Buying a house is exciting (and stressful) at even the most sedate of times, but when there’s a pandemic sweeping the globe and you’re dealing with brand-new rules and regulations, you’re entitled to feel panicked. There are times, however, when the show (or sale) must go on.
Whether you were already under contract or are still searching for your dream home, here’s what you need to know about buying a home during coronavirus.
Is it possible to buy a house right now?
It depends on where you live. A local, experienced real estate agent can give you deeper insight into what is and is not permitted at this moment in time.
Under guidelines from the White House, Americans nationwide are practicing social distancing measures in order to mitigate the crisis and flatten the curve. Practically speaking, this means that people are to avoid gatherings of 10 or more people, and that work and school tasks should be completed at home, whenever possible. Most state governments are urging people to stay home except to grab necessities using “shelter in place” and “safer at home” directives as a matter of public health.
In states, counties, or cities with these rules, only essential services are allowed to operate. If real estate is considered an essential service where you live, then you can still buy a house right now — but if it’s not considered essential, then you will have to wait until the COVID-19-related rules are lifted in your area.
There are a number of services bundled under real estate as an industry, including appraisals, inspections, rentals, and home sale transactions. If those activities are not considered essential, then you won’t be able to get an appraisal or inspection for a home you want to buy, even if you can find a seller willing to make a deal right now.
Ask your agent for the most up-to-date information as restrictions affecting real estate are shifting by the day and vary from city to city.
Are real estate services allowed to operate in my state right now?
Federally, the Cybersecurity and Infrastructure Security Agency (CISA) has declared “title search, notary, and recording services in support of mortgage and real estate services and transactions” as well as “residential and commercial real estate services, including settlement services” essential. Guidance from CISA is advisory in nature, however — it’s not a federal mandate, and states, counties, and municipalities can create their own rules.
Of the states that have issued shelter-in-place directives of some kind, many have declared at least some real estate services as “essential” and allowed to continue operating despite the directive, but a handful have not. Shelter-in-place orders generally require businesses that aren’t deemed “essential” to shut down their physical offices.
If you’re under some kind of shelter-in-place mandate and real estate has not been deemed essential in your city, county, or state, any services that cannot be done remotely will be on hold. As of April 3, 2020, 14 states have permanent laws allowing for remote online notarizations (RON), while 12 have enacted emergency RON measures in response to the coronavirus, according to the National Notary Association (NNA). Elsewhere, closing a transaction still requires an in-person signing. Rules and guidance around online notarizations, such as which technology you need and whether notaries have to register, also vary across states. Check the NNA’s website for updates and to see w here your state currently stands).
You can see how there are a lot of variables in the mix — so call up your agent and get their input.
Is it safe to go house-hunting when my area is shut down?
The safest way to hunt for houses right now is online. Real estate agents and sellers might or might not be taking precautions to protect themselves and your health, and there is no way to know for sure how your contacts have circulated in the state, country, and world during the past two weeks.
That said, if you must hunt for houses in person, follow all of the CDC and WHO coronavirus-related recommendations: stay six feet away from other people (do not ride in the car with your agent); refrain from touching your face; wash your hands frequently or use hand sanitizer; cover your mouth with your elbow when you sneeze or cough; wipe down surfaces you have touched with Lysol.
Be aware that sellers might ask you to take additional steps or precautions to keep their homes clean, and be willing to follow any extra instructions.
Can I tour houses online?
Many listing agents and sellers are making virtual home tours available to buyers online so that you can walk through the home or attend a virtual open house via livestream. Ask your real estate agent how you can tour homes for sale online.
Is it safe to get an inspection right now?
In states and areas where inspections are permitted, buyers and sellers might have questions about how to keep themselves (and the home) safe during the inspection. There are some precautions that can alleviate fears and minimize cross-contamination.
Inspectors should walk through the house by themselves, unaccompanied by buyer, seller, or agent. They should wear gloves when touching anything in the home, and they should probably wear a mask, as well. Some sellers might ask inspectors to use hazardous-materials uniforms to provide a barrier between the inspector and the home.
What is an alternative appraisal? How is it different from a regular appraisal?
An alternative appraisal is a home appraisal that does not conform to the standard Fannie Mae 1004 appraisal, usually because there is not an in-person interior inspection of the home. Instead, appraisers use exterior inspections, drive-bys, someone else’s inspection (such as a home inspector), or even a video walkthrough hosted by the seller in order to assess the home’s quality and condition.
The Federal Housing Finance Agency has permitted alternative appraisals to be used in lieu of a full appraisal through May 17, 2020, as a result of the coronavirus; these alternative appraisals help maintain social distancing while still obtaining a reliable valuation for both the buyer and seller.
Why are mortgage rates so low? Should I lock mine in?
Mortgage rates respond to upward and downward pressure from Federal Reserve rates. When the Federal Reserve rate was slashed to nearly zero in mid-March 2020, mortgage loan interest rates also dropped to three-year lows. Talk to your loan officer or mortgage broker, and your real estate agent, about timing for locking in your own mortgage loan rate if you’re ready to buy right now.
What is an overlay? What does it mean if my lender imposes one?
A lender overlay is an additional set of guidelines or standards that a lender requires from homebuyers in addition to the minimum standards set by the government-sponsored enterprises (GSEs), the FHA, or the VA. Lenders will impose an overlay when they believe that the risk of making the loan has increased.
There are different types of overlays that lenders can impose. The most common ones are credit score and down payment: Lenders could require a higher credit score or bigger down payment (or both) to secure the same mortgage loan. For example, the GSEs have set the minimum credit score to get a conventional loan at 620, and the minimum down payment at 3%; during the coronavirus, some lenders imposed overlays that raised the minimum credit score to 700 and minimum down payment to 20%. Lenders might also impose a debt-to-income or loan-to-value overlay, but these are less common.
If your lender imposes an overlay before you close on your house, it’s possible that you might not qualify to buy the house any longer. You can protect yourself by shopping toward the lower end of your price range so that if an overlay is imposed, you’ll still qualify for a loan.
What can I do to make my home purchase easier right now?
Be aware that the coronavirus is causing substantial delays in many parts of the real estate closing process. Whatever you can do to streamline underwriting for your mortgage loan will be helpful; make sure you have all your documentation together and are careful not to open any new lines of credit while you’re trying to buy.
It may be more difficult to secure a mortgage loan right now due to economic upheaval, and that might mean additional hoops for you to jump through to prove that you have the funds and the financial ability to buy. Be prepared to take those steps so the sale isn’t delayed more than necessary.
Be patient and flexible with your agent and with sellers, who may have to follow certain guidelines, such as only allowing one buyer inside a house at a time (in which case your spouse may have to wait in the car). Talk to your agent about whether and how to have the home deep-cleaned before you move in if you are concerned about COVID-19 infection. And understand that appraisal and inspection delays will likely lead to a longer closing timeline than you had hoped.
What happens if there are unforeseen delays?
Real estate contracts include several dates by which different tasks must be completed in order for the contract to remain valid. Those dates include deadlines for the inspection, the appraisal, the closing itself, and moving out. Because so many real estate services have been disrupted by the coronavirus, you should expect delays.
A coronavirus addendum is a clause that your real estate agent can add to the purchase agreement; the addendum extends these deadlines and also pushes out the closing date by as long as 30 days. If you cannot close the home sale within that extra 30 days, then you will have to negotiate and sign a new purchase agreement with the seller.
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