It’s no surprise that as the coronavirus began to spread across the nation that the real estate market was one of the industries impacted. A survey by the National Association of Realtors in April reported a decline in both home buyer and seller interest due to the virus. This was a result of health and safety concerns as well as the breakdown in the economy.
But now as stay-at-home orders begin to lift and more businesses re-open, there may be opportunities for those looking to buy a home or make an investment. If you are ready to jump into the market, there are a few things to know before spending too much time browsing real estate apps or scheduling appointments with a realtor.
Here are three things to consider to making the most of the home buying process during the pandemic:
1. Expect some hurdles and a longer transaction process.
Buyers may experience low inventories, challenges viewing a property in person, delays in scheduling the home inspection and appraisal, and even closing dates that are 90 days out. The new norm in the industry is virtual tours, Facetime and Zoom meetings and contactless ways to obtain paperwork and signatures. In this uncertain and competitive market, buyers should have a solid credit rating, job security and possibly even a little more patience. The key to a successful house hunting and purchase experience is to find a realtor and lending partner that you can trust.
2. Get prequalified for a mortgage.
Completing the mortgage prequalification process with a lender provides parameters for what the financial institution will let you borrow, which ultimately dictates how much house you can afford. This is a straightforward process that can be initiated by completing an online form. For instance, Lakeland Mortgage uses a simple online prequalification form. Once the financial institution receives the information, the lender will evaluate facts including credit, employment status, income, and debt and asset information in order to determine the maximum amount the financial institution can confidently lend. After the prequalification process is complete, prospective buyers will have a realistic idea of the price range that fits their budget. It can also provide sellers with some peace-of-mind that there will be financial means available to the buyer to complete the purchase.
3. Build a budget to support buying the home you want and its on-going expenses.
While getting prequalified does provide guidelines for a home buying budget, it’s also important to consider other financial details to ensure the mortgage and other associated expenses can be comfortably covered each month. The general recommendation is to spend no more than 28 percent of your budget on housing expenses, which include the mortgage, insurance, and taxes. Consider the pros and cons of the expenses that can be overlooked such as these examples:
- Living in a housing association that charges a monthly Home Owner Association (HOA) fee. This fee may cover expenses including lawn care, snow removal, trash disposal, or access to recreational facilities.
- The commute to work or other frequented destinations. Choosing to live in a particular location may make buying a home more affordable, but the trade-off could come with hidden costs. A long commute may translate into more money spent on gas, oil changes, tire replacements, and higher insurance premiums. And don’t forget about the extra time spent driving each day.
- A big back yard, an in-ground pool or large covered deck are all nice features, but how much money will be needed to maintain these types of amenities?
After evaluating expenses more closely, you might determine that even though you are prequalified for a certain amount, it may be more financially sound to shop for a home in a lower price range. And, a structured budget can help you specify the must-have and nice-to-have qualities you are looking for in a home.
Preparing to buy a home can be a complex and stressful process, especially during the current situation. But by knowing what to expect, getting prequalified and ensuring that you have a budget outlined, you can set the stage to successfully manage the home buying process. The Mortgage Representatives at Lakeland Bank are experts in navigating all aspects of the home buying process. They are equipped to help you prepare to make a major purchase by pairing you with a financial solution that fits with your plans and goals. Whether you are looking for answers to initial questions or are ready to take serious steps toward homeownership, request a consultation to get the conversation started.