How to Afford a New Home in a Down Economy
If you pay close attention to the housing market, you know that it typically ebbs and flows. Expansion, decline, recession, recovery — rinse and repeat. That cycle, of course, can be disrupted by a housing market collapse like the one we saw in 2008. Today, all eyes are on the housing market once more as the economy takes a significant hit from the COVID-19 pandemic.
The potential good news? As the economy slows down, housing prices and mortgage rates also go down, leaving the potential for more affordable home options. That has a lot of people wondering: Is now the right time to buy a new home?
Buying a New Home in a Recession
We’re breaking down the basics of how to afford a new home in a down economy, and what you should consider before you start packing.
Get clarity on your current financial situation
Before considering the purchase of a home during a down market, you should ask yourself: Can I really afford to buy a new home? Yes, home prices may be lower, but that shouldn’t be the only deciding factor. If you can, seek advice from a loan officer, financial advisor, or accountant to help you crunch numbers and paint a clear picture of what you can and can’t afford.
Another crucial factor to consider is future financial security. While you may be able to afford a new home right now, what does that look like in the future? Unemployment is at an alarmingly high rate and will likely continue to rise as our country weathers this current economic storm. With this in mind, here are some questions to consider:
- Do you have job security in the “COVID economy”? What about in a post-COVID economy?
- Is your employer considering future downsizing, furloughs, pay cuts, or layoffs?
- Would your position be safe in an economic recession?
- If you’re a business owner, has your business taken a hit during the pandemic? Could it also survive an economic recession?
Be sure to get clear, honest answers to these questions, as they can make or break your ability to afford a new home now and in the near future.
Seek professional help or advice
As a potential home buyer in a down economy, you have the upper hand as owners, new home communities, and realtors become more and more eager to sell. However, that doesn’t exempt you from making a bad investment. To ensure you get the best (and most affordable) deal, consider hiring a local and trusted real estate agent or realtor, and working with onsite agents if you want to buy a new build home. They’ll have insight about the market and help determine whether houses are priced at, above, or below the average range for that area.
Shop different lenders
Like home prices, mortgage interest rates are incredibly low right now, making it a prime opportunity to capitalize on a reasonable and affordable home loan. Don’t let that force you into your first offer, though. Shop around different lenders to find the best and lowest interest rate, because a better interest rate means paying less over time — and more money in your pocket.
A good rule of thumb is to get rates from at least three different lenders to seek out the best offer. Don’t limit yourself to shopping big banks; you should also inquire at credit unions, local or regional banks, mortgage brokers, and online lenders. You can also talk to on-site agents at new build communities to see if there are any additional incentives to using their lenders, and compare your findings.
Pro tip: Make sure you’re at least pre-approved for your loan before you go home shopping. That way, you can act on a good deal as soon as you find one, potentially avoiding a long, drawn-out buying process.
Explore new build communities
While existing homeowners may have more incentive to sell than ever, that doesn’t mean you have to settle on just any home. If you’re interested in buying a home that meets your lifestyle, has a central location, and offers modern amenities without breaking the bank, now is a great time to look at new build communities.
New home builders are motivated to sell during down economies, but they also offer many incentives that existing home purchases don’t. Think of interior upgrades, closing cost coverage, approval for FHA and down payment assistance offers, and more. Even with a down economy, real estate can still be a competitive game. Looking at new homes can eliminate the stress and get you what you really want — a home that checks your “wants and needs list.” A new home can help you step into homeownership confidently, even during a down economy.
Find your new home at West Line Village
The short of it? Buying and affording a new home in a down economy isn’t as simple as taking advantage of lower prices and mortgage rates. While you can find a great deal, it’s still one of the biggest financial decisions you’ll make in your life. As a result, you should take your time, and gather all the necessary information to make a well-informed decision.
If the time is right for you and you live in Colorado (or are thinking about making the move), come find your new home at West Line Village in Lakewood! Our community of modern, energy-efficient, and affordable townhomes are waiting to welcome you. Book an appointment and see for yourself all the incredible amenities and incentives we have to offer.