Tips for Buying Your First House During an Economic Crisis

May 26, 2020 Posted by : Hugo Lara
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Buying real estate has always been considered to be a generally safe and profitable investment. In addition to opening the door to a number of tax benefits, owning property can provide investors with a reliable source of passive income that can appreciate substantially over time.

Most importantly, real estate investments are not governed by the fluctuations of the stock market, which means that they can often lead to higher long-term yields than those produced by stocks or bonds.

An Influx of Millennial Homebuyers

Buying real estate is no longer reserved solely for older, more experienced and wealthy investors, either. In recent years, research has indicated that the real estate market is experiencing an influx of younger buyers (millennials in particular).

Today, despite the fact that the national economy is being pushed to the brink of a recession, many millennials have still made it their number one financial goal to buy their own home. At first glance, this ambition might appear to be reckless. But in fact, economic crises can actually present some unique opportunities for first-time homebuyers.

Interested In Buying Your First House During the COVID-19 Crisis? Here’s What You Need To Know

Mortgage rates have plunged to all-time-lows, and forecasts predict that they will continue to hover around and below 2% for the foreseeable future. The upshot of this trend is that many high-end homes can now be bought at a lower price and will require lower monthly interest payments. This, in turn, presents a golden opportunity for homebuyers with more limited budgets (most homebuyers in their 20s and 30s, in other words).

That said, there are a few important considerations to keep in mind if you’re considering buying your first home in our current economic climate:

  • Be prepared for a speedy process. Due to the aforementioned unprecedentedly-low interest rates, homes in many local markets are selling very rapidly. In light of that, you should plan on getting the ball rolling with listing agents as quickly as possible. If you do decide to make an offer, we recommend shopping around for a lender who will be able to help you close in 10 days or less.
  • Educate yourself about the virtual homebuying process. Every financial sector has been forced to adapt to federal, state, and local social distancing measures, and the real estate industry is no exception. In an effort to keep all parties safe during the homebuying process, the following procedures are starting to become the norm:
    • Mortgage lenders and title agents have begun to collect buyers’ signatures electronically via a process known as eClosing. Keep in mind that notarization laws vary between states, which means that eClosing is not legal everywhere.
    • Many inspectors are now leveraging remote meeting platforms like Zoom and Google Hangouts to conduct virtual home inspections with interested buyers.
    • Finally, rather than sending a human appraiser, many mortgage lenders are increasingly coming to rely on algorithms to conduct home appraisals.
  • Consider adding a “COVID-19 clause” to your contract. Traditionally, one of the responsibilities of real estate agents is to create a contract that will be mutually agreeable to both the seller and the buyer. But now that there’s so much uncertainty looming over the finances of most Americans, many homebuyers are opting to insert special COVID-19 clauses into their contracts. The purpose of these clauses is simply to make room (if necessary) in the homebuying process for any unexpected delays that might occur as a result of the pandemic.

The Bottom Line

No one can say for certain what will happen to the national real estate market in the coming weeks or months. But what can be said with certainty is that the present economic crisis could present a rare opportunity for first-time homebuyers to invest in real estate at an affordable price. But just like all major financial decisions that are made during an economic crisis, buying your first house should only be done after careful planning, organization, and communication with your local real estate professionals.

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About Author

Hugo Lara
Hugo Lara

Hugo is leading our Marketing and Sales team. He holds an MBA from a top global program and writes on personal finance and career development.

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