Is It a Good Idea to Relocate During the Fourth Quarter of 2020?
An increase in housing sales in the fourth quarter of 2020 is expected as parents race to move into neighborhoods with the best schools for their children. Low mortgage rates and fear of COVID-19 will encourage migration from urban areas into rural and suburban homes. Homeowners who adapted to working from home are expected to want a home office or den instead of a simple work area. Employees who can work remotely no longer need to live near industrial parks or center city offices. Mortgage rates below three percent entice buyers, but they don't motivate banks. The pandemic made it difficult for many previously creditworthy people to qualify for mortgage loans or refinancing.
The Advantages of Waiting to Make a Planned Move
If your reason for relocating, moving to another state, or downsizing is retirement or divorce, you'll probably find real estate prices will decrease over the next few months. As banks stringently require high FICA scores, steady employment, or large down payments, sellers will be forced to lower their list price eventually. With fewer qualified buyers, the sellers' expectations don't immediately change. They expect pre-pandemic home sales. Eventually, they'll accept lower offers, and the values of similar properties also decrease.
Increase Your Chances of Getting a Mortgage Loan
June 2020 mortgage interest rates are 3.15% for 30-year fixed-rate mortgages. Get a copy of your credit report from each of the major credit bureaus, dispute inaccuracies on your reports, and pay off your credit cards if you can. Calculate the amount you can afford to pay for a house and how much money you have for a down payment on the house. You should get preapproved and list the added costs you'll pay at closing. Read the ratings and reviews each lender gets from respected sources.
Understand the Types of Lenders
If you've banked with the same bank for years, you use an online bank, or you have competitive offers for mortgage financing, you need to consider the types of financial institutions not just the mortgage money that they offer you.
- Custodial banks: Custodial banks hold a major portion of our country's wealth, but they differ greatly in organization and investment policies.
- Commercial banks: Commercial banks are business-oriented, offer lines of credit, and advise businesses during mergers and acquisitions.
- Savings and Loans: Savings and Loans focus on mortgage loans and return on their customers' investments. They may apply higher standards to mortgage applicants.
- Credit Unions: Nonprofit Credit Unions tend to offer lower rates to their members when they offer retail bank services.
- Nonbank lenders: Nonbank lenders may be nonprofit with niche goals and provide services that banks don't offer, but they're less regulated.
- Online banks: Online banks offer convenience, liquidity, and lower overhead, but there is no guarantee that your interest rate won't change or that they won't sell your loan for a profit.
Understand the Types of Mortgage Loans
The National Association of Realtors recommends that you compare types of mortgages.
- Fixed-rate: Fixed-rate, or conventional, loans specify a constant interest rate and payment amount for 15, 20, or 30 years.
- Adjustable-rate: Adjustable-rate loans give homeowners five or ten years of low interest financing before increasing or decreasing to current interest rates.
- FHA: FHA loans require a 3.5% down payment for a government insured mortgage loan.
- VA: VA loans benefit those who served in the military with no down payment and low interest rates.
- USDA: USDA loans for rural residents who struggle financially offer no down payment and low interest rates.
- Bridge: Bridge, or gap, loans are for those with impeccable credit who purchase their new home before selling their old home.
United States Department of Housing and Urban Development
The Department of Housing and Urban Development (HUD) awards grant funds to help first-time homebuyers to purchase houses. HUD helped 3.5 million applicants from 2015 to 2020. HUD may help you with a government-backed mortgage loan if you’re on active duty in the military, a disabled veteran, or a retired veteran. HUD helps police officers and teachers buy homes in underserved neighborhoods.
Finally, the interest rate you pay for a mortgage loan may be based on the amount of money you put down on the property and the quality of mortgage lender that you choose. If the offer sounds to good to be true, it may even be consumer or securities fraud. Before you sign a mortgage loan in 2020, look at in-depth reviews of each lender.
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