Stay Informed: Buying A Home During Coronavirus
Keeping you informed on how to handle buying a home in Columbus and Central Ohio — as we adapt to life during COVID-19.
Home is a sanctuary, a place of comfort and connection. But right now, that ideal may be complicated by our new reality.
We wish to always be a resource for homeowners and home seekers, and have setup this page to serve as a place with timely information to help you make sense of things.
We’re grateful so many of you have invited us to be a part of your journey home, and we want to be with you on the path forward. At the heart of NextHome and The Opland Group is home, and never has home been more important than right now.
Is it possible to buy a home right now?
Real estate and the mortgage services industries are considered essential services, so you can still apply for and secure a loan.
People across the country are practicing social distancing, or, in some cities and states including Columbus, Ohio, following public health orders to stay at home. While in some states this may mean you might not be able to walk through a home with your agent, this is not the case in Ohio.
That said, across the country agents have gotten creative in adopting tools and technology that allow prospective buyers to take 3D or video tours of a home. Home video tours are where the agent walks through the home with a camera, allowing you to watch virtual tours at home.
It’s also possible to remotely browse new construction homes for sale and under construction, or select a buildable plan that you can customize with the builder. Community Details Pages often include floor plans and video tours of homes, and builders’ websites may offer additional content as well.
In addition to changes in how people are viewing homes, in some places, temporary business closures are affecting other key parts of the real estate transaction, namely appraisals, inspections, closing and title services, and moving. Affected businesses have found ways to adapt allowing home buyers to successfully process their transactions.
Traditional real estate practices have adjusted in the age of the new coronavirus as we agents work to balance job responsibilities with common-sense measures to protect buyers and sellers, and even ourselves.
Is it possible to get financing right now?
Again, real estate and mortgage services industries are considered essential services, and you can still apply for and secure a loan. Mortgage rates have fallen to all time lows and are bouncing at this level. Unfortunately both purchase and refi loans are now harder to get as the mortgage market is badly battered on several fronts due to the impact of the pandemic on the economy and employment.
There has been a reduction in the availability of loans with lower credit scores and higher Loan to Value (LTV) ratios, but the largest pullback came from the jumbo and non-QM space. Non-QM are loans that fall outside the criteria for government purchase forcing the lender to retain these loans in their own portfolios.
Lenders are making credit criteria changes to account for the increased likelihood of forbearance and defaults, as well as higher costs. Some of the largest national lenders including JP Morgan Chase and Wells Fargo have begun to increase their minimum required credit score and down payment values.
Mortgage servicers are being besieged by calls from borrowers requesting the government’s forbearance program, wherein borrowers can miss three months or more of mortgage payments which will then have to be paid later. The servicing industry has been begging the Federal Reserve for some kind of liquidity facility to help them make their payments to bondholders, but so far only Ginnie Mae has done that for FHA loans. The lack of liquidity is putting a strain on the servicing industry and adding to a growing list of reasons to tighten lending.
As for liquidity in overall lending, the Fed did step in and is now buying billions of dollars’ worth of conforming mortgage-backed bonds, but there is much less liquidity for other types of lending. As a result, the banks are seeking to maintain liquidity and reduce their risk by requiring large down payments and higher credit scores.
Several nonbank lenders are also raising minimum credit scores for FHA loans, which are generally used by borrowers with lower scores and lower down payments. The FHA itself has not changed its guidelines.
Adding to the difficulty in originating mortgages for both new home purchases and refinances are changes to underwriting guidelines by Fannie Mae and Freddie Mac, who, along with Ginnie Mae, purchase the majority of mortgages today. They are requiring that all income and asset documentation for borrowers be dated within 60 days of the initial application, compared with the 120-day standard time frame.
This is likely because people are losing jobs and income at an unprecedented rate. For self-employed applicants, lenders must verify the existence of the borrower’s business within 120 days. That has now shrunk to just 10 days.
As investors and financial markets struggle to find their footing during the coronavirus pandemic, the effects are impacting mortgage rates. Not only are rates swinging wildly day to day, they are varying more dramatically lender to lender. As such it's more important than ever to get a mortgage preapproval as a first step in the home buying process, to shop lenders for the best possible mortgage rate, and to lock your interest mortgage rate.
How are showings being handled?
In most instances in person showings are still an option with these being limited to a single group in the home at a time. That said, don’t be shy about asking your agent to help you get a better look at a home, even if you can’t or aren't comfortable being there in person. Many of us have experience working with remote clients and are happy to accommodate requests for a video tour.
There are a few ways agents can help you to get a better sense of a property that interests you:
- Pre-recorded video tours
- 3D Home tours
- Live video walkthroughs
Pre-recorded video tours
A pre-recorded video is one of the easiest ways to view a home without going there. Your agent (or someone on their behalf) would record a video of the home, then share it with you. Make sure you tell your agent exactly what you’re looking for in a home so that they know what details to focus on during the tour. Remind them to capture some of the surrounding neighborhood as well to give you a better sense of the area.
3D Home Tours
3D Home Tours allow home shoppers to explore the rooms in a home and see how they connect at their own pace.
You can also look for homes on Zillow and Trulia that have 3D Home tours already uploaded by looking for the “3D Home” label in the upper-left corner of listing photos.
Live video walkthroughs
Many people are accustomed to video chatting these days through FaceTime, Skype or similar platforms. Your agent or builder can help facilitate a tour of a home using a video chat app. Let them know you’re interested, and they can work with you to determine a list of homes that fit your specifications and times you’re available for the video call.
Note: If you’d like to video-tour a home where a seller is unable to let anyone into their home due to COVID-19-related health concerns or restrictions, your agent may be able to find a solution by working with the seller and listing agent.
Am I missing out if I don't buy now?
