Are you in debt? You are not alone. Millennials between the ages of 21 and 34 have a $1.1 trillion debt. The pandemic last year didn’t help at all in reducing this debt. People defaulted on their home loans and credit card debts. They couldn’t even pay the minimum amount due because the companies cut their hours or laid them off. But here you are, wanting to buy a home amid a pandemic because there’s a couple of good deals that you can’t let pass. Besides, now more than ever, you realized how important it is to have a home for your family, so you never have to worry about the landlord kicking you out.
But before you go and make an offer, remember that applying for a home loan is not like using your credit card in your favorite retail store. Credit card companies will approve transactions in a millisecond. As long as you still have space in your card, they’ll just let you max it out. Lenders are a different breed. They’ll have to look at your finances and determine the level of risk they will take to let you borrow money. The interest they will charge will depend on that risk level.
Although it is important to start thinking about buying a home, it’s equally important to clean out your mountain of debts first. Unless, of course, you want to borrow money with the highest interest rate ever. That’s not what you should aim for. You’ll want the lowest possible rate you can get, so you don’t waste your money paying the interest rather than the principal amount of the loan.
Talk to a Financial Advisor
The first thing you have to do is to call a financial advisor and talk to a mortgage agent. The financial advisor will help manage your finances and teach you about paying off your debts faster, while the mortgage agent will give you a glimpse of how the home loan market is like. You need information about how much you can afford and what interest rate is fair enough given your financial circumstances. The mortgage broker will act as an intermediary between the borrower and lender.
Pay off Your Existing Debts
You need to be prudent with money if you want to buy a home in the middle of the worst thing that has ever happened in modern times. The pandemic is no joke. One day, the economy is doing fine, and then, the next, businesses are closing again. Your finances have to be stable enough that even if you lose your job or have the hours cut, you will have enough to pay your mortgage for the next six months. That will give you enough time to look for a new job or find a side hustle. But to be that financially stable, you have to pay your debts—credit card dues, mostly.
Get Preapproved for a Mortgage
You have surely heard about getting preapproved for a mortgage. This is an important step that many homebuyers forget about. A preapproval is not an approved home loan, but it’s a critical step in reaching that point. This means that the borrower will have an estimation of the interest rate that will be imposed on their eventual home loan. Also, it gives the borrower an idea of the maximum principal amount that they can borrow. This will narrow down the search for the dream home.
Take Virtual Tours
Thanks to technology, the real estate market didn’t have to slow down that much during the pandemic. Take advantage of virtual tours before deciding when you will visit the home in person. This way, you don’t have to meet with agents repeatedly. It will save you the hassle and dangers of face-to-face interactions at this time. Some real estate developers are even offering a virtual reality (VR) tour of their properties. This is a great way to find information about the neighborhood, amenities, and community activities.
Work a Side Hustle
Obviously, during a pandemic, money is tight. If you have a bit of time left, spend it on a side hustle. The Internet gives many opportunities for graphic designers, web designers, content producers, social media managers, marketing strategists, and many more. Find a niche. Develop your skills. Who knows? You might even be able to pay off your existing debts and loans on your side hustle.
There is always a way to afford a home even amid a pandemic. You have to be prudent and smart with your money, though. The important thing to realize is not to rush things. Although you might find great deals now, this doesn’t mean you have to dive into it. Think on your feet. Seek great financial advice. Once you are 100% sure you’re on the right track, then make that offer.