This is an unusual time to be shopping for a home, but we are seeing record low mortgage rates, so it can also be an advantageous one.
If you are going to purchase a home during COVID-19, it is important to weigh all the financial considerations involved with respect to current and possible future changes in your life.
Home Purchase Tips in Today’s World
Following are some tips to help you make smart financial decisions when purchasing a home during the coronavirus outbreak.
1. Try to lock in the lowest rates.
Although mortgage rates have been low in general lately, swings up and down have been commonplace and hard to predict.
So, you will need to move fast to secure the lowest rates when you spot an opportunity. Work with a mortgage broker that will do all they can to help you do just that.
2. Consider a fixed rate mortgage.
If you are only going to be in your home for the next few years, an adjustable rate mortgage might make sense. But otherwise, you should strongly think about getting a fixed rate mortgage.
This would be relevant advice even if we were not living in unprecedented times. But since we are, the future is less predictable than ever. Being as that is the case, it is in your interest to try and make your future more predictable by choosing a mortgage which is not going to throw unwelcome surprises your way.
While there are no guarantees that an adjustable rate mortgage will spiral out of control, with a fixed rate mortgage, you are guaranteed that will never happen.
Who knows how far mortgage rates could climb in the future? But if you lock in a record low fixed rate today, you will not be paying any more than that in the future, regardless of what happens to other homeowners.
3. Minimize closing costs if you can.
With home prices being on the high side right now, closing costs lately have been as well. But right now, you may not have the financial flexibility to pay higher closing costs.
There are ways to get around the closing costs, depending on your qualifications. With some types of mortgages, the seller can even contribute towards the closing costs. This is something to talk to your Virginia mortgage broker about.
4. Figure out whether to go for a larger or smaller down payment.
You will need to decide about the size of the down payment that you will make on a new home.
On one hand, if you choose a large down payment, you can keep your payments going forward smaller and more manageable. That could be useful over the coming years.
On the other hand, if you choose a small down payment, you can keep your current finances more liquid. That could be important if there is an emergency soon.
You might decide to choose a down payment size which is somewhere in the middle if you want to compromise.
If you do need a small down payment, check into mortgage programs which have lower down payment requirements.
For example, with an FHA mortgage, your down payment could be just 3.5%, and there are easy credit qualifications.
If you have strong qualifications, you also can apply for a conventional loan with a down payment of only 3%.
Two other government-insured programs similar to FHA are USDA and VA loans, either of which can include a zero-down payment.
To qualify for a USDA loan, your income must fall below a certain threshold, and you must be shopping for a home in a rural zone as defined by the USDA.
In the region surrounding Blacksburg, there are plenty of homes which you may be able to finance using a USDA loan.
To qualify for a VA loan, you must be a veteran, active-duty service member or eligible surviving spouse.
At First Residential Mortgage, we also can help you check into state and local programs which can help you manage your down payment and closing costs.
5. Choose a mortgage company without high fees.
Fees can vary widely from one mortgage company to another. Since it is extra important to save money currently, work with a company which is not going to charge your excessive fees.
First Residential Mortgage keeps fees to a minimum so that you can put more money toward paying off your home or save more money for your future.
6. Keep a larger emergency fund than you might have otherwise.
One more consideration when buying a home during the corona virus pandemic is to recalculate the size of the emergency fund you will be keeping available in the future.
Lapses in income are more likely than they used to be, as are unexpected hospital bills. So, you probably should save a few thousand more dollars than you would have otherwise.
First Residential Mortgage Can Help You Buy a Home During COVID-19
If you are ready to move forward with buying a home in Blacksburg, Marion, Abingdon, or elsewhere in Virginia, First Residential Mortgage can connect you with a competitive home loan. We also can provide you with additional guidance and financial advice for these unprecedented times.
To get started now, please give us a call today at (540) 838-5868. We look forward to helping you move into a beautiful new home in VA.