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Should You Buy a Home During Coronavirus?

There is a certain time in everyone’s life when we start to ask ourselves, “Should I buy a home? Am I ready?”

That question is a bit different now that our communities are dealing with coronavirus.  Maybe you were ready to give a confident answer a few weeks ago before the pandemic began.

But how should you answer that question today?

No matter what’s happening in the market or “out there,” your decision on whether you should buy a home has to do with your own personal situation and finances.

So before you move forward with buying a home, now or at anytime, answer these four questions to see if you should begin taking steps toward homeownership.

It’s important for any potential buyers to take the time to do this, but now more than ever, go over each question carefully and take into account how COVID-19 could be impacting your ability to seriously look for a new home in the weeks and months ahead.

1. Can I afford it?

There are several factors to consider before you can answer this question.

Your financial picture.  Your personal finances could be fluctuating due to employment changes or income losses, dipping into your savings account, and also the volatility of the stock market.  Take a hard look at your finances and your employment outlook for the coming year and how much cash flow you will have during that time.

Down payment and closing costs. When purchasing a home, you’ll also need to consider some immediate costs, such as a down payment and closing costs, which typically require cash up front.

Depending on your qualifications, lenders may require higher down payments now, so it’s important to know what is expected from as little as 3% for certain loan programs to 20% down.  And closing costs can run around 3% of the purchase price.

First-time buyer programs. There are assistance programs for first-time buyers that can help lower both your monthly payments and any cash required upfront.  You may qualify for one of them and it’s worth looking into what is currently offered.

Monthly mortgage payments. Once you are a homeowner, you want to make sure you can afford your monthly payments. Buyers should work backwards and focus on what they can afford each month for a payment to determine a purchase price that is affordable.

Understand that on top of your mortgage payments, you’ll also need to pay for condo fees (if any), insurance, and taxes. In addition, you’ll need to cover your utilities and home maintenance.

Budgeting now. Start a budget, if you don’t already have one. Be realistic about your spending and take into account how COVID-19 is affecting it. Your budget may have changed and could continue to change in the coming weeks and months ahead.

Purchase price. Once you decide what your monthly payment and down payment amount should be, then and only then, can you focus on homes in a certain price point. This is the best way to stay within your comfort level and not be “house poor.”

2. How is my credit?

Lenders are being strict when it comes to mortgage loans right now to reduce their risk, and most are requiring higher FICO scores than before coronavirus.

Know your credit score. It’s a really smart idea to take a look at your credit score and history as soon as you start asking yourself if you’re ready to buy a home. It never hurts to have a solid grasp on what’s in your report. The higher your credit score, the better the available loan products and interest rates will be offered to you, especially now with lenders being careful with borrowers.

Having a score in the high 600s and 700+ will give you more loan options. Lenders want to see that you are dependable and reliable when it comes to credit and borrowing money, and this score shows them that.

Monitoring your score. A credit monitoring company would be a great place to sign up for regular credit reports.  It’s also a way to protect yourself from credit fraud; your credit could be compromised for a reason that has nothing to do with you!

Improve your score. There are steps you can take to improve or repair your score, which is why taking a look ASAP is a good idea. If there are marks on your credit history, look into each one, check for accuracy and then take action.

Now is the time to improve your score or to make sure you don’t make a good score worse during the coronavirus. Make your credit card payments and avoid unnecessary or large purchases that make your balance too high. You can always work with a free credit counseling service if you need guidance on your budget and paying your bills.

3. Am I planning to stay put for the next 3 to 5 years?

This is an indicator that tells you if you are ready to settle down in one place and picture some stability in your life in the years ahead, including your employment. If the answer is yes, then buying could be the smart financial choice if other important factors also line up despite what is happening with coronavirus.

Renting vs. buying.  You can look at some break even research to see how long you need to stay in your home for it to be worth it when compared to renting. Many times buying a home could be cheaper in the long run than renting.

Check out these interactive maps and graphs for more information on your area:

Zillow: Rent vs buy calculator

NerdWallet: Rent vs buy – what’s right for you?

Tax break for homeowners. Renting offers zero tax breaks, but buying a home offers several tax benefits that can make homeownership more affordable: mortgage interest rate deduction, property tax deduction, and certain deductible expenses during the home buying process. Always check with your own tax advisor when determining any benefits with your home purchase. Take this into account when comparing the costs of renting vs buying.

4. Am I ready to take care of a home?

Being a homeowner means maintaining a home and being ready to budget for it too.

Make a commitment. As a homeowner, you can’t call the landlord to fix a problem, it’s all on you. Are you ready for that responsibility and the time it might require?  You don’t have to know everything about how to take care of your home before you buy — you can learn or hire a professional for certain tasks. It’s being aware of what needs to be done and what needs to be maintained that is more critical when you’re a homeower.

Maintaining your home’s value. Your home is your dwelling but it’s also an investment, so educating yourself on what to do to keep it up is an important part. Budgeting for your home’s maintenance is essential to being a good homeowner and maintaining its value. Remember, when the time comes to sell, you want your home to be at its best when you list it.  That way, you can sell it at a good price so you can move on to your next home with confidence.

5 (bonus question).  Who can help me with making my decision?

We are here to help you go over your finances and see if your situation could work with what is going on in the current housing market in the coming months.

Once you ask yourself the questions above, contact us if you are leaning toward “Yes” and we can help you proceed accordingly and safely.  Many of our buyer clients are seeing this time as a good opportunity to buy a home when less buyers are out and about.

If you are more “No” right now, it’s never too early to start any planning or budgeting so that homeownership can happen in your near future.

Either way, we always say the best way to start the home buying process, even if you aren’t ready to look at homes yet, is to be well educated about the process itself.

We like to meet with our clients even a year before they are ready to see homes so we can talk them through what to expect so they are ready when the time is right.

Right now, we are doing meetings over Zoom, FaceTime, or Skype.  We’d be happy to schedule one with you.