The best time to buy depends on your personal circumstances. Trying to time the market for the best deal is something even professional investors aren’t very good at.
According to economists, the current environment poses both opportunities and challenges. The opportunities are not as obvious as the challenges, but they are out there:
- Mortgage interest rates are very low, which has the potential to significantly boost your buying power.
- At this exact moment, with many people pulling back and staying home, there could be less competition for the limited pool of homes for sale.
- Sellers may be more flexible on pricing and/or timing in order to close a sale, especially if they are currently in contract to purchase a home and need to sell in order to purchase their replacement property and letting their home stay on the market will cost them or delay their own plans.
- If demand stays strong and the crisis passes relatively quickly — then we can probably expect price growth to accelerate like it was earlier this year. If that’s the case, it might be a good time for some buyers in some markets to get ahead of any growth in home prices and to beat a rush of buyers to market.
Still, the challenges are daunting:
- Inventory is already low, and it’s likely that many would-be sellers will wait to list their homes right now to avoid the traffic and risk of contamination. That could make it harder for you to find the right home.
- Mortgage interest rates are low but volatile — and lenders are working through a flood of refinance applications. For would-be buyers who secured financing in early March, this may not be as big an issue. It could be a lot tougher if you have not yet started the mortgage process and depending on your employment situation.
- Job uncertainty may also have you thinking twice about buying.
- If the crisis persists and social-distancing and other behaviors last through the bulk of the year, home prices may fall somewhat in response to reduced demand from buyers. While this is a possibility, it is not one that we anticipate.
If you have the time and willingness to face the current challenges, now could present some unique opportunities. But you should have a plan to ensure you can back off and/or re-evaluate as the situation unfolds. If you’re risk-averse or don’t feel ready, you’re likely to be more comfortable waiting until the situation is more clear.
For the most up-to-date market analysis, data and commentary on how the local Central Ohio housing market is responding to this situation, visit our Market Reports.
What can I do now to be ready to buy?
Buying a home right is a bit more challenging — however, sellers who are on the market right now tend to be those that are motivated to sell and with fewer buyers out looking as a result of social distancing and fear of the virus, there are opportunities this is creating opportunities.
Here are still steps you can take now so you’re ready to act when the time feels right.
1. Contact a Realtor
When buying a home, you will want to work with a Realtor, a top agent that will dedicate themselves to you and your real estate needs. Start by checking agent reviews on sites like Realtor.com, Zillow.com, Trulia.com, Google for great Central OH Real Estate Agents. Reviews are provided by buyers and sellers who have previously worked with these agents and upon completion of their transactions. The sites mentioned above include agent production and activity logs which are an indication of the agent's level of experience (consider the difference between a part-time real estate agent who sells a few properties for friends and relatives and someone who treats it as a full-time business venture), as well as a sales history which demonstrates the parts of town the agent has the most experience in.
Communication style can also be important and if you want to get to know your agent on a more personal level you can also check sites like LinkedIn and Facebook. Your agent has a responsibility to look out for your best interests throughout the buying process and you'll want someone you can trust. While the listing agent represents the seller and their interests, your buyer's agent is available to you free of charge as the seller pays the real estate commission.
2. Identify pre-approval materials
A pre-approval letter is usually valid for 60-90 days, so you don’t need it until you’re closer to buying. But make sure you have (or have access to) the documents you’ll need, such as tax returns, W2s (or 1099s), pay stubs and bank statements. Lenders may also want to see evidence of your down payment. If you’re getting help from friends or family and the money isn’t in your account, you may need to secure the funds prior to pre-approval or provide documentation showing when the funds will be available.
3. Get pre-approved
If you think you'll be ready to buy in the next 60-90 days, you can start the pre-approval process. A lender can help you determine how much you can afford and get you pre-approved for a loan.
4. Keep saving
If possible, continue setting money aside for your down payment. The amount can vary: It can be as much as 20% of the purchase price, but it also can be as low as 3% with conventional loans, or 0-3.5% if you qualify for an FHA or VA loan. You’ll also need funds to cover closing costs, moving and other expenses.
5. Check your credit
Your credit score can impact the interest rate you qualify for. You can request a free copy of your credit report from any of the three major credit reporting agencies. Review it carefully and check for discrepancies. Work on improving your score (by paying down credit card debt, for example), and avoid taking out large loans during this time.
6. View homes for sale
Searching for the perfect home can be overwhelming. To avoid wasting time looking at homes that aren’t right for your family, first set aside time to prepare a “wish list”. You’ll want to determine what you want and need in a home and categorize these items accordingly so your agent can focus on what’s most important to you. If you and your real estate agent have a clear idea of what you’re looking for, you’ll spend a lot less time visiting houses that don’t appeal to you.
When narrowing down your home search, consider the following:
- know what type of home you want to buy
- determine what age and condition of the house you want to buy (New vs. Existing Homes)
- consider resale potential
- use a features wish list to keep focused (needs and wants)
- use a home search comparison chart to keep organized
- act decisively when you find the right home
Buying a home is likely one of the single largest purchases you’ll ever make. Review neighborhoods carefully, pick the type of property you want (single family homes, town homes or condos), and screen for amenities (beds, baths, etc.) Your Realtor can help you filter by area, quality of construction, price, lot value, and construction value and areas that are likely to experience above average rates of appreciation in the near future all to help you find good options. Your agent will assist you in
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If you've been thinking of buying a home in Central Ohio, we're here to help. We're real estate experts in Columbus and it's surrounding suburbs and can answer all of your questions about buying a home in our area! We have the resources and expertise to assisting you in making the best decisions through every step of the home buying process, and eliminate the doubt and frustration. Ready to get started with your search? Let's talk. Give us a call at 614-332-6984.