What Impact Does Coronavirus Have on Your Home Loan and Mortgage Rates?
Now that millions of Americans are forced to self-isolate in their homes, many are either left without a job or have to make do with significant pay cuts. The good news is that state and federal programs are offering help. Perhaps the most recent example of this would be President Trump’s orders to cease foreclosures and evictions for 60 days across the US in response to the COVID-19 pandemic.
Then there is the Federal Reserve’s decision to cut interest rates to near zero, which is also good news because it will reduce mortgage rates on home loans. The Fed’s short-term rate will affect 30-year mortgages and long-term rates indirectly. The fixed rate for a 30-year mortgage is seen lingering around the 3.5%, down a full percent from 4.31% in 2019.
That being said, these measures are not enough to protect the luxury housing market from economic uncertainty. Many Americans are unsure about the effects of the coming recession and how long it may last. Last week on March 21, 3.28 million Americans sought unemployment benefits, which is unprecedented. The index of applications for home-purchase loans has also slipped by 15%, according to the Mortgage Bankers Association. This is the lowest since August 2019.
Low mortgage rates have caused homeowners from all over the US to send in their applications all at once. Many lenders are unable to address the huge surge of applicants in a short enough period of time, creating a massive backlog. Despite the hurdles they have to go through, now is still the best possible time to apply.
Word of Caution: Mortgage Rates Are Volatile
Although mortgage rates are in freefall, they are still changing frequently in response to the COVID-19 pandemic. And when too many people apply at once, it has the effect of raising mortgage rates to slow down the number of applications. So, if you find mortgage rates increasing in your local area, they might decrease sometime tomorrow or next week.
It is important to prepare for the rates to change at a moment’s notice and be flexible.
The Early Bird Gets the Worm
Make sure to send in your application as soon as you possibly can. This is because the home buying process is taking longer than it usually does, and you may end up waiting in a long queue if you don’t give yourself a head start. It is worth noting that many lenders are now working from home, which slows down the process and prevents them from addressing your needs fast enough.
There are other slowdowns you have to take into account, such as home appraisals. An appraiser will have to physically visit a house in order to do their jobs, and now, many of them won’t want to visit a home that has been quarantined because an inhabitant may be sick and could spread the virus.
This is why if you’re hoping to purchase a house by a certain date, you’ll probably want to get in touch with a lender and real estate broker sooner rather than later.
Use Video and Virtual Tours
Now that companies have been forced to close open houses and tours to prevent the spread of coronavirus, they’re offering video and virtual tours. This means you won’t have to rely on outdated pictures that tell half truths. Many real estate agents have the option of live chatting on their website where they “walk you through” the home-buying process.
A virtual tour is a simulation that can provide a realistic idea of what it feels like when you’re physically visiting a home. Some companies are also able to produce 3D models that you can walk through, much like a video game.
While home-buyers from remote areas have relied on this technology in previous years, it wasn’t until the advent of COVID-19 that it really picked up speed. 3D technology and rendering for virtual tours are reliable enough to help you make an informed purchase decision.
Work with Brokers Who Take Coronavirus Seriously
The last thing anyone needs right now is a skeptic who downplays the effect of coronavirus. It’s not just a flu that goes away in weeks, and it certainly doesn’t only affect elders. COVID-19 has the potential to kill a person even if they’re receiving the best possible healthcare. For this reason and more, it is important to work with a real estate agent who takes the pandemic seriously.
Real estate agents should have adapted now to accommodate the home-buying process. Almost everything can be done virtually, from virtual tours to closing a house. If the state you’re living in allows it, try finding a broker who lets you close on a home digitally without going in-person.
Videoconferencing is a real possibility thanks to tools like Skype and Facetime. Do keep in mind that only about half of all states allow notaries to be done virtually. The latest to join the list is New York, which under the new executive order, now permits this, too.
Make sure the real estate broker you’re working with is reputable. Online notarization systems are vulnerable to fraud, and you have to be on your toes at all times. For instance, how can you verify the authenticity of a person on camera? It pays to do your homework on real estate brokers before contacting them.