Purchasing a home has always been anxiety-inducing for first-time buyers. There are new and unfamiliar things to learn like what a pre-approval letter is, what to expect from the home inspection, and the agonizing hours spent waiting to find out if your offer gets accepted.
But the COVID-19 crisis complicates the home buying process even more. With social distancing and the need to keep people safe – especially high-risk individuals – the real estate industry has had to adapt some of their most common processes, like the fact that multiple families might be traipsing through somebody’s home while it’s on the market.
As a first-time home buyer, now there’s even more to learn about the home buying process.
Why you might still want to buy your first home during COVID-19
We understand that with extra time on your hands gained from stay-at-home orders, working from home, or no longer spending as much time with friends and family, you may be filling your free hours scrolling through Zillow and dreaming about the home you’ve been saving for.
Maybe the low interest rates are enticing you (they are at record all-time lows), or maybe you’ve finally hit your down payment savings goal.
If this is you and the stars are aligning in your home buying journey, that’s wonderful! We’ve put together a list of 5 things to consider when you start the home buying process during COVID-19.
5 things you need to know when buying your first home during COVID-19
1. Make sure you’re still eligible for a mortgage loan
One of the most important steps for first-time home buyers is getting approval for the mortgage loan amount you need. With record-low interest rates instituted by the Federal Reserve Board, and the projection that these low interest rates will hold steady for some time, excited buyers are currently outnumbering homes on the market.
Lenders want to be sure they’re offering loans to creditworthy borrowers, so their approval process may be stricter than ever. Your financial situation will be scrutinized even more right now, and lenders will want extra reassurance that your job security is intact. They may check your employment status multiple times during the process.
If your credit history needs a little boost, you may want to consider a solution like Loqbox, which helps you build credit and save money at the same time. Learn more about how Loqbox can help you improve your creditworthiness here.
If you’ve been furloughed or laid off, a pre-approval given prior to this event will likely no longer be valid. Although a furlough or lay-off is undoubtedly devastating, this can be a good opportunity to find other ways to bring in income and prepare even more for the big step of purchasing your first house.
2. Know what to expect from virtual viewings
The most exciting part of the home buying process is the chance to look at lots of different properties. And viewing a property with a critical eye can make sure you don’t purchase a home you don’t absolutely love. After all, you’re going to live in this house for years to come, so you should be over-the-moon in love with it.
The viewing gives you a chance to open storage spaces, get a sense for how small the bathroom really is, or become aware of unpleasant smells that obviously wouldn’t transfer from a photograph (like, ahem, a kitty that’s not been properly house-trained). You’ll definitely want to know if you need to replace the carpet before moving all your furniture in – or making an offer.
In these times though, we must keep each other safe and follow public health guidelines regarding social distancing. Sellers may not want multiple families visiting their homes, and real estate agents may not feel comfortable coming in close contact with their buyers.
For now, it looks like virtual viewings will be the norm. In many cases, your real estate agent will be able to go to the home and walk you through the house “virtually”, so they can be your sensory detective and let you know how small a room really feels or whether there are unpleasant odors lingering in the house.
3. Time the home buying process just right
Make sure your timing is right and weigh your options. Interest rates might be low, but are you fully ready to commit to a mortgage payment? Keep in mind that because of low home inventory, prices are still high. Unlike some predictions early in the coronavirus economic downturn, the housing market has shown no signs of slowing or crashing.
You should also consider your job security or your ability to make mortgage payments if you do lose your job. The coronavirus is still suppressing economic activity, so even indirectly affected industries are seeing layoffs and job losses. This could be an indication that the coronavirus recession is having long-lasting impacts, and not all jobs are safe.
If there’s any chance this could happen to you, it needs to factor into your home buying decision.
4. Have (extra) patience during COVID
The home buying process can be frustrating even in a perfect year, so it’s important to go into the process with extra helpings of patience during COVID-19.
With the high amount of buyers on the market, realtors and lenders are busier than ever – especially the good ones. They might not get back to you right away, so you may need to shop around a little longer to find professionals who can make time for you in their schedules.
Furthermore, houses are flying off the market. You might schedule a showing only to have it cancelled because the owners accepted an offer. And if you do get the chance to see a house and put an offer down, prepare for bidding wars.
If you make it to offer acceptance, closing could take longer than usual as well. Because so many eager buyers are flooding the market, the volume of transactions has created a backlog for appraisers, which are used by banks to value the property before they agree to extend a mortgage. The lead time for appraisers has been prolonged by many weeks in some regions.
As difficult as it is, it’s important not to get too attached to a potential house in this market until the papers are signed and the keys are yours.
5. Prepare for your first home while you can
Finally, use this time as wisely as possible to keep preparing to be a first-time homeowner. If your job is safe, save as much as you can while you’re not tempted to spend more money on expensive dinners out. Use the entertainment category in your budget – money you’d usually spend on movies or concerts – to boost your down payment savings category.
After all, the more you put down, the more attractive you’ll be to a lender (and a seller). You’ll save more on interest rates as well.
If your down payment savings are good to go, pad your emergency fund. All kinds of things can happen when you’re a first-time homeowner. You might realize early on the pain of having to pay for repairs and maintenance yourself – especially if those repairs involve the purchase of an expensive new appliance like a washing machine or hot water heater.
And finally, use this time to keep improving your credit score. If you’re planning to save more now while you can, kill two birds with one stone and boost your savings while improving your credit history by signing up for a free account with Loqbox.
Learn more about exactly how Loqbox can help you prepare for your first-time home buying journey here.