Buying a house is never easy, but especially not as a first-time homebuyer in the middle of a global pandemic. That was the situation I found myself in this past September when my partner and I spent most of one Sunday night wide awake, repeatedly scrolling through the pictures on the Trulia listing of our dream cabin here in southwest Colorado.
We’d been casually looking at homes in the area for weeks, having traded in our nomadic van lifestyle for a bit more stability. Then we found this house, and within 24 hours made an offer, and within 48 hours went under contract. From start to finish, we were lucky enough to work with people who made the experience easier — but at times it still felt like a total crapshoot.
Looking back, I doubt things would have been any better even if we were more experienced homebuyers, like others in the area who were looking to buy a second home. With the threat of the coronavirus still looming, there’s a lot about my experience that will undoubtedly be repeated for many homebuyers in the coming months — including the extra paperwork needed for a mortgage application, and the uber-competitive and fast-paced seller’s market we find ourselves in.
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Here’s everything I learned from buying a house during a pandemic.
Because of how much it’s affected the economy, COVID-19 has also undeniably changed the housing market. Some feel that has made now a good time to buy real estate. But some of these changes — like record-low interest rates — may make things easier, whereas others — like stricter mortgage qualifications — may not.
Here are some of the most major changes I noticed throughout the process of buying a home during the pandemic, and what you can do to get ahead of the game.
Touring homes during a pandemic
Pandemic or not, you should absolutely try to do an in-person tour of any home you’re considering buying. No matter how good the quality of a video virtual tour may be, it won’t be the same as seeing your potential future home in real life.
That being said, there are some new rules around touring homes in person. For one thing, every seller has different requirements and open houses may no longer exist where you are. Some sellers will now ask you to leave shoes outside, mask up, and wear gloves. Others may simply request you don’t touch anything. Some sellers’ agents may leave all the lights on beforehand to avoid potential buyers touching the switches. Others will call your agent in advance to explain any particular hygiene requests from the seller.
As a general rule, it’s common courtesy to enter someone’s home the same way you would anywhere these days — masked up and with your hands freshly sanitized.
While touring homes in Colorado, these were the only requests we encountered. However, during the summer months, I spoke to a real estate agent in Flagstaff, Arizona, who would have required a prequalification letter before allowing us to tour a home. This would have basically proved that we were financially qualified to get a mortgage for the house.
Although we only encountered this requirement once, I’ve no doubt that other sellers are making similar requests. In any event, it’s good practice to only tour homes you’re serious about potentially buying, and be prepared to jump a few extra hoops along the way.
Buying when inventory is low
Another way the pandemic has affected the real estate market is in the number of homes for sale. In Colorado, as in other states around the country, homes are going fast. Our home was listed on the market on a Sunday night, and by Monday afternoon we had a decision to make. With three other offers already on the table, we either had to make a competitive offer ourselves or forget about it. Like I said, the market is fast.
But the reason for this isn’t just that everybody decided to buy a home at the same time, it’s also because inventories are extremely low in most places — meaning all the buyers are competing for the same few homes. According to the October 2020 Housing Market Trends Report from Realtor.com, the national inventory declined by 38.3% throughout last year, and October marked the first time on record that homes sold more quickly than in prior warm-weather months.
Translation? Homes are coming and going at record-breaking speeds, and if you’re serious about buying, you should be prepared to compete with other buyers.
Besides having your finances ready for the scrutiny of a mortgage lender, this also means putting forward a competitive offer for the seller. In a hot sellers’ market (like this one) you’ll typically want to offer listing price or higher, and avoid contingencies. Contingencies are things written into the contract that the seller has to do to make the deal go through, and as you can imagine, sellers tend not to like these.
My advice for winning the bid on a house you love? Make a generous offer when it comes to the home price, skip the contingencies as much as possible, and work with a real estate agent who can help you go the extra mile to make your offer as competitive as possible. Paying realtor fees can be well worth it if you have the right agent.
Getting a mortgage
As we said earlier, mortgage rates have reached historic lows, with a lot of buyers qualifying for 30-year fixed mortgages with rates around 3%. Compare this to the average interest rate of 5.59% we saw for the past 50-odd years, and that makes the prospect of buying a house right now pretty appealing, especially if you can do it with one of the best mortgage lenders.
On the other hand, you’ll still need to qualify for a mortgage to lock down those interest rates, and here’s where it gets complicated. In addition to all the usual requirements from lenders, such as a good credit score and a solid debt-to-income ratio, some lenders now require extra proof of income from potential borrowers — especially if you’re a business owner or independent contractor.
Lenders want to be sure your financial situation hasn’t been negatively affected by COVID-19, and different lenders are handling this in various ways. But if you or your significant other work as a freelancer or independent business owner (or any other job that isn’t salaried), you can expect to be asked for extensive documentation proving your income.
This may be in the form of something called a year-to-date profit and loss statement, bank statements, or both. In order to avoid having any issues while getting approved for a mortgage, be prepared to quickly provide these documents. It’s also worth taking a peek at other aspects of your personal finances. Look at your credit score and any outstanding debts you may have (whether credit card debt or student loan debt) as these are all things the bank will look at too.
Homebuying has gone remote
Like everything else during COVID-19, the process of house-hunting and buying a home has gone remote. What this means for buyers is that most of your communications with people will happen via email and over the phone.
Although we still saw our real estate agent in person to tour homes (always masking up and social distancing), almost every other aspect of the home-buying process happened online. We reviewed nearly all our documents and contracts entirely online, and we secured our mortgage and homeowners insurance without ever stepping into an office.
The one exception to all of this was closing — which is the final step where the house officially becomes yours. This happened in-person at the local title company (think: the place that grants you ownership of the home) with our real estate agent and one title company employee.
Although buyers and sellers sometimes sit at the same table for this final step, that hasn’t been the case since COVID-19. During the hour or so it took us to sign our names a record-breaking number of times, we also briefly met our mortgage broker for the first time.
For anyone who’s used to the whole working-remotely thing, this won’t be an issue. In fact, it’s kind of convenient to be able to review documents and ask your mortgage lender questions without going into someone’s office. Did it mean spending a little more time checking emails and missed calls? Yes. But overall, this was probably the least tricky aspect of buying a home during the coronavirus pandemic.
Pros and cons of buying a house during COVID-19
Here are some of the pros and cons of buying a house during COVID-19 that you’ll want to consider.
- Tours and viewings are restricted to one party at a time, so chances are good you’ll have the home for yourself when you visit.
- Record-low interest rates mean you could secure a more affordable mortgage.
- Buying remotely means less time spent traveling back and forth to real estate and lending offices — it’s possible you’ll complete all your documents online.
- Securing a mortgage can be harder right now, especially if you’re working as an independent contractor.
- Inventory is low in many parts of the country, which means you might end up paying more than the asking price for a home.
- Homes are selling fast, so you’ll need to be ready to make a competitive offer on a home quickly.
Image Credit: Feverpitched / iStock.
Homeownership is still possible during the pandemic. And buying a new home right now isn’t necessarily any harder than buying one any other time, it just comes with a different set of challenges. Before you dive in, take some time to figure out exactly what you want in a home, so that when the right one comes along, you’ll be able to move on it quickly.
Talk to a mortgage broker and find out what kind of extra documents you may need to qualify for your home loan, and any other details you want to know about how to get a loan. Finally, be sure to find a real estate agent you really trust. Now more than ever, it’s important to work with someone who understands what you want, is a great communicator, and can ultimately help you close the deal on your dream home, regardless of the pandemic.
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This article originally appeared on FinanceBuzz.com and was syndicated by MediaFeed.org.
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