3 mistakes to avoid when buying a home during the coronavirus pandemic
Buying a home during the pandemic is giving buyers unique challenges. Here’s what potential buyers need to know for 2021. (iStock)
As the COVID-19 pandemic expanded its reach to every corner of the world, all eyes were on the susceptibility of the U.S. residential real estate market. Although everything came to a halt in the spring of 2020 due to uncertainty and stay-at-home orders, it was a record-breaking year in the U.S. housing market with historic low mortgage rates.
It’s fantastic news — especially after the bursting of the U.S. housing bubble shortly before the onset of the Great Recession — but it doesn’t mean potential buyers won’t run into challenges when purchasing a home in 2021.
Buying a home during the coronavirus pandemic can present unique challenges for potential buyers. The better prepared you are, the less likely you are to run into unexpected problems. To find the best mortgage rate, start by using Credible.
Avoid these 3 mistakes when buying a home during COVID-19
Record low mortgage rates triggered a surge of potential buyers into the housing market looking to lock in low rates, creating a housing market frenzy that tipped the scales in favor of sellers for most of 2020.
According to the Realtor.com Housing 2021 Forecast, home price growth is expected to slow with more sellers entering the market and as mortgage rates fall into a pattern and ultimately trend upwards. As far as a return to normalcy, seasonal patterns are expected to emerge with improved inventories by the end of 2021.
These events changed how buyers must approach the housing market. Here are three mistakes potential buyers should avoid when navigating the housing market during the pandemic.
- Overspending
- Getting caught up in a bidding war
- Not being prepared for lender requirements
1. Overspending
Interest rates are so low. You can get a lot more house for your money in today’s market.
Sometimes, however, it’s better to just say “no." Low mortgage rates may result in considerable savings but it doesn’t mean buyers should purchase a higher-priced home. The best way to take advantage of these low rates is to stick to your original budget and lower your mortgage payments instead. This extra cash could also be used to pay down your mortgage debt and reduce the length of the loan.
Credible can show you current mortgage rates from multiple lenders and help you make an informed decision to ensure you aren't overspending
SHOULD I BUY OR SELL A HOUSE DURING THE CORONAVIRUS PANDEMIC?
2. Getting caught up in a bidding war
The pandemic hasn’t slowed down the housing market. Buying in a seller’s market means increased competition, bidding wars and higher home prices that can be attributed to:
- Mortgage rates
- Low inventory
- An ultra-competitive housing market with more potential buyers
It’s easy to get caught up in a bidding war and end up paying more than you originally intended. Do your research before putting in an offer. Look at the market and what similar homes have sold for in the same neighborhood. At the same time, be quick. Homes come and go and buyers need to be fast when purchasing a home in a seller’s market.
Credible makes it easy to compare rates and lenders in one place so you can find the best mortgage loan for your needs quickly.
HOW TO FIND THE BEST RATES AND FASTEST CLOSINGS DURING CORONAVIRUS
3. Not being prepared for lender requirements
As of December 2020, the unemployment rate was at 6.7%, which was nearly twice the pre-pandemic level from February 2020, according to the Bureau of Labor Statistics. Coronavirus relief efforts enabled many borrowers to take advantage of mortgage forbearance, leaving many homeowners behind on their mortgage payments going into 2021.
Because of increased rates of financial instability among borrowers, mortgage lenders are highly cautious of borrowers defaulting on their payments. Be prepared to jump through some hoops to prove financial stability when buying a home during the pandemic.
Always be prepared and have your paperwork ready before you decided to purchase a home. Credible can tell you how to get pre-approved for a mortgage. After all, not all pre-approvals are the same. You can get started on the pre-approval process through Credible today.
WHAT CREDIT SCORE DO YOU NEED TO BUY A HOUSE?
What are today’s mortgage rates?
Based on data from Freddie Mac’s Primary Mortgage Market Survey, the U.S. weekly averages as of Feb. 4, 2021, are as follows:
- 30-year fixed-rate mortgage: 2.73%, unchanged from last week and down from 3.45%, -0.72 from last year
- 15-year fixed-rate mortgage: 2.21%, up from 2.20%, +0.01 last week and down from 2.97%, -0.76 from last year
- 5/1-year adjustable-rate mortgage: 2.78%, down from 2.8%, -0.02 last week and down from 3.32%, -0.54 from last year
For the past year, remarkably low mortgage rates have boosted purchase and refinance activity. As of February 2021, mortgage rates remained near record lows as the U.S. economy continues to struggle to recover from the coronavirus pandemic. However, rates are predicted to remain low as the Federal Reserve keeps interest rates close to zero until the economy bounces back. For a ballpark estimate on corresponding monthly mortgage payments, try using a mortgage calculator.
Visit an online mortgage broker like Credible to get personalized rates and preapproval letters without affecting your credit score.