Survey: 30% of Americans think 2020 is an ideal time to buy a home
To say the economy has been tough in 2020 would be an understatement. The coronavirus pandemic has caused significant damage to the job market, which has led to a record-breaking number of unemployment claims filed in recent months. And, as the months roll on, the hits from the COVID-19 pandemic just keep coming.
Still, despite this year’s economic turmoil, a surprising number of Americans think that 2020 is an ideal time to make a property purchase. According to a recent survey by TheSimpleDollar, about 30% of the participants agreed that this is an ideal time to buy a home or property – and nearly 7 in 10 of those in agreement think that 2020 is the best time for them to purchase a house or property due to low mortgage interest rates (68%). The process of buying a home is one of the toughest things you’ll ever have to do in your lifetime, but more people could be inclined to do it if they have the chance to secure a low mortgage rate in the process. You just need to make sure that you find the perfect house. You could do this by looking for “open houses colorado springs” or in an area closer to home, as well as getting in touch with your local real estate agents to help aid with the house-hunting process. Either option will work. You just need to make sure that you have the relevant finances to secure the move, and 2020 could be the perfect time for some people. If people feel like it is the right time to move during this pandemic, they need to keep something in mind – organization. Buyers staying organized during uncertain times can help them prepare for delving into the real estate market. Things are different now, so much is being done from a distance and organization has to be key because it’s not like you can meet up face to face with your realtor and hash out any issues.
So, if you want to ensure a smooth home purchase during this time, you should:
Clean up your finances. As websites like https://grootrealtyco.com/grand-rapids-mi-homebuying-tips are suggesting, sort out your finances, and clear any debts that you have. If you want to get approved for a loan right now, you’ll need to make sure your finances reflect that you can afford to pay it back. This means socking away some money into savings, paying off other loan or credit card balances and avoiding large or significant purchases in the time leading up to the loan application.
Pay close attention to your credit. You should pull copies of all three credit reports to go over before you apply for your mortgage. These reports are usually free to pull once a year at Annualcreditreport.com, but all three reports have been made available for free each week through April 2021 due to the coronavirus pandemic.
Get preapproved. The best way to get an idea of your rates is to go through the preapproval process with a lender. This will give you an idea of where you, as a buyer, fall on the borrowing spectrum. You’ll need to have financial information on hand, but in many cases, you can complete the process fully online and receive an answer in 1-3 days or less.
Consider ways to be flexible. The reality of the current housing market is that in some markets – especially in larger metro areas – there are fewer houses for sale than the demand calls for. If you’re shopping in those areas, you’ll have to find ways to make concessions – and you may end up paying the full asking price or more than list price for the home if there’s a ton of competition. As more people aim to take advantage of the record-breaking interest rates, the more demand you’ll have for the homes on the market.
Tips for finding the best lender
Consider these tips from mortgage professionals for finding the best lender:
Choose a local lender.“Local companies are rooted in the community and have a reputation to uphold. They know the local market and you have a much better chance to ensure the deal goes smoothly,” Dave Cook, a loan officer for Cherry Creek Mortgage Company in Denver, Colorado, said.
Choose a lender that understands you. You may need a company that specializes in military and VA loans, or you may work best with a first-time homebuyer specialist or lender that understands the needs of lower-credit applicants. “Understanding your borrower profile, and how that corresponds into options in the mortgage market, is key,” Joe Thweatt, branch manager at Axia Home Loans, said.
Interview your lender. Some lenders may be too busy to handle your application in a timely manner, and other lenders may not fit your needs. Ask questions about how they can be reached if you have questions and monitor how long it takes them to call you back. Philip Georgiades, Chairman of VAHomeLoanCenters.org said you should be proactive and “ask your mortgage broker how their service is at the moment.”
Mortgage FAQ
How can I save on mortgage interest rates?
Work on your credit score: The better the score, the lower risk you will be to a lender, which will give you access to better interest rates.
Take out a mortgage with your existing bank: While your bank may not offer the lowest interest rates, you may get lucky and be offered a special rate for being an existing customer.
Shop for competitive rates; Work with a lender or broker who can watch interest rates on your behalf and let you know when they’re lower.
When should you refinance your mortgage?
Refinancing is when you replace your mortgage loan with a new one. This is often done after you’ve built up a better credit score and can qualify for lower interest rates or have a higher income and shorten your loan with higher monthly payments. By replacing the older loan, you can lower your monthly payments and the total cost you pay to borrow the money. When you’re ready to get to work you should use a mortgage calculator to help you understand closing costs based on your financial situation.
When refinancing, you can also reduce the length of your loan and remove private mortgage interest. You may also want to refinance to change your loan from an adjustable-rate mortgage to a fixed-rate mortgage depending on the interest rate you’re currently paying.
