5 Ways You Can Prepare to Buy a House after Coronavirus
The coronavirus has had an effect on the economy and society, and many are still following social distancing guidelines and adhering to stay-at-home orders. The coronavirus housing market is a bit different from what home buyers typically experience, but hopeful home buyers can still move towards their dreams of homeownership during this time. Due to the recommendations of health and government officials, the housing market made a few changes so home buyers can continue their home search, even during quarantine. By use of facemasks, gloves and shoes coverings, while also increasing the use of virtual tours and video conferencing, prospective home buyers can shop for a new home while social distancing. As shelter-in-place restrictions ease, the process of purchasing a house may continue to change. But before you commit to virtual house hunting, set aside time to get your finances in order and prepare for the pre-approval and mortgage process. Here are five ways you can prepare to buy a house during and after the coronavirus.
#1. Analyze Your Debt and Review Your Credit Score
While the coronavirus continues to affect our everyday life, including the housing market, you might have some extra time on your hands. This is a good time for you to analyze your debt, particularly unsecured debt from credit cards. Review your revolving credit card debt and the interest that you are paying on each personal credit card you hold. Due to the pandemic, major credit bureaus such as Equifax, Experian and TransUnion are offering consumers one free credit report per week until April 2021. Take this opportunity to review your credit profile and see if you notice any errors that might be negatively impacting your credit score. While the details surrounding recommendations for staying healthy and safe during the coronavirus continue to change, you can expect the importance of a strong credit score to remain important for your financial health. Keep in mind the types of activities that affect your credit score: paying your bills on time, the amount of revolving debt compared to your total credit line, and the overall length of your credit history. And a tip, even if you’re not using your airline credit cards right now, cancelling a card could hurt your credit score. Try to reduce your debt as much as possible and make at least the minimum required payments on time, every month.
#2. Start Saving for a Down Payment
Shelter-in-place orders in many parts of the country are still limiting recreational spending like restaurant dining, concerts, shows, travel and vacation. You may have noticed a reduction in smaller daily expenses, like your morning coffee run, eating out for lunch and filling up your gas tank to handle the daily commute. After you review your debt, analyze your income and finances to determine a savings plan for your down payment. Evening during the coronavirus pandemic, staying focused on your down payment savings plan will be beneficial to you later during the mortgage application and review process. Even though there are mortgage programs that allow for as little as 5% down or less, establishing a secured down payment could help you avoid the need for private mortgage insurance or offer you a reserve for cash that might be needed as you get closer to closing on a new home.
#3. Research Real Estate Markets and Determine Your Home Purchase Price Budget
When you thought of becoming a homeowner, you probably had a town or city in mind for where that house would be. Some buyers feel pangs of buyer remorse after a home purchase, because they regret not doing more research on the neighborhood or housing market before moving in. If the coronavirus has you stuck at home, your phone and computer can be resources to help you learn more about various housing markets. Maybe your original home search was based on decreasing your commute time, and now you have the opportunity to permanently work from home. Or possibly, your dream home was based on home features, but didn’t include a review of neighborhood amenities. No matter what inspired your home buying dreams, this is a good time to learn more about local housing markets, including average home listing prices. While you learn more about various housing markets also consider additional expenses such as home taxes, which will be in addition to your monthly mortgage.
Websites such as realtor.com, Zillow and even real estate brokerage sites can help you see the price of homes currently on the market. For example, during your research you may notice that two different 4-bedroom, 2-bathroom homes of similar size are listed for different prices just because of the area they’re in. Once you’ve analyzed your debt and confirmed a down payment savings plan, it’s important that you set budget expectations for how much home you can afford and what your maximum home price benchmark will be (based on your affordability and financial goals).
#4. Research Different Types of Mortgage Programs and Loan Options
Even if you’re a first-time homebuyer, you have many options for a home loan. Depending on a series of factors and eligibility requirements, you may qualify for different types of purchase mortgage loans. Every borrower is different, so have an open mind when learning about various types of mortgage loan programs. For example, you may be familiar with FHA (Federal Housing Administration) loans because they’re well-known and a popular option among younger and first-time home buyers. However, FHA purchase loans are not the only purchase loan program type which offer attractive down payment and credit requirements for borrowers. Here are some mortgage programs you can look at as you prepare to buy a house after the coronavirus:
- Conventional Loan
- FHA Loans
- VA Loans
- USDA Loans
In addition to the variety of loan programs, there are also mortgages that appeal to different terms and rate formats. Interest rates have remained near record lows recently. Depending on your financial goals, you may consider a mortgage loan for 10, 15 or 30 years. Take this time to learn more about the difference between fixed-rate and adjustable-rate mortgage loan programs, too. Mutual of Omaha Mortgage offers an array of mortgage purchase loans, and we’ll create a customized solution for your needs.
#5. Get Pre-Approved from a Mortgage Lender
Buying a home can often feel like a competitive process. Housing inventory shortages and increased buyer demand has given many sellers the opportunity to review each buyer more carefully before confirming an offer. Once you’ve partnered with a licensed lender and determined how much home you can afford, the best way to stand out as a strong candidate to a seller is to come prepared with a preapproval. Getting pre-approved not only helps the seller to better understand you and build confidence in your ability to complete the transaction, it also helps you to firmly understand your home shopping budget. A pre-approval often requires a high-level evaluation of your credit profile, income, down payment expectations and assets. Moving forward in the house-hunting process without a preapproval can lead you to be overlooked, or even waste time making an offer on a home you ultimately cannot afford. Because buying a home is more than a simple financial transaction, the pre-approval process will allow you to connect with your lender and ask questions that will help you in the early stages of your mortgage process.
No matter where you are in your home purchase process, it is never too early to partner with an experienced professional. The knowledgeable team at Mutual of Omaha Mortgage is available, and they’re backed by the insurance company that has been helping customers with financial decisions since 1909. Our team of local experts understands the market and can guide you through the mortgage loan application process. Give a Mutual of Omaha Mortgage Banker a call to get the guidance you'll need, and we’ll make buying your next home simple.