How To Prepare To Buy A Home During A Pandemic
Updated: Sep 30, 2020
When you are preparing to purchase a home, you should put together a checklist of items involving your total financial picture. This should include the current state of the economy. As everyone is coming to understand, the current situation in the United States regarding the pandemic, can have a significant effect over your financial future that you must adapt to in order to meet your future goals.
The following are items that can help you prepare your finances for buying a home:
Stability: You must have a stable job or business that has adjusted to the current COVID-19 economy. This is crucial in order to move forward to any other steps on this list.
Savings: In order to make a serious judgement about buying a home, you must have money saved. One should estimate 10% for down payment and closing costs. Also, an emergency fund for at-least 3 months would benefit you greatly.
Credit Report: Make sure you obtain a free copy of your credit report at annualcreditreport.com . You will have to keep track of your credit score from month to month in order to recognize any positive or negative changes to your credit score. A small change in your report or score can have a significant impact when closing comes around. You may check out IdentityIQ, as they offer a free trial for $1 for 7 days using our link , and they provide up to date credit reports and scores from all three credit bureaus on a monthly basis. A higher score can save you points on your mortgage which will save you a lot of money over the long term on your mortgage.
Budget: Many people do not take into account how much house they can afford or need when looking to buy a home. You must look into your monthly bills as well as your finances to see if buying a home right now is affordable and in your best financial interests. Usually a good rule of thumb is to keep your mortgage below 40% of your total income. The lower you go, the less financial strain on your life. Some loans require 29% and below for loan approval, while others allow over 40% debt-to-income ratio.
New or Used home: Usually new homes are more expensive in comparison to used homes. However, many builders offer price breaks and may even cover your closing costs if you use their mortgage lenders for approval. Used homes may be a better fit sometimes because of location or the current owner is willing to negotiate the price in a down market.
Timing: In the current time of uncertainty, waiting may be the best option depending on the housing market in your area. This means more time to put yourself in a better financial position to take advantage of the best deals out there in case a buying opportunity presents itself in the near future.
Make sure you go over your financial big picture and credit to take advantage of the best buying opportunities during this pandemic. The Federal Reserve has lowered interest rates, but many banks are not to eager to quickly lend money either. Making sure your financials are in order will help you quickly obtain lender approval when the time comes.