With the events of recent months, people are spending more time than ever inside their homes—and that means they’ve had plenty of time to consider every flaw and limitation.
Some have invested in home improvement. Home Depot and Lowe’s combined increased their net sales by 26 percent—$13.5 billion—for the three-month period ending in July 2020, compared to the same period in 2019 (according to the LA Times).
Others have learned to appreciate what they have.
For a significant portion of renters and homeowners, though, the self-quarantine has led to the decision that it’s time to buy a new home.
Whether in search of more space, more privacy, a better location for work, or just a more pleasant atmosphere, the number of home buyers today has skyrocketed (as of December 2020).
“The State of the Nation’s Housing 2020” report by Harvard’s Joint Center for Housing Studies (JCHS), reported that, while the early days of the pandemic caused an abrupt drop in home sales (sales of existing homes dropped 27 percent year-over-year in May), the market has since recovered. Total sales in 2020 are now expected to exceed those for 2019.
The supply of homes, though, is insufficient to meet current demand. There were 1.47 million homes on the market in September 2020, according to the JCHS report—a supply of only 2.7 months. That’s the lowest supply in U.S. markets in decades.
Financially, buyers’ incentives are mixed: on one hand, interest rates are extremely low, making mortgages more appealing. On the other hand, lenders, wary of the recent hits to the economy, have tightened their standards, making it harder to get approved.
What to Expect When You’re Expecting to Buy
With few things in a state of normalcy, you may be anxious to know how long it will take you to find your next home, get everything in order, and close on a new property.
The answer will depend on factors such as the inventory in your location, your financial situation, and delays caused by backlogs in work surrounding real estate transactions.
Here we’ll explore the steps of home buying, estimate the time they might take in the current environment, and suggest ways to expedite the process and get you in your new home faster.
TIME: 1 day if you’re extremely organized; 1 month if you need to search for documents or request changes to your credit score.
Speed it up: Keep your records organized so it’s easy to pull up the relevant information.
Your heart wants to jump right in and look at all of the exciting homes for sale in your neighborhood. But the first step involves your brain, and your financial records.
Fire up a spreadsheet and take a good, hard look at the numbers. Pull or print relevant documents for your mortgage application file while you’re at it. Here is what you’ll need to evaluate:
- A. Income—Salary, wages, tips, bonuses, dividends, interest. If you’re buying a home with your partner, you’ll need this information for both parties.
- B. Debt—Any existing mortgage, school loan, vehicle loan, credit cards and lines of credit. Your lender will look at your debt-to-income ratio (how much you owe compared to how much you make) as well as the actual amount of debt.
- C. Savings—Look at accessible and inaccessible savings for the full picture: checking and savings accounts, IRAs, 401(k) or 403(b), stocks, bonds, and equity in your existing home.
- D. Monthly expenditures—How much are you spending each month? Account for housing, insurance, food, transportation, clothing, maintenance, and loan payments. If there are payments you make annually, divide them by 12 to add to your monthly costs.
- E. Credit report—You’re entitled to a free credit report every year from each of the three credit bureaus (Equifax, Transunion, and Experian). The official website for this is AnnualCreditReport.com; don’t fall for the many imposters. Look for any errors and request corrections as necessary. Lenders will pull your credit score, but if you want to see it before they do, you can pay for it.
Once you’ve completed this work, pat yourself on the back. For many, the worst part is over.