This ARTICLE On Buying A House During Recession And COVID-19 Pandemic
The team at Gustan Cho Associates gets countless calls about Buying A House During Recession And COVID-19 Pandemic.
- Home values have been skyrocketing prior to the coronavirus pandemic for many years
- Many experts and economists predicted the housing market will undergo a market correction due to the coronavirus pandemic
- However, economists and analysts were dead wrong
- The housing market did the opposite
- The housing market is strong today than it was prior to the COVID-19 pandemic
- There is more demand for homes than inventory available
- Part of the reason is due to the lowest mortgage rates in history
- The Federal Reserve Board has dropped interest rates to zero percent
- The drop to zero in interest rates by the Central Bank has added fuel to the fire with mortgage rates
- Mortgage rates on a 30-year fixed-rate mortgage hit under 3.0%
- Many potential homebuyers are expediting buying homes now rather than to wait due to historic low mortgage rates
- Many homebuyers do not seem concerned about buying a house during recession and COVID-19 Pandemic
Buying A House During Recession Versus Booming Economy
Buying A House During Recession And COVID-19 Pandemic or a booming housing market depends on each person’s individual situation.
- The first question to ask yourself is how secure is my job. Job security is the number one factor when it comes to the answer to buying a house during recession and/or a booming housing market
- Other questions to ask yourself is why would I want to buy a house versus renting a home
- The coronavirus pandemic has hit the U.S. economy hard
- Over 50 million Americans have filed for unemployment
- Is a home purchase now a good idea?
- What are my risk factors?
- Is there uncertainty in the market now?
- The stock market has hit an all-time high in February 2020
- The Down Jones hit 29,000 in February 2020
- The Dow Jones Industrial Average then tanked to a low of 18,000 due to the doom and gloom of the coronavirus pandemic
- The Dow Jones has been creeping up consistently to 27,000 despite 50 million Americans out of work
- News in the housing market is positive
Experts are telling the world that now is a great time to buy a house despite surging home prices for the past five years.
What Experts Are Forecasting On The Housing Market
Historical low mortgage rates are adding fuel to the fire on the hot booming housing market.
Historic Low Mortgage Rates Attracting More Homebuyers
The coronavirus pandemic has failed to ruin the U.S. economy.
- The housing market after the coronavirus pandemic is stronger than ever
- There are more homebuyers today than a year ago
- The demand for housing has never been stronger than before
- Despite the uncertainty of the U.S. economy due to the COVID-19 pandemic, Americans are shopping for homes like never before
- The Central Bank lowered interest rates to zero percent
- With interest rates at zero percent, mortgage rates hit an all-time historic low
- Mortgage rates for prime borrowers on 30-year fixed-rate mortgages fell below 3.0%
- One of the things that are boosting the housing market is investors are anticipating a quick economic recovery from the devastation caused by the coronavirus pandemic
- You can tell that investors are optimistic about a speedy economic recovery due to the Dow Jones trading at 27,000
- The Dow is nearing the all-time high of 29,000 it reached in February 2020
One devastating news about an economic downturn will send the financial markets tanking like never before.
Overinflated Stock Market
There are over 50 million Americans who have filed unemployment. However, the stock market is nearing all-time highs. Why is that? The stock market and investors think the recovery will be quick and fast. Investors think the 50 million unemployment numbers are just temporary. They believe the economy will be back to normal in a matter of months and not years.
Maria Windham of Gustan Cho Associates is an expert in helping borrowers with lower credit scores and bad credit qualify for a home mortgage. Maria has been researching home prices, home value swings, and housing markets in the nation.
The decision of when the right time to purchase a home is dependent on individual personal credit, income, and personal standards.
Buying A House During Recession Depends On The Ability To Repay
The U.S. economy is booming. However, it is booming too fast. The stock markets are definitely overpriced due to the optimism. Home prices are still increasing with demand overpowering supply. With mortgage rates as low as it is today, more buyers are itching to purchase a home today than wait. In the event a recession hits the U.S., homes will not tank as it did back in the 2008 financial crisis. People still need to live. Rent prices are escalating and owning is cheaper than renting in many cases. As mentioned in the earlier paragraph, the decision of buying during recession or a booming housing market depends on the individual. Buyers with a strong job and skills who are confident they will remain employed should purchase now rather than waiting. Buyers who have high paying jobs but are in a field as a restaurant industry with a shakey future may want to wait to purchase a home. Lenders prefer wage earners employed by a solid company rather than self-employed borrowers due to job stability during the current market conditions. Most mortgage companies have implemented more lender overlays to weed out weaker borrowers who may experience a difficult time in having the ability to repay their mortgage payments. People who have weaker credit scores, little to no cash reserves and short term on a new job may want to rent versus buying at this time.
