Should I buy or sell a house during the coronavirus pandemic?
Buying or selling a house during the COVID-19 pandemic can add new wrinkles to your financial plan. (iStock)
The coronavirus pandemic has affected the way Americans live, work, travel and manage their finances. For homebuyers or those looking to sell a home, COVID-19 may mean putting those plans on hold.
Deciding whether to buy or sell a home is always a big decision, but even more so amid a pandemic. If you're wondering whether now is a good time to follow through with your buying or selling plans, here's what you need to know.
What are today's mortgage rates?
One important consideration for a home buyer is the interest rate they may be able to qualify for on a home loan. Online marketplace Credible can show you what rates you currently qualify for — just plug some of your information into their free online tools to learn more.
If you're basing your decision to buy a home on mortgage rates alone, the numbers look promising.
"Last week, the average rate for a 30-year fixed-rate mortgage dropped below 3 percent for the first time in 50 years," said Christopher Totaro, an agent at Warburg Realty.
Jumbo mortgages, meaning home loans that exceed conforming loan maximums, notched slightly higher at around 3.25 percent. By comparison, the average mortgage rate for a 30-year fixed-rate loan was at 3.49 percent at the end of June, according to Realtor.com.
Totaro pointed out that rates have maintained historic lows over the last year, though the big question is how they'll trend in the next few months. Mortgage rates, which follow the movements of the 10-year Treasury note, have dropped as investors have moved more of their money into those safer investments.
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Stricter criteria for mortgages
Getting a mortgage in the middle of the coronavirus pandemic can present new challenges for home buyers or homeowners hoping to refinance as banks roll back on lending.
Totaro said this can be chalked up to a number of factors, including banks having less liquidity and demand for loans outpacing supply. Record unemployment numbers have also played a part in reshaping how lenders assess risk.
"The result is that minimum credit score requirements have risen to a 700 or higher credit score and down payments are moving from 10 percent to 20 percent," Totaro said.
FHA mortgage loans, USDA loans and VA loans can be more accessible to home buyers with lower credit scores and liquid savings to make a down payment. If you're looking for a loan to buy a home or you're interested in refinancing, comparing mortgage rates from different lenders is a must.
For instance, you may be leaning toward a fixed-rate loan, but you should also consider the benefits of choosing an adjustable-rate mortgage. Using an online tool like Credible makes it easy to compare rates from different lenders without affecting your credit.
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Finding the best rate possible can help keep your home buying costs as low as possible. That could prove beneficial if the coronavirus pandemic has affected your income or your ability to set money aside in savings.
What are the latest real estate trends?
In terms of trends, you could look at real estate as a buyer's market right now. Totaro said there are more sellers needing to sell, though whether it makes sense to do so can depend on where you live and the type of property you own.
"Will things get worse and I better sell now or should I wait a year to sell? That's the question every seller wants answered," Totaro said.
The Mortgage Bankers Association's July 15 update found that mortgage applications increased 5.1 percent from the week before. That's on a seasonally adjusted basis; on an unadjusted basis, mortgage applications were up 16 percent week over week.
The survey suggested that this trend is due largely to the continuing downward slide in mortgage rates. Though it could also be attributed to being the middle of the peak summer buying season.
Traditionally, late summer is considered a prime time to scoop up bargains as sellers try to unload homes and complete their moves before the start of the school year. Though whether that holds true for this year may hinge on how states handle school reopening plans amid COVID-19 concerns.
If you haven't compared mortgage rates yet, now could be a good time to see what lenders are putting on the table. With Credible, it's easy to compare rates and get pre-approved online.
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The process of shopping and closing on a home may be different
If you're venturing into the real estate market, either as a home buyer or seller, be prepared for things to look a little different.
Totaro said that in his home area of Manhattan, buyers are touring properties without their agents because only the seller's agent can be present. Showings have become more spaced out and public open houses have become less common. If you want to view a property in-person, you may need to be prepared to wear a mask and/or gloves, submit a financial statement, sign off on a COVID liability release and sign documents stating that you have no symptoms.
One alternative for both buyers and sellers is the use of virtual tours to show homes. These can eliminate the need to see a home in-person if you're concerned about the virus. Though if you're committed to buying, seeing the home with your own eyes is still something you may want to plan for before closing.
In terms of closings, there may be limits on the number of people who are allowed to attend and/or mask requirements. Digital closings offer a work-around, though you'd need to check first to see if your closing attorney has adopted them.
While COVID-19 is unpredictable, what you can count on is that buying a home is no longer business as usual. The more prepared you are, the better and that begins with comparing mortgage rates online and using an online mortgage calculator to estimate your monthly payments.
If you're still unsure whether to buy or sell a home during the coronavirus pandemic, visit Credible today to connect with experienced loan officers and get your mortgage questions answered.