According to an article from The Washington Post, millennials are considered one of the unluckiest generations due to the financial woes that have been unwittingly thrown upon them. First it was the Great Recession, and now during the present circumstances many potential first-time home buyers may be scratching their heads. Some wonder if now is as good of a time as any to buy a home. In this article we exam some of the key trends coming out of 2020’s unique year and how they affect the homebuying decision process.
Factor 1: Mortgage Rates at New Lows
You may have read our recent post discussing how mortgage rates are at an all-time low today. Indeed there has never been a time where it was common to be quoted a 30-year fixed mortgage rate under 3%. When the stock market crashed in March 2020, the Federal Reserve Bank stepped in to bring stability in unprecedented ways. Among their actions included reducing interest rates to rock bottom levels, creating the lowest mortgage interest rate opportunity for homebuyers in recent history. The Federal Reserve has also committed to keeping these rates low for at least the next 2-3 years.
Factor 2: Mortgages Hard to Come By
So is it a no brainer with interest rates so low that you should buy versus rent today? If only it was that simple. The current economic uncertainty has squeezed the banks with greater loan defaults, creating a credit crunch where the banks need to rein in their lending. The largest banks in particular have become the stingiest, often turning away applications for any reason they can find. However, mid-tier banks and lenders such as Caliber Home Loans do not have the same financial constraints and have been lending quite generously. Especially in these uncertain times, it’s important to shop around for quotes so that you are not discouraged from today’s tighter credit market.
Factor 3: Rents Are Low As Well
Given the environment, it is critical when deciding whether to buy or rent today to consider all the advantages as well as disadvantages to buying a home. The rental market should also be considered in your decision process as rents have declined across most of the US. In addition many renters are being incentivized with great deals. Many large institutional landlords, for example, need to meet certain rent thresholds to maintain their loans for their lenders; as a result, many have been offering one or two months of free rent for new leases. Whether you are on the buying or renting side, this is a unique time where you will have tremendous negotiating power.
Factor 4: Where You Buy Also Matters
You may be reading many articles detailing how crime has been going up significantly in all the major and mid-sized cities. Indeed between higher crime, the ongoing pandemic and the current economic uncertainty, many are leaving the cities for the quieter, more spacious and safer confides of the suburbs. While this means tremendous negotiating power for you if you are considering buying or renting in a city, you will find the reverse if you are trying to move to a desired area. In fact, competition is greater than ever for many suburban areas. For those looking for a deal, this may be the opportunity for you to go against the pack and head back to the cities.
Factor 5: Your Financial Budgeting is Critical to Buying
Certainly times of economic uncertainty make it more important than ever to set a new home budget. It is just as important to understand what you can afford by using an affordability calculator. Finally, getting your finances in order and being well organized will be important to navigating the home buying process. Once you are organized and prepped, it is very easy to take the next step and request mortgage quotes from some of the top lenders.
How to Make the Decision Today
Renting versus buying used to be a far simpler process where a simple rent vs. buy calculator would often get you to the right answer. With the uncertainty caused by the events of 2020, the answer is not so simple anymore. Ultimately everyone’s unique situation needs to be accessed individually, but in general if you are well organized, have a strong credit score, and are looking for a property in a city, you will likely find today will be a bargain time to buy. For those with less strong credit scores looking for a place in highly desirable areas such as the suburbs of cities, you will likely find it is better to rent. With such an important decision, we encourage you to fully compare the pros and cons of renting versus buying.
Discover More with Loan Compass
Loan Compass simplifies the homebuying process by providing simple directions through easy to understand steps. Our mission is to empower you with the knowledge and tools you need to get the best possible mortgage and home buying experience. Visit our site and we’ll walk you through each step of the process!