Mark Kunzer, ESL Manager of Business Development Mortgage Originations, and David Staggert, ESL Manager of Mortgage Originations, have more than 55 years of experience combined in mortgage originations. David and Mark give us their perspectives on how COVID-19 has impacted first-time homebuyers from a financial institution’s point of view.
How has COVID-19 impacted the homebuying process for first-time buyers?
It has definitely changed the homebuying process in that it has dramatically limited the ability for the first-time homebuyer to meet face to face with their lender, Realtor, and real estate attorney. When proceeding into such a large and impactful transaction for a new buyer, the direct and personal encounter can often be important in building trust and confidence.
What are the top challenges first-time homebuyers are up against or what should they be prepared for?
In today’s very competitive real estate market, greater demand for low housing inventory makes finding your perfect home much more of a challenge than it has ever been before. First-time homebuyers should be prepared to act quickly and timely when a new listing appears that they have interest in. Waiting a couple of days or possibly even hours can mean the difference in getting or not getting the home you’re looking for. One tip that can be helpful for homebuyers in a competitive market is to get pre-qualified for financing before your begin your home search.
As it relates to financing, what are the top things first-time homebuyers need to know or be mindful of?
First-time homebuyers need to ensure they have adequate savings or assets to complete their home purchase. The biggest surprise first-time homebuyers face is the amount of funds needed to close the transaction, which includes down payment, closing costs, and taxes. A good rule of thumb is 10% of the purchase price. You can receive gift money from a relative, or ask for seller’s concessions to help you with funds as needed. But in a very positive light, rates are historically low, which will stretch your buying power greater than ever before.
How can lenders/financial institutions support first-time homebuyers throughout the process?
Many questions come with buying your first home. As a lender, it’s important to be very open and transparent right up front about the mortgage origination and approval process. We explain and educate buyers about the timeline, what steps will occur, and what documents will be required—from the mortgage application through the loan closing. It’s also important for your lender to be attentive to the details of their loan request and ensure that critical dates in the purchase contract are met.
What information do first-time homebuyers need to have to qualify for a mortgage?
The key elements are sufficient income, assets, and credit. Lenders will confirm that your income is sufficient to cover your expected mortgage costs, and any other outstanding debts. These debts are typically reflected in a “DTI,” or debt-to-income ratio. Your lender can tell you the maximum amount of DTI for your mortgage, and generally a lower DTI is better and helps buyers. For assets, the rule of thumb of 10% of the purchase price again applies. Your lender will also review your credit and explain all available mortgage options for you.
How can first-time homebuyers determine which type of loan is right for them?
It’s best to speak to a mortgage originator to your review income, assets, and credit, which will help guide the process for each individual and determine what mortgage options are available for your situation.
Will the time to close a mortgage loan be impacted?
It is difficult to specify any direct impacts to the timeline of closing a mortgage during the COVID-19 pandemic, but all partners involved in the process are adapting and working diligently to ensure there are minimal or no delays from the norm.
What things should first-time homebuyers avoid doing?
A first-time homebuyer should avoid making rash or quick decisions out of frustration. Low inventory and high demand of homes for sale have created a very competitive market, and all buyers are facing the same challenges to get the house they want. If you are bidding on home after home and losing out, do not resort to over-buying or settling on something which does not meet all of your needs. Either decision has the potential to create more of a financial risk for you down the road.
