learn more and huecu.org/home-loans to speak with a home loan expert.