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Recession-Friendly House Hunting
Tips
for First-Time Buyers and Investors
The real estate market is showing a strong recovery following
coronavirus-related shutdowns. Despite financially uncertain times and social
distancing recommendations, people everywhere are still buying and selling
homes. In fact, the current recession is an enticing opportunity for many
buyers. Whether you’re thinking about buying your first home or looking to
invest in real estate, the recession may be a great time to purchase property
and lock in a low mortgage rate! Here are some things to keep in mind before
making your big purchase.
Ensure You’re
Financially Prepared
For many people, the recession could be a great time to buy a
house. But is it the right time for you? If you’re not financially
prepared for this major purchase, don’t rush your plans just so you can secure
a low interest rate on a loan. Do some research to find out how much home you
can afford so you can get a better idea of your options. Looking into home
loans is a good place to start. According to PennyMac, a conventional mortgage
can be a good low-cost loan option for both primary homes and investment
properties. Plus, you can choose between a fixed rate and adjustable-rate mortgage and
enjoy a range of down payment options.
Of course, financial preparedness will look a lot different
depending on whether you're buying a home as a principal residence or
investment property. It’s a good rule of thumb to keep your mortgage expenses
under 28% of your gross income. If you’re buying an
investment property, make sure you will be able to charge enough rent to come
up with a positive cash flow.
Be Careful About Buying
a Home ‘As-Is’
As you start looking for homes, you may notice quite a few
selling “as-is.” These homes are more common during recessions as many owners
can’t afford to make repairs before selling. Banks also list foreclosed homes
“as-is”. While buying an “as-is” home may help you get a great deal on your
dream property, it’s important to be cautious.
Make sure you know exactly what you’re getting into by
purchasing a home that may need substantial work. For example, Redfin warns
that “as-is” homes could have major defects like
structural problems, pest infections, or mold issues. If you decide to go after
an “as-is” home, get a home inspection before closing your sale and
be prepared to cover any maintenance issues yourself. These homes may not be
your best choice if you’re looking for a low-maintenance first home or a
turnkey real estate investment.
Try to Be Flexible
When house-hunting during a recession, flexibility is key.
Don’t limit yourself to your favorite neighborhoods. Whether you’re investing
or buying your first residence, look into areas of town where you won’t get a
lot of competition from other buyers. Working with a great real estate agent
can help you discover up-and-coming neighborhoods where homes are
more affordable and prices are projected to rise over time.
Consider Your Plans for
the Property
It’s easy to get caught up in the excitement of buying your
first home or investment property. But don’t forget to think about the future!
What are your plans for the property? How long do you plan to live in the home? Will
you be making renovations or upgrades? Do you intend to rent out the basement
suite to help with your mortgage payments? Investors also have to consider
their future plans. If you want to rent out your new property as a short-term
vacation home, you may need some extra money in your budget to make attractive
renovations or interior design upgrades.
When personal finances are in the right
place, recessions can be exciting opportunities for prospective home buyers.
This may be your only chance to score a historically-low interest rate on your
dream home. As long as you’ve thought ahead, calculated your home
affordability, and researched your loan options, this could be a great time to
buy your first home or investment property!
Article By
Suzie Wilsoninfo@happierhome.net
House Hunting Tips, First Time Home Buyers, Recession Home Buyer, Interior Design, Investors
