Buying a home is one of the most coveted aspects of the “American Dream”. This year, as the housing market sees unprecedented growth due to historically low interest rates, many are looking to purchase, sell, or refinance. Mortgage rates are below 3%, according to lender Freddie Mac, and the increased demand for homes is creating an aggressive seller’s market, as buyers compete for homes and the inventory dwindles.
The process of buying a home during this time has changed as drastically as the housing market itself. Social distancing mandates due to COVID-19 have shifted how house tours are conducted, one-on-one meetups with realtors have been put on pause, and meeting the seller – or even your lender – at closing might be completely off the table.
While navigating through the waters of buying a home this year, keep in mind a few changes to the homebuying process that’ll prepare you for what’s to come when getting in the game.
Realtors and lenders are booked and busy
Everyone working in the housing industry during this time is working harder than ever. With interest rates at an all-time low, the pool of buyers and sellers is getting crowded, and realtors, lenders, and title officers have their hands full with new and existing clients.
When shopping for a lender or researching and interviewing potential real estate agents who’ll represent you through the homebuying process, it might seem like a hassle trying to get a call back or a mortgage preapproval. Be prepared to pack patience when communicating with everyone on your team, as they most likely have multiple buyers and sellers all in the market at the same time.
Make sure to find a real estate agent who’s responsive in case you find the house of your dreams and are ready to tour it. A great real estate agent should walk you through the process of buying your home effortlessly. Once you’re under contract on a home, your agent will be in charge of making sure you’re aware of every part of the process and are properly prepared. They’ll also be your biggest advocates in getting the price you want, handling interactions with the seller and their agent, and getting your home inspection requests taken care of.
Your lender will be key in making sure you know what to expect financially from the time you make an offer on a home to your closing. Their responsiveness and effectiveness matter during the most crucial parts of the homebuying process. Since lenders are bombarded with loan applications and mortgage approvals, feel free to take it upon yourself to see if your loan officer needs anything from you. Patience combined with finding the right team can make or break your homebuying experience, especially during a competitive time in the housing market.
The typical house tour has changed
Remember the days of riding past an open house sign, pulling over, and walking in to take a look? This year, open houses and home tours have completely been turned upside down, as availability to tour a home have dwindled due to social distancing. Now, the process of touring a home has become more stringent and meticulous for buyers and their realtors. Buyers are expected to adhere to social distancing and proper sanitary precautions, including being able to tour the home with their agent only – no other family or friends – wearing masks and gloves, or touring the home virtually or not at all.
As a buyer looking to see every nook and cranny of your future home, it can be hard to gauge a home solely based on a virtual tour or through photos. If you’re looking to tour a home in-person, make sure to take precautions to keep you and the seller safe by following all safety mandates outlined by your state, your agent, and any suggestions from the seller:
Be prepared for possible bidding wars
When you find that perfect home, be prepared to come with your best offer – and fast. This year, the housing market is moving so quickly homes are flying off the market in just weeks – sometimes days – after being listed. According to Redfin, almost half of the homes sold during the first week of July were on the market for two weeks or less. The demand for homes is expected to continue, and as demand grows, buyers are competing for only a few homes that suit their needs and budgets, as inventory attempts to keep up with demand.
Because of this high demand and low inventory, your perfect home might be the perfect home to five other buyers as well, creating the perfect storm for a bidding war when submitting your offer. Now, many sellers are choosing from multiple offers, including full-cash offers and offers that forego some of the typical stipulations, like home inspections. A bidding war can bring the worst out of sellers, who’ll sometimes drive up the price to get the best possible offer, making buyers compete and bid above their price range to beat out other potential buyers.
If you’re expecting a potential bidding war on the home of your dreams, consult with your real estate agent and make your offer stand out to the seller:
Your finances will be scrutinized
You found your perfect home, your offer has been accepted by the seller, and now, you’re working with your lender to get your loan approved to seal the deal. During the process of underwriting, where the lender takes a hard look at your credit and finances, it can seem like every aspect of your spending and past credit history is under a microscope – and it is. During this time, when unemployment is at an all-time high across the U.S., its highest since the Great Depression, lenders are skeptical and are combing through every buyer’s finances to make sure they’re equipped to handle a home loan in the midst of a pandemic.
During the underwriting process, your loan officer might request copies of your bank statements, tax returns, W-2 forms, and even verification of employment by calling your employer. Don’t take offense if this happens to you; lenders are ensuring they’re protecting their best interest – and yours, too.
To ensure a smooth underwriting process, make sure your documents are close by and ready to go when your lender asks. Stay on top of emails and phone calls to make sure you’re corresponding effectively to provide them with what they need, even if it might seem repetitive. Lenders have just as much at stake as you do when issuing a home loan, so even though the process seems invasive, it’s important for you and the lender to evaluate everything before taking on this big commitment.
Eventually, you’ll make it to closing day, sign what seems like a few hundred documents, and finally receive the keys to your home. Whether you’re searching for your first home or your dream home, don’t let the tough market stop you. Your piece of the “American Dream” to call home sweet home is just on the other side of a long but rewarding process.