Before the pandemic, people would tell you that the best time to purchase a house is during the late summer or early fall. However, 2020 is different and we have been dealing with a pandemic for a few months now. This health crisis is even likely to last for a long time.
Many industries are hit hard by the pandemic and we are on the brink of a recession. However, real-estate is still thriving. There has been a decrease in home selling and buying, but people are still interested, especially when it comes to buying a house.
And so, is it a good time to purchase a home right now when we are in the middle of a pandemic? A quick answer to that is yes, but only if your job or your income is not threatened by everything that’s happening right now. If you calculate the average monthly payment of buying a house, will you be able to pay for it? Is there a possibility that you will encounter hardships at work in the coming months or years? These are just a few questions that you should ask yourself if you’re planning to purchase a house right now.
We are saying that you should go ahead and purchase a house if your financial situation is doing great because right now, interest rates are running low. However, even if interest rates right now are low, it’s still best to purchase a house with caution because there are other expenses that you should consider like paying for the property taxes, purchasing a homeowner’s insurance, and of course, the closing costs that can be around one to five percent of the property’s closing price.
Drew DeWitt, the senior vice president of investments for Ivy Equities in Greenwich also explained that even if low-interest rates are good, it’s still not at zero percent. DeWitt said, Lower interest rates mean lower monthly mortgage payments on your home loan; therefore, you technically can pay more since your monthly costs are lower.
“However, it also means that there is a greater risk in the economy in general. The FED drops rates to spur growth when there is a risk of unemployment and people not being able to make their monthly mortgage payments. As a result, banks will tighten their lending standards, and it may be harder to secure a mortgage despite the lower rates. This is where people get confused.”
Buying a home right now will also mean that technology will be more involved. The process is just very different now because of social distancing protocols. Zillow released a report that there was an increase of 408 percent in agents using a 3D home tour feature. Redfin also said that video tour requests increased at 500 percent.
Gill Chowdhury who is a broker from Warburg Realty talked about how the home-purchasing experience has gone virtual nowadays. She said, “Today’s buying experience has gone completely virtual. It’s still possible to negotiate for, contract and close on a property, but you’ll have to be comfortable with doing it without the in-person visits.”
There are still some agents who would conduct in-person tours. However, social distancing is also applied. Stephanie Beckwith from Redfin described how in-person tours are conducted today. She said, “For those who prefer to tour in person, we tour two at a time in a home, six feet apart with all of our protective gear on.
“Sellers usually have the doors open and lights on so buyers do not have to touch anything while in their homes. We are asked to leave the doors and lights on as we exit the home. Besides, there are gloves, masks, and hand sanitizer in most homes with notes saying please do not touch anything.”
What you should also know is that lending institutions have stricter standards when it comes to approving loans or mortgages. You might need a high credit score to get an approval. The FHA loans typically require a credit score of 580 but lenders aren’t comfortable with that anymore.
For example, Chase is already requiring a credit score of at least 700. Better.com, an online mortgage lender, has also increased the minimum allowed credit score to 680.
Gary Pivo, a professor of real estate development and urban planning at the College of Architecture, Planning, and Landscape Architecture gave this advice for people who are thinking of purchasing homes right now.
Pivo said, “The interest rates are the lowest in history, so if you’re looking to buy a place to call home and have a secure income, I’d go for it. If you’re looking for a student housing or a vacation rental investment, I’d wait and see what the future holds. You may get a better price and returns down the road. For sellers, prices are holding up just now and have been rising for the past few years. So, it is a good time to sell even if you may have to wait a little longer to find a buyer. I don’t see much upside to waiting.”