How do you compare different types of mortgage lenders
While you’re looking for the best possible mortgage rate and mortgage type, take into consideration the different types of mortgage lenders on the marketplace today. While you shouldn’t find anything drastically different between lenders, the details are still important. We’ve narrowed mortgage lenders into three categories:
Banks
This category includes mortgage bankers that work for the major banking institutions (Bank of America, Wells Fargo, etc.). Mortgage bankers can provide direct links between lenders and the organizations that provide the capital for their mortgage.
There’s more security in using a mortgage banker, and if you already have a good history with the bank, you might be able to obtain a lower interest rate than on the marketplace.
Brokers
Mortgage brokers are essentially middlemen between borrowers and lenders. Using a broker means that you’ll have more access to competitive repayment terms and interest rates outside of specific financial institutions.
Credit Unions
Credit unions can be an appealing choice for anyone looking to find a mortgage with average to bad credit. They tend to operate as nonprofits and tend to keep loans in-house as opposed to utilizing third parties.
Non-bank Lenders
Non-bank lenders, such as Quicken Loans, specialize in mortgages and don’t offer other traditional consumer banking services. They represent a fast-growing segment of the mortgage market.
Ask the Experts
Chane Steiner, CEO, Crediful.com
What’s your advice to people who have lower credit and are applying for a mortgage?
If people have lower credit and are applying for a mortgage, my advice would be to take your time shopping around. With a lower credit score, it might seem like there are no low-interest or affordable options for you. This isn’t really the case, however, you might have to look a bit harder, you can find a lender that works for you and your financial situation.
What would be your advice to folks who have no credit history and are applying for a mortgage?
If you’re applying for a mortgage without any credit history, I would advise looking towards some non-traditional credit history options, such as rent and student loan payments. Even without a formal credit history, you can still use these payments to show lenders you have a good history and you’re capable of paying them on time consistently.
What do you think people’s biggest pain point is when getting a mortgage? What tips would you offer those people?
I would say people’s biggest pain point when getting a mortgage is feeling overwhelmed. When shopping for a mortgage, it can be incredibly difficult to pick a lender when there’s so many options, and there’s so much you have to think about and consider.
My advice to these people would be to take your time. There’s no harm in taking this decision-making process slowly, and carefully weighing your options. One great strategy is to do a side-by-side comparison between multiple different lenders and mortgage plans, so you can easily see which one will work best for you.
Dennis Shirshikov, Writer, Fit Small Business
What’s your advice to people who have lower credit and are applying for a mortgage?
Now more than ever, working to improve your credit score is a great investment. With rates at all time lows, it might make sense to consolidate card debt with a personal loan. That will increase your credit score, allowing you to access a better mortgage. You might find that most mortgage companies will refuse to give you a mortgage if you have a poor credit score. This is because they don’t think you’ll pay it back, causing them to lose money. That’s why credit scores are so important, so it might be worth trying to get a personal loan from a company like Tower Loan, for example. Hopefully, that should help you to improve your financial situation, ensuring you stand a better chance of getting a mortgage in the future.
What would be your advice to folks who have no credit history and are applying for a mortgage?
If you don’t have a credit history, it might be more difficult to qualify for credit. It will likely require a larger down payment, or you can start building your credit with credit cards in the meantime. You can also show utility statements and any other payments to demonstrate timeliness and creditworthiness.
Should people get pre-approved for a mortgage? Why or Why not?
Definitely get pre-approved for a mortgage since it will help you avoid shopping outside your budget. If the pre-approval is higher than you expected, remember that you don’t have to use all of it. It’s much better to spend a little less and decrease the debt burden.
Eric Jeanette, Owner, Dream Home Financing & FHA Lenders
What is your advice to folks who have no credit history and are applying for a mortgage
Fortunately, there are some lenders who will still provide mortgages for individuals who have no credit at all. Even FHA guidelines permit a manual underwriting process for borrowers with no credit history. They will instead review your payment history on your utility and phone bills for example.
What do you think people’s biggest pain point is when getting a mortgage? What tips would you offer those people?
The biggest pain point from my perspective would be how overwhelmed people get with the entire process, collecting the documents, and worrying about whether they are getting the best rate possible.
The best tip would be to do everything possible to improve the credit scores and to save for the largest down payment. That will go a long way in making the borrower eligible for more loan programs and at the lowest rate.
What are the most common things people don’t understand about mortgages?
The most common misunderstanding is how mortgage interest rates are determined. We often get calls from people who first ask “what is your rate”. That is like walking into a car dealer asking “what is the price of a car”. There are so many different kinds and with many different options. It is the same when it comes to mortgage rates. There are so many different factors that will determine what your particular rate will be for your specific loan scenario.
Andrina Valdes, Executive Sales Leader & COO, Cornerstone Home Lending
What’s your advice to people who have lower credit and are applying for a mortgage?
Look into an FHA loan, it’s one of the friendliest to anyone with low credit and especially first-time buyers. This kind of loan is known for its flexible credit requirements – potentially as low as 580, though it can depend on the borrower. FHA loans are also known for their low down payment, as low as 3.5-percent minimum.
