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Buying a house is one of the most sought-after aspects of the modern dream and ever since the coronavirus pandemic engulfed the entire world with its presence, housing markets have witnessed a massive boom due to the low-interest record rates. This has caused many to either buy, sell, or even refinance their properties in 2020.
But despite the Coronavirus impacting the real estate markets majorly, it is still possible to buy a house for yourself. You’ll be happy to know that residential real estate sales have been deemed essential services by the US government. Some deals can be found online, but you need to be smart with your approach, especially when it comes to the financial aspects given the furloughs and layoffs that many workers have had to deal with.
Here are some of the things to know when buying a house:
Things to Consider When Buying a House for Yourself
Can you afford a house right now?
Because of the impact that COVID-19 has had on the real estate market, some advantages present itself to homeowners when buying a house at the moment. For one thing, interest rates on mortgages have reached a historic low, indicating that monthly household payments will be incredibly low as well.
Another thing about is the financial aspect of home buying, especially when it concerns competition. COVID-19 has discouraged some homebuyers from shopping for a new house. As a result, some buyers who venture out to shop for a house (while taking precautionary measures) encounter less competition, putting them in a much stronger negotiating position with sellers.
If you’re looking for a house in the Durham region and wish to know your target property’s price rate, then the best company to consult is Paradise Developments. They produce new homes all throughout the Greater Toronto Area!
See if your employment history is stable.
Besides browsing around for mortgage and housing market rates in your locality, you also need to consider your personal finances as well. Home lenders won’t just offer a loan to anyone; they also need to see whether there’s enough money coming in to fulfill the mortgage cost and whether you can continue to pay for that mortgage as time goes on. In order to convince them, you need to show them that you have a stable employment history.
To get your employment history verified, the lenders will request the previous two years of W-2s. If you’re working self-employed, then you’ll have to show tax returns from the previous two years. Besides that, you also need to show them some 1099s that you may have gotten during that period.
See if your credit score is good.
One more thing regarding what to know when buying a house is to inquire about whether your credit score is good or not. It might be possible to qualify for a lower credit score, but your chances of getting approved for a loan (even those of competitive rates) are better if the score is higher. This could be your only way of getting a more affordable deal on homeownership, especially if you buy a bigger home right away as there aren’t any good starter homes available in your area, or if you’re forced Into paying a premium where you’re looking because of it being a seller’s market.
But if it does come down to the fact that you need to improve your credit score, then you need to do the following:
- Pay your credit card debt down
- Pay the bills right on time
- Get a credit card report company to inform you about any inaccuracies
- Don’t apply for closed lines of credit or new ones
Look into your savings
Savings can make a difference between owning a house and going broke. A loss in savings would result in putting down less on the amount you want to save as a deposit for your new home. That’s because a recession can result in a loss of jobs more easily, which is why you need to contribute a healthy level of savings once you get your down payments made.
So if you want to make this work, paying for private mortgage insurance is a requirement that many lenders ask for if you’re putting down less than 20% of a property’s value. Just remember that extra expenses need to be accounted for when buying a new home, like increased electric and utility bills.
Check if your debt-to-income ratio is manageable
A debt-to-income ratio is another piece of financial instrument that lenders use to analyze your mortgage loan application. The lenders need to inquire if your monthly income is going into debt right away, allowing them to analyze the amount of mortgage debt you’ll be able to take on.
Reviewing your DTI before applying for a loan is a smart strategy. Most of the time, a 50% DTI is required to qualify for a mortgage, but the number can vary based on the loan type, lender, and other aspects.
