Thinking of purchasing a home during the coronavirus crisis? There are certainly advantages, but this article outlines some of the downsides you will want to consider.
Earlier this month, we wrote an article about the advantages of buying a home during the COVID-19 crisis.
We discussed how there will probably be less competition from other buyers, a possibility for stabilized pricing, and a likelihood that many real estate firms will start investing in remove technology, such as virtual tours.
But we don’t want to give the wrong impression. There are still downsides to buying during the COVID-19 crisis. Besides the higher potential for contracting and spreading the virus (which we won’t even try to analyze; we’re mortgage experts, not medical professionals), there remain downsides to the real-estate shopping and purchasing process as a whole.
In the end, whether or not you buy now, or simply wait until things settle down, is a personal decision. There is no right or wrong answer that applies to all people.
To make the right choice for you, the first step is to be informed on all the possible downsides of purchasing during the coronavirus crisis.
Purchasing a Home During the Coronavirus Crisis: What are the Downsides?
Tighter Qualification Standards
When the economy is running strong, with lots of jobs, high pay, and a stock market that is soaring, lenders can be a little more lenient with their qualification standards. People are less likely to default on loans, so lenders can offer financing with lower downpayments and smaller credit scores.
But when the economy slows, as it has during the coronavirus crisis, lenders have to tighten their restrictions. When people are, from a statistical standpoint, more likely to default on a loan, lenders often require higher downpayments. They could also temporarily stop offering low-credit loans as well as other loan products that create buying opportunities for would-be homeowners.
While lending will still be available, and many borrowers will still be able to qualify (and more still will notice virtually no change whatsoever) you may have a more difficult time with qualification depending on which loan product you choose.
You May Have to Settle for Site Unseen
Virtual tours were becoming more common even before the coronavirus pandemic; now that people are social distancing, the rate of adoption is accelerating. Real estate agents know they need to offer this service, which helps people look at housing on a deeper level than simple pictures.
But in some cases, you may have to settle for purchasing a house “site unseen,” as some sellers do not want small groups or even a single person entering their home. Virtual tours provide a high level of detail, but they don’t give the total immersion; they don’t let you feel what it’s like to be in a home. While you can always request a visit (and walk away from the deal if you can’t), it’s entirely possible that to purchase certain houses on the market, only site-unseen will be allowed.
Fewer Houses From Which to Choose
When shopping for a home, part of the fun is looking at all the different properties, comparing layouts, sizes, landscaping, pricing, and more. Visiting the dozens of homes for sale in your neighborhood is part of the process. But with the coronavirus, fewer people will be listing properties, which means you will have fewer options to browse.
Certain Loan Products May Be Unavailable
When you find a home you want to buy, you’ll then need to choose which mortgage is best for you. (Assuming you’re not paying cash, of course!) However, as long as the coronavirus is lingering over American public health and the economy, some loan products may not be available. While most government-supported loans, such as FHA and VA loans, are still available, certain forms of financing may not be. This is especially true for loans that typically have higher risks levels.
Jumbo loans, for example, were reduced or eliminated by many lenders, and bank-statement loans, which have recently returned to many lending offices, can still be limited in scope and qualification standards.
Selling Your Old Home Could be More Difficult
If you are planning to purchase a home in the near future, there is a good chance you will need to sell your existing home. In some markets, moving your old house could be more of a challenge, as other buyers may still be waiting for the coronavirus to run its course.
Unless you are a first-time buyer who has no concern for selling an existing property, this is an important consideration. Yes, you will be able to find a home to purchase (even if options are fewer), but there is a possibility that you may have to settle for a lower price due to decreased demand. You also face the possibility that while your qualification may go through, the buyer may have difficulty qualifying, which could create delays on your sale.
All current homeowners need to keep this in mind before they decide to enter the housing market. (It’s worth noting that in many areas, homes are still selling quickly, so your specific market is especially important on this point.)
No Open Houses (In Most Areas)
While we won’t go so far as to say that open houses are a thing of the past, we will say (with confidence) that if you are purchasing a home during the coronavirus crisis, you probably won’t visit open houses. Open houses are a convenient, casual way to look at homes with little to no commitment. You don’t have to schedule a showing, you don’t have to be pre-approved; you just show up and look at the house. They are helpful for gathering information, and they are an important part of the overall sales strategy.
But for the summer of 2020 and the foreseeable future, there will likely be no open houses in many markets.
Proudly Serving Your Needs During the Coronavirus Crisis
If you are purchasing a home during the coronavirus crisis, let us help. With common-sense mortgage underwriting, we can help you get approved for a top-quality loan that helps you purchase the home of your dreams!
Even if you simply want to explore the idea of purchasing, contact our staff and learn more about affordable loans through our expert team!
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