Should people get preapproved for a mortgage? Why or why not?
Definitely. Getting prequalified is absolutely the most important step you can take when buying a house, even before you start house-hunting. Getting prequalified takes a few minutes and will tell you how much house you can afford to buy. You’ll avoid shopping in the wrong bracket, outside of your price range.
Also, prequalification, or taking even more steps to a full loan approval, shows a seller you’re motivated. If there’s a bidding war, they might choose your offer just because some of your loan paperwork has been done, and you’re pre qualified.
What are the most common things people don’t understand about mortgages?
One of the biggest misconceptions we see surrounds closing times. The industry average is over 40 days, but lenders that specialize in speedy closings can close on a mortgage in as few as 10. So, buying a house and getting a mortgage shouldn’t be a long, drawn-out process; it can be done from start to finish in a little over a week.
It’s also helpful to eliminate the 20-percent down payment myth that a big portion of buyers believe is required to get a mortgage. Up to 13 percent of buyers think 20-percent down is needed, and 40 percent have no idea how much it takes to get a mortgage. Point being, the minimum required down payment is normally a lot more reasonable than potential homebuyers are thinking.
Helen Chen-Tournay, “Mama Bear Finance”
What do you think people’s biggest pain point is when getting a mortgage?
I think the biggest pain point for those who are trying to obtain a mortgage is to have an established history of good credit combined with a healthy income. Since lenders care a lot about creditworthiness, your credit history and credit score will be a good guide for understanding your repayment pattern. Your income is an important criteria to get pre-approved.
How does getting a mortgage differ from your first house to your second house?
Getting a mortgage for your second house may be easier than your first if you have paid your mortgage payments on time. This means that you have had the chance to prove to the lenders that you’re reliable to pay your mortgage. Meanwhile, buying your first house means that you don’t have any proof of your creditworthiness, therefore it may be harder to get pre-approved as a new homeowner.
What are the most common things people don’t understand about mortgages?
The most common thing people don’t understand about mortgages is that it is an amortization loan. This means that a large portion of the mortgage payment goes toward the interest in the beginning with a small portion going towards the principal. As time passes by, the amount of interest you pay will decline. Knowing how much you pay in interest will give you a better understanding of the true cost of homeownership.
Scott Lindner, National Sales Director for Mortgage Lending, TD Bank
What’s your advice to people who have lower credit and are applying for a mortgage?
It’s important to understand your credit standing before starting the mortgage process.
When reviewing your credit report, make sure that all accounts listed under your name belong to you and that the account balances are accurate. It can take several months to have an error removed from your credit report, so the earlier you look, the more time you’ll have to fix any issues. If you have any outstanding collections or payments that are past due on your credit report, be prepared to discuss these with your lender.
How does getting a mortgage differ from your first house to your second house?
Homeowners are often surprised to learn that the requirements for securing a mortgage on a second home are often stricter than those for their primary residence. Requirements can also vary by what you plan to do with your second home. For example, if it is a vacation home, many lenders require a secondary residence to be at least 50 miles away from your primary home. Otherwise, it would be classified as an investment property and have different tax considerations.
While primary homes may have more flexibility in the down payment, second homes may require an upfront payment of 10 to 20 percent and have more stringent credit standards.
What are the most common things people don’t understand about mortgages?
It’s important to remember that a mortgage is just a portion of the overall cost of homeownership. When considering how much to put down and how to establish a manageable monthly payment, consider additional expenses like homeowner’s association fees, furnishing your new home and having an emergency fund for things like a broken water heater.
John Bush, Financial Planner, Garrett Investment Advisors
What would be your advice to folks who have no credit history and are applying for a mortgage?
If you have no credit history, there are some mortgage brokers that will accept alternative information when obtaining a mortgage. They will likely review things such as assets (savings and retirement accounts) and payment consistency for utility and insurance payments. Your interest rate will likely be higher than advertised rates, but once you build your credit, you can consider refinancing in a few years, assuming interest rates are similar in the future.
Should people get preapproved for a mortgage? Why or Why not?
In many cases, getting preapproved for a mortgage is required by real estate agents before they will show you a house. It is important to remember that just because you are preapproved for a certain amount does not mean that you should spend that much on a house. Through research, or an appointment with a financial planner, you should be able to determine how much house you can comfortably afford.
What are the most common things people don’t understand about mortgages?
People often don’t understand that an amortization schedule is used to determine how much principal and how much interest one is paying. At the beginning of a traditional mortgage, most of the payment is interest. If you make extra principal payments at the beginning of the mortgage, you can greatly reduce the amount of interest paid over the life of the mortgage.
Too long, didn’t read?
Getting a mortgage loan doesn’t have to be as complicated as it sounds. Assemble your financial profile, home budget and down payment. We recommend you research a few different lenders and comparing rates before committing. Look for low rates and a loan type to fit your purchase. Our list of lenders have been ranked based on current rates, customer satisfaction, fees, credit impact and product variety.
