Experts aren’t in agreement on whether the economy is yet in a recession, but it’s undoubtedly facing a downturn. Add to that the current high cost of living, and you may be questioning whether homebuying is a wise decision right now.
Despite the current economy, some experts say you should not let the downturn deter you from buying a home.
“For homebuyers whose finances are in good shape, a downturn can be a good time to buy,” says Jami Morris, Director of Mortgage Operations, at InterBank. After all, she says, if you can find a house that meets your needs and fits your budget, it’s a good time to buy in any housing market.
There are even benefits to buying a home during a downturn. Read on to discover those benefits and get five tips for buying a home this year.
3 Benefits To Homebuying During a Downturn
A downturn in the economy is not all bad. It can make it easier to find a good deal on a house that meets your needs. Here’s why:
Home Prices Are Typically on the Decline
During a recession, the demand for homes often decreases, leading to a drop in home prices. So a recession could result in a more extensive selection of homes in your price range.
“We’re already seeing this in some parts of the country right now,” adds, Jamie. “You’re starting to see home prices plateau or come down in some housing markets.”
Interest Rates Are Still Competitive
While the Federal Reserve has slightly increased rates over the recent months to battle inflation, rates are still low and desirable. Rates may not be at historical lows, but they are still situated in favor of borrowers. Combine current rates with the ability to be a buyer in a position to be considered, now is a great time for homebuyers.
More Home Choices Become Available
Because a recession typically leads to fewer people buying homes, more options are available to those who are buying. You’ll have a better opportunity to shop around and find a home that best meets your needs and your budget rather than rushing to purchase something before someone else can.
5 Tips for Buying a Home This Year
Rushing into a home purchase is not something you want to do. The best approach is to use the following tips to get prepared so you are ready to buy when the perfect home presents itself.
1. Assess Your Financial Situation
In any economy, you should always determine if your finances are in good enough shape to support a new home purchase. Consider your credit score and job security. Some industries are more prone to layoffs during recessionary times. A low credit score will usually mean paying considerably more in mortgage interest.
Putting off a home purchase until your finances improve or your job situation becomes more secure can significantly reduce the risk of losing your home and save you thousands in interest over the life of your mortgage.
2. Determine How Much House You Can Afford
Even if your financial situation is good, buying more house than you can realistically afford can change that. Look beyond just the monthly mortgage payment. Your budget must support the mortgage payment and the additional expenses of homeownership, such as maintenance, property taxes and homeowners insurance.
Don’t forget about a down payment. A 20% down payment is generally recommended, although you might not need that much. Depending on the home you’re buying and whether you want to avoid private mortgage insurance, you might need anywhere from 3% to 20% for a down payment.
3. Talk to a Local Mortgage Lender
Taking the time to explore mortgage rates and types of mortgage products before jumping into home shopping is the first step to your homebuying opportunity. Your local Mortgage Loan Originator can provide a personalized experience to illustrate your potential borrowing scenarios putting you in an educated spot to start your process. The better the mortgage rate you get, the more buying power you will have since more of your money can go toward the house rather than interest.
4. Get Pre-Qualified
When making an offer on a house, it can help to have a mortgage Pre-Qualification letter. It lets the seller know that you are pre-qualified to get a mortgage up to the maximum amount of your pre-qualification, and it may make you more attractive to the seller than another bidder who has not been pre-qualified.
5. Find the Right Real Estate Agent
A knowledgeable real estate agent has the resources to find home options that match your needs and budget, and that are on the market at a fair price. They know problems to watch for, are well-practiced at negotiating, and can make the homebuying experience much easier.
Also, since the seller typically covers the buyer’s realtor costs in most homebuying transactions, there certainly is no downside to working with a realtor.
Do you qualify? Community Banks Offer a More Personalized Home Loan Experience
Homebuying starts with education and a personalized experience tailored to your borrowing needs. Local Mortgage Lenders tend to offer personal attention that comes with banking in a smaller community. It also provides a face-to-face conversation that gives you the chance to ask questions as opposed to going through an online-only process that can be cumbersome and hard to understand.
All loans are subject to credit approval.