Is This the Right Time to Buy a House?

Source: Medium

The pandemic is challenging the real estate market worldwide, but it doesn’t mean people have stopped buying houses.

The homebuying landscape deals with some significant changes right now, and both buyers and real estate agents must adapt to a scenario they never met. Some lenders are raising their credit score requirements, increasing the minimum down payments, and pausing the issuance on loans. Sellers have started to take their houses off the market because they cannot get the price they ask. Even buyers are pausing their searches because they cannot find a property to match their requirements.

If you want to buy a house, you may wonder if this is the right time to do it. The following guide can help you decide if to jump in or not. Learn more here.

Source: Mashvisor

Are you ready to buy your own house?

We shouldn’t tell you that buying your own house is a huge commitment. Before browsing the market for properties or hiring a real estate agent, make sure you’re ready to take this step. Here is a list of factors lenders analyse when they look at your application.

Employment and income status

Lenders aren’t interested only in how much you earn, but also in how much you can save, so they check your history of income to ensure your income source is enough to repay the mortgage.

Preparing the paperwork to prove that you have a stable and reliable source of income requires pulling the right documentation, and it may take some time. If you’re self-employed, the lender may even ask you to submit your tax returns. Before providing the lender with the documentation, analyse its content to understand if your income is enough to cover the costs associated with buying and caring for a house.

Source: experian

Debt-to-income ratio

Lenders use this tool to evaluate your loan application because it allows them to see how much income you can direct towards your debt, and they can determine how much mortgage they should offer.

The debt-to-income ratio is calculated by dividing the monthly debt to the gross monthly income. The lender has access to your credit information to calculate the debt-to-income report. But you should review it before you contact a lender because most mortgage providers ask for a DTI of 50% or less to qualify for a loan. The DTI can help you shorten the lenders’ list if you find it hard to decide what organisation meets your requirements best.

Liquid assets

You can buy a house even if you don’t have money down, but you need some cash for a down payment. The down payment is the first significant payment you make on the mortgage. The amount of money you need to pay depends on the sum you borrow, loan type, and provider.

Source: inspirationfeed

A common misconception is that you need 20% down payment to get a house, but the truth is you can purchase a property even with a 3% down. But if you pay more, you won’t have to get private mortgage insurance. Lenders use the private mortgage insurance to protect themselves, and allow you to cancel it when you reach 20% equity in your repayment. Larger upfront payment can also lower the monthly payments, so you may want to postpone buying the house to save some money. There is also the chance to have a loan with 0 down payment for current or former members of the ARMY by requesting a VA loan, you can find more about these at SecurityAmericanMortgage.

Alongside the down payment, you also need to cover the closing costs. It’s best to save from 3% to 6% of the total home value to cover for the closing costs.

Credit health

As the mortgage experts from MortgageHouse explain “The credit score is a determining factor in what loan and interest you qualify for. The lender checks your credit score to understand what risk they take by financing your loan. Improving your credit score and reducing your debt can pay off if you plan to purchase a house.” The better the number is, the lower the interest rates you get. To determine how much you’ll pay monthly use a mortgage repayment calculator online

Source. Investopedia

Factors that influence your credit score:

– Payment history

– Types of credit you’ve used

– Amount of money you owe

– Your pursuit of new credit

– The length of your credit history

Check the credit score with your local lenders to determine what number qualifies you for a mortgage.

Are you willing to live in the same place for your entire life?

A house mortgage is a 30-year-long commitment. Buying a house doesn’t oblige you to live in it, but it’s still a big decision. When you own a home and pay a monthly instalment, you may find it difficult to move. In most cases, you must sell the house first before relocating.

So, decide if you’re willing to live in the current area for at least ten years. Consider your family obligations, career goals and personal preferences.

Source: Forbes

Factors that can slow your down

Even if the pandemic has changed the real estate environment, real estate agents are still working, yet they had to adapt their activities to the present situation. The reactions vary by markets, but if you’ve already pre-qualified for a mortgage, you may want to wait because there may not be too many options to choose from. However, desperate sellers may be willing to cut the price, and you may get a deal. Some sellers refuse tours as they try to prevent the spread of the virus. A virtual tour may be all you get before you make an offer on the house.

Also, once you find the perfect house for you, expect current restrictions to affect the mechanics of the purchase. Appraisals and home inspections take longer because inspectors have to meet specific procedures. Staffing shortages can trigger a delay in legal and mortgage loan processes because there are simply no people to complete title searches and write down paperwork.

Only a few states offer remote closings, so you need to ask the mortgage provider if they can handle a loan during the pandemic.

Source: Good Housekeeping

The COVID-19 has affected the house purchase process and restricted the types of loans you can apply for. You need an excellent credit if you want a lender to approve your mortgage application.