If you have been following the news, you know the housing market is incredibly strong even during these unprecedented times. It may sound like an oxymoron, but this pandemic has created a surge in the United States real estate market. Thousands of Americans are trying to capitalize on historically low-interest rates. We are also seeing a surge of families moving out of major cities and into suburbs. In this blog, we will detail how to prepare to qualify for a home loan. Every borrower’s situation is different, but these are some general rules. We encourage you to reach out to Gustan Cho Associates for a one on one mortgage consultation to specifically address your qualifications.
Mike Gracz can be reached directly on (800) 900-8569 or via email at gcho@gustancho.com.
How To Prepare Buying A House During The COVID-19 Outbreak: Down Payment And Closing Costs
The main hurdle Americans need to conquer to buy a home is saving money for the down payment and closing costs. Additionally, many mortgage products require extra liquid capital as RESERVES to qualify. Many Americans have high consumer debt and saving money is next to impossible. It is a common misconception that you must have a 20% down payment to purchase a home. There are loan programs such as VA and USDA that do not require a down payment. There are numerous low-down-payment housing options available. First-time homebuyers may capitalize on a 3% down conventional mortgage. Further, any American can utilize a 3.5% down payment for an FHA mortgage. Assuming you’re buying a primary residence. Utilizing a less than 20% down payment, you will have added mortgage insurance but will allow you to achieve homeownership.
Strategies In Saving Money For The Down Payment And Closing Costs On A Home Purchase
Now that you know a 20% down payment is not required, let us go over some strategies for saving the required funds to buy a home:
Retirement funds:
- Thousands of Americans will utilize their retirement funds to purchase a primary residence
- In many retirement plans such as a 401(k), there is a clause where you can utilize a portion of your account to buy a primary residence without an additional penalty
- Please contact your tax professional for any income tax-related penalties
Utilizing technology to help you save:
- Many banks and some third-party applications can assist you in saving money
- Some will automatically take money out of your account and move it into a separate account
- Allowing you to save money slowly
- Moving money out of your primary bank account can help because the money is not visible
- Those funds will start to compound faster than you think
- We have had clients in the past open a separate bank account simply for saving money to buy a home
- They will set up their direct deposit with a portion of the check going directly to a different bank account
- This is a great strategy
Keeping the money separate from your everyday funds will make you less likely to spend the money you need to save for down payment.
Down Payment Assistance Programs For The Down Payment On A Home Purchase
Down payment assistance programs:
- Down payment assistance programs are starting to roll back out after disappearing at the beginning of the COVID-19 coronavirus outbreak
- This is a good sign for the housing market
- Down payment assistance programs can be a great tool to buy a home
- However, it is important to understand that nothing in this world is free
- Most down payment assistance programs come with higher interest rates
- They may cost you more money over the life of the loan but can be a great tool to enter a property
- It is important to understand the specifics of your down payment assistance program
- Some programs will have a prepayment penalty
- Meaning if you sell or refinance the property in the first X amount of years, you may owe the money that was given to you
- Make sure you ask your loan officer the proper questions if you are utilizing a down payment assistance program
The last thing you want to happen is you need to move for family or work, and you owe the money back when preparing to buy your next home.
How To Prepare Buying A House During The COVID-19 Outbreak: Importance Of Credit
Credit. Credit is also a major pillar in mortgage financing. Having a higher credit score will dramatically increase your qualifications. However, we specialize in lower credit score mortgage lending. We are able to utilize credit scores all the way down to 500 even during this pandemic. Besides credit score, credit history is incredibly important. Missing payments will reduce your chances of qualification. Guidelines requirements are based on the ability to repay your mortgage loan. Underwriting will need to see on-time payments for rent, installment loans, student loans, and revolving credit cards. You are allowed to have a few minor missed payments sprinkled throughout your credit report. For more information on credit history requirements, please read our blog on LATE PAYMENTS REPORTING ON CREDIT.
How To Prepare Buying A House During The COVID-19 Outbreak And Qualifying For A Mortgage With A Lender With No Overlays
Gustan Cho Associates are experts in mortgage lending without LENDER OVERLAYS. We have helped numerous clients finance their first property. Most of our clients become repeat clients. Our customer service is unlike any other. Our loan officers are up to date on the ever-changing guidelines. That is incredibly important during the COVID-19 coronavirus outbreak as major agencies are changing guidelines quickly. It is important that you are comfortable with your lender. Since we do not have lender overlays, we are able to help more clients than most lending institutions. If you are having issues
qualifying for a mortgage, we will point you in the right direction. Feel free to call Mike Gracz on (800) 900-8569 for a one on one mortgage consultation. We are available seven days a week. We look forward to helping you and your family buy or refinance your next home!
