Buying A Home During COVID-19
The U.S. economy is struggling to come back from the coronavirus. One area that proves to be surprisingly strong is Housing. Because of low mortgage rates, real estate in many cities, including Illinois, are selling nearly as briskly as it was before Covid-19. Properties that come on the market that are priced right are gone in a matter of hours.
According to Redfin, more than 41% of homes faced a bidding war in the four weeks ending May 10. That’s up from just 9% in January before the pandemic hit the U.S
If you’re hoping to buy a home in a hot real estate market, here’s what you need to know:
Do your research
A Travelers Insurance article states, Starting your hunt virtually while sheltering in place can be beneficial if you find you have the time to shop online more thoroughly; that extra effort may give you an advantage in finding a home you love within your price range
Many real estate agents post virtual tours of properties for sale on their websites and YouTube. When you take a virtual tour or attend a virtual open house, you can get a realistic view of the property.
Get Preapproved for a Mortgage
The Travelers article also mentions, get a mortgage preapproval before you begin house hunting. It may be possible to get preapproved online, so consider looking into that option. A mortgage preapproval is a letter from a lender that indicates how much you are qualified to borrow from the lender, at a specific interest rate.
- Check your credit reports and get your credit score. Good credit, such as a FICO score of 620 or higher, will qualify you for a conventional mortgage and lower interest rate.
- Gather all the information your lender will need to start the mortgage preapproval process: income information (W-2 statements from the last two years and recent pay stubs); asset information (bank statements and investment account statements); and your personal identification.
According to Money.com, homes that are clean and priced well will sell in the first weekend or week on the market. Just as COVID-related shutdowns began, you should look at properties as quickly as you can when they come on the market.
If and when you make an offer, stay available to accept or reject counteroffers. The listing agent isn’t going to wait for you. Also, choose a lender who can do a speedy closing — within seven to 10 days.
Since there has been bidding wars on house buying, you may need to make an offer on more than one property, and yours may be just one of multiple offers. Multiple offers are increasingly the norm, especially in the spring market. The money.com article also suggests because you might need to bid higher, don’t look at homes at the top of your price range. Know your maximum price and look at properties listed for less than that, so you have room to make a higher offer if that’s required.
Put 20% down and bump up your earnest money
Money.com also states the more money you put down, the stronger your offer will appear. The same is true of earnest money.
Even during these challenging times, there is still much you can accomplish in your quest to find your dream home. If you’re planning to buy a house, you’ll need homeowners insurance.
Insurance Steps to Consider When Purchasing a New Home
- The most obvious step is to obtain quotes for the new residence. You’ll need to know specifics about the residence: year built, square footage, construction, etc. Most of this information is available online. Your agent should be able to obtain this information with a proper address.
- Have your agent review your auto as well for a complete package. Typically, you obtain the best rate by packaging your home and auto together.
- The agent will calculate a replacement cost estimate to determine how much coverage you need to insure your home (aka dwelling coverage). The replacement cost estimate is obtained by using the information above.
- Think about how you will title your property. Homeowners insurance should list all names that are listed on the title.
- Be sure to discuss any areas of additional concerns with your agent (i.e. if you run your business from home, if you have expensive jewelry, or if you have any collections). Coverage is inexpensive to add and will make your life easier during the claims process.
- If your new home has a pool, consider an umbrella policy. An umbrella policy is extra liability. A pool always means more visitors which inevitably leads to an increased opportunity for injury. With a cost of $150+ per year for $1 million in coverage it may be worth it to consider the policy.
- Share your agent’s contact information with the person handling your financing. They will eventually want to obtain proof of insurance and confirm the home is properly protected. It is also helpful for the agent to obtain a copy of your appraisal to ensure the replacement cost estimate is accurate. Not everything online is accurate!
- Same as above, however you should also let your agent know what you will be doing with your existing home. This is important because the coverage type will change. If you are not properly covered, the carrier may NOT cover your claim. Often people plan on selling the existing home, but the property ends up vacant for a longer time frame than anticipated. In the event of a loss, the carrier will DENY coverage because the property is vacant. We can fix this by switching the policy to a Landlord policy or Vacant policy. Most carriers will allow for a property to be vacant for 30-60 days.
If you have questions or need homeowners insurance please contact Kelly at 708-444-0050 or firstname.lastname@example.org