The coronavirus crisis has rapidly complicated the home buying process. Here are 7 tips to help you stay on the path to owning your own home despite these uncertain times.
The homebuying process looks a lot different today than it did just two months ago. Mortgage qualifications have tightened, home tours have become virtual, and closings are taking longer than expected.
But, despite these sudden changes, many homebuyers have stayed remarkably determined. Redfin has reported that homebuying demand has surged to 81% of pre-coronavirus levels as of April 19, following a brief drop to about 66% in the beginning of April.
For the many buyers who still have their hearts set on homeownership, though, navigating the purchase process likely seems more intimidating and confusing than ever.
Our mission at Divvy is to make homeownership accessible to everyone. That’s why we’ve put together this list of tips to help you find a home of your own now, despite the challenges of COVID-19.
We’ve put these tips in order based on the stage of your home search in which they’ll be most helpful.
So, if you’re just getting started in your home buying journey, start from the beginning and take your time. If you’re farther along, feel free to skim through the stages you’ve already knocked out.
Let’s get started!
Tip #1: Pay Extra Attention to Your Credit Score
Credit scores have been one of the most important factors in qualifying for home financing since their invention over thirty years ago. If you’ve been seriously considering homeownership for a while now, you may have already given thought to how you can raise your score.
Getting your score as high as possible is even more important now than before the onset of COVID-19. Many major home loan companies, like Wells Fargo and US Bank, have increased their minimum score required to qualify for a mortgage.
Many of these higher minimums apply not only to conventional mortgages, but also to FHA loans, which applicants with lower credit scores often rely on in order to qualify.
According to Realtor.com, most lenders who required a minimum 580 credit score for FHA loan applicants before COVID-19 now require scores between 640 and 680. They predict that these new minimums may negatively affect anywhere between 5% and 20% of prospective borrowers’ abilities to qualify for mortgages.
So, even if you were happy with where your credit score was at before this crisis, check it again to see how it currently stacks up against lender minimums.
Then, see if there are any actions you can take now to improve it quickly. That way you’ll have as many financing options as possible when facing lenders’ new requirements.
Tip #2: Consider Your Job Stability and Backup Plan for Making Payments
The U.S. unemployment rate has risen sharply as a result of COVID-19. The Wall Street Journal is forecasting that, once released, data from April will put it at a record 16.1%.
As you plan your home purchase, it’s crucial that you consider how vulnerable your job may be as the economy continues to struggle.
Your job security will be highly dependent on your own personal situation, and you’ll need to use all the information you have available to you to assess where you stand.
Certain industries are clearly struggling more than others.
The chart above shows which industries suffered the most immediate job losses at the onset of COVID-19 in March.
While layoffs certainly have not been limited to these industries, this may help you get a general sense of where your own stands.
If you feel comfortable enough with your own job security to move forward with your home search right now, you’ll still want to have a backup plan for making your payments in the event you did lose your job.
The simplest way to do that is to check how much money you’ll have saved up after you make your down payment and cover all the expected costs of closing on your home and moving into it. While there are no set rules around what “enough” savings is, we recommend being able to cover at least three months of expenses without income.
We know that building up savings can be difficult. For most people, saving up is the most challenging part of affording a home to begin with.
At Divvy, our customers automatically build up savings with every monthly rent payment. Some of them have even used a portion of those savings to cover their rent as they’ve run into unexpected financial hardships during COVID-19.
Click here to learn more about how Divvy helps you save up along your journey to homeownership.
Tip #3: Talk to Multiple Mortgage Brokers and Lenders
One advantage of buying a home right now is that interest rates are near historic lows. This means that the long-term cost of mortgages is incredibly appealing right now for those who can qualify.
Keep in mind that specific interest rates vary by lender. So, especially given the increasingly tight restrictions on qualifying, you’ll want to talk to multiple mortgage lenders and/or brokers.
This will increase your chances of getting the lowest possible rate given your situation.
For more information about finding lenders and gathering the information they’ll ask you for, check out our upcoming post on preparing for a mortgage.
If you’re concerned about your ability to qualify for a mortgage or get a reasonable rate, don’t worry. At Divvy, we offer structured pathways to homeownership for people who have trouble qualifying for mortgages. That way, you can move into a home of your own today and automatically build up to buy it over time. Get started here!
Tip #4: Get Comfortable Doing Virtual Tours
Virtual tours have quickly become a popular option for buyers who want to continue their home search while practicing social distancing. For some, they’ve even become a necessity as sellers cancel open houses and restrict access to their homes.
Real estate brokerage Redfin saw demand for virtual tours increase 350% between mid-March and mid-April, illustrating how quickly it is becoming common to have an agent guide you through showings via video chat instead of in-person.
While these tours are a helpful way to continue your home search safely, seeing a home virtually makes it harder to notice the smaller details you normally would when there physically.
Here’s a list of questions to keep in mind and ask your agent as they guide you through homes remotely:
- Do you have access to a floor plan map that I can follow along with during the tour?
- Are all the windows and blinds open so I can get a sense of the home’s natural light?
- What is the quality and cleanliness of the surfaces? Is the paint or carpet dingy or faded in any area?
- What is the quality of the finishes, like countertops, hardware, etc? Do they feel durable and look attractive?
- Are you noticing any noise from outside or inside the home during the tour? If so, what’s the source?
- Are there any smells that you’ve noticed? Can you tell what they are or where they’re coming from?
