How to Buy at a Time of Uncertainty?

Times are uncertain. The pandemic has made life anything but normal. In the past few weeks, 38.6 million jobs have been lost, and we’re still gathering data to measure the damage that has been done.

Covid-19 recession is different from the one we experienced in 2008. The recession of 2008 was triggered by the housing market crash. This one is different because of the social distancing, and restrictions placed in all parts of the world. It seems like half of the world is suffering from a reduction in merchant activity.

The lockdown is forcing people to minimize social interactions, and business in large is dependent on the sale of goods & services. Health, education, retail trade, leisure, and hospitality sectors have been hit hard. Schools are closed, and because of that, the labor force is unable to contribute to their fullest potential. These factors are different if you compare the situation to the 2008 recession.

The common factor, though, is ‘uncertainty”. We still don’t know about the future. You can’t quantify the risk; therefore, it’s challenging to plan ahead. You don’t see how the situation will turn out, and that’s resulting in confused decision making.

Housing Market Can Remain Strong

Your home is an investment, but more than that, it’s a basic need. You don’t compare the property to a stock or a bond because a home is a much-needed place when you’re getting married or starting a family. You need a place of your own to collect memories, and that need exists despite the ongoing circumstances in the entire world.

However, to fulfill that need, you need a stable income source, a good credit score, and a mortgage loan. Given the times, the buyers can struggle to keep up with mortgage payments, and the unemployment rate will directly impact the housing market.

Since the beginning of the second quarter, the housing market has been seeing a slow start. What used to be the hottest season seems like an unpredictable period. Given the situation, you won’t see a significant change in home prices because fewer transactions are making their way through the uncertain time of Covid-19.

Getting a Mortgage is Harder than Ever

 To avoid the crash of the housing market, mortgage lenders are offering modification & forbearance plans. On paper, these options are available to anyone with an FHA mortgage. Homeowners can suspend/reduce their payments for a while, but the situation can’t continue for long. If the circumstances don’t improve, the mortgage lending institutions will go out of business.

On the same note, banks are making it harder to get a mortgage. Although, you can be eligible for an FHA loan even with a minimum credit score that doesn’t guarantee mortgage approval. Lenders have changed their criteria, and anyone who has talked to a mortgage officer knows how the situation is changing and making it difficult to purchase a new property.

The interesting part is that banks are reducing their interest rates. Mortgage rates were already at a historically low point; a further reduction means savings worth years of payment. That means if you have a good credit score, enough savings for the down payment, and a stable income source, you can lock a deal at a reasonable price.

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