- How does the size feel to you? Can you set the camera down and walk into the rooms so I can get a sense of space?
- Does the layout flow well? Is it generally an open or closed living space? Are there any points where you can’t move easily from one room to the next?
- Are there any signs of disrepair?
- Can you stand at the front door and show me the view of the neighborhood in all directions? Can you do the same from the edge of the street?
- Are there any problems with where the lot is located? Neighbors’ homes too close? Proximity to busy streets or commercial buildings?
- Is there anything special about where the lot is located? End of a cul de sac? Proximity to walking trails?
- Did you run into any neighbors that you were able to converse with from a distance? What were they like?
- What did you notice about the neighborhood when you were driving in?
Overall, do your best to visualize yourself on the tour in person and notice what it would feel like. What would you be noticing? What would you be feeling?
This is one area of your home search where working with an experienced agent can help substantially. They’ll likely have an intuitive feel for what important features to point out based on years of previous buyers’ feedback during tours.
Tip #5: Research Your Neighborhood Remotely
If you’re looking for homes in neighborhoods that are unfamiliar to you, whether in an area of your current city or in a totally new one, your virtual home search will extend to your neighborhood as well.
Getting a feel for a neighborhood through your computer may be challenging, but there are plenty of online tools you can use to scope out the most important details.
For homebuyers who have children, or are expecting to, schools are often the first consideration when assessing a neighborhood. Niche is a powerful site for school shopping. They combine data from the Department of Education with parent and student reviews to rank schools and districts nationwide. You can make your search as narrow as a neighborhood or as wide as the entire US.
You’ll also want to get a feel for what your lifestyle will be like in any neighborhood you’re considering. How easy will it be to run errands? Can you walk or bike easily and safely? How much time should you expect to spend in the car?
Walk Score can help you answer questions like these. You can enter the address of any home you’re considering and Walk Score will rank its walkability on a scale of 1 to 100. Not only that, but you can break your score down by categories such as parks, schools, dining, grocery, and more to see which services are most accessible.
Remember to keep any special needs and interests you have in mind. Maybe you need specific medical treatments frequently, or have a hobby that requires visits to specialty stores. Google Maps will be helpful for you here. You can search for whatever specific service or vendor you have in mind near the address, neighborhood, or city you’re considering to see whether you can find one nearby.
Google Maps can also be extraordinarily helpful in getting a feel for a neighborhood virtually by using their Street View feature. You can start at a specific house you’re considering, or a main point of interest in a neighborhood, and use Street View to navigate as if you were driving or walking there in-person.
Tip #6: Include a Coronavirus Clause in Your Offer
An essential purpose of a real estate contract is to establish a timeline for the sale of a home, and clarify what each party is committing to at every stage of the transaction.
Contracts usually commit the buyer to put down a deposit, establish how much that deposit will be, specify under what circumstances the buyer can cancel the transaction and still receive their deposit back, and commit the buyer to closing the transaction within a certain period of time.
COVID-19 has made it much more challenging for buyers to commit to those timelines with certainty. That’s why it has quickly become common practice for buyers to include a “coronavirus clause” in their offers.
Coronavirus clauses are clauses or addendums included in a purchase agreement that explicitly state that the effects of COVID-19 may make it difficult or impossible to meet the timelines specified in the contract.
Lockdowns and shelter-in-place orders across the nation have put restrictions on many parts of the purchase process, from home inspections to appraisals and beyond. A coronavirus clause can help protect your right to receive your deposit back if any of those restrictions cause you to have to cancel your transaction.
When you’re ready to make an offer, ask your agent whether your state has issued a standard clause already. If a statewide clause is not available, ask your agent to include one in your offer and walk you through what its terms entail. Homelight has an in-depth post on what you’ll want to be looking for in your coronavirus clause.
Tip #7: Stay Sanitary When Moving
Cleaning will be an even more important part of your move during COVID-19 than it was before.
The CDC believes it’s very possible that the virus can spread via contaminated surfaces and objects, so it’s crucial that you deep clean all your belongings before moving them. You’ll need to do the same for your new home before you move into it and your old one after you’ve moved out.
While this does mean extra work in the moving process, it’s absolutely essential to protecting yourself, your family, your movers, and whoever is moving into the home you’re leaving behind. Consider hiring the help of a maid if your local laws allow you to. HomeAdvisor estimates the typical cost of a maid to be between $116 and $235.
Whether hiring help or taking care of the cleaning by yourself, follow the CDC’s recommendations for effectively disinfecting your home.
Once you’ve put the effort into making sure your home and possessions are clean, make sure your movers are following the same standards. If you’re planning on using a moving company, ask them ahead of time about the cleanliness practices that they’re following during COVID-19.
Will the movers be wearing masks and gloves? Will all surfaces in their vehicles be disinfected before and after moving? Interview multiple movers if necessary and don’t hesitate to be clear about the safety precautions you’ll want taken in order to feel comfortable working with them.
Trenessa & David Gudgeon, Divvy Customers
Becoming a homeowner while COVID-19 is prevalent will require even more effort and patience than before. But, if you stay focused and are ready to overcome some unexpected challenges, a home of your own is likely still within reach.
By following the tips above, you’ll lower the probability of surprises along the way. If you find yourself confronting an obstacle that seems insurmountable, don’t hesitate to reach out to our team at Divvy here. Even in the face of COVID-19’s challenges, we are as dedicated now as ever to giving you a path to homeownership.