As the world is grappling with coronavirus, the process of home buying or mortgage is witnessing a change. With slight changes in applying for a mortgage, a lot has changed about getting a mortgage, especially during COVID-19. Mortgage rates have become volatile, longer waiting times; the buying process has lost its velocity.
To make it a smooth process, providers have become more online friendly; from touring a place to closing the deal, digital has become the new trend in the mortgage industry.
Coronavirus has supposedly affected each Canadian’s life – postponing vacations, managing finances, working from home, dealing with stress and anxiety, and dawdling the home buying process.
What to do, how to manage during Covid battle?
There haven’t been many clear answers to these.
Whether you are a first-time homebuyer or fourth, changes in the process, canceled open houses, fluctuating interest rates Covid has left people bamboozled. Some have even postponed their buying or mortgage process.
For those who decide to proceed with the process, there are extra considerations as most have been affected financially by the global pandemic.
Here is everything to know before getting a mortgage during Covid time;
1. Start the process Early.
Since the process is taking longer than usual, it is wise to initiate the process early; else, you might have to face long waits.
With dropping or slashing rates, lenders have received a sizable number of refinancing applications. Moreover, many employees are working from home, which can further hinder the process.
So, it is better to start early to kick things off.
2. Check your credit report
Credit reporting agencies in Canada maintain a credit report which has a credit history and credit score.
A healthy credit score is 700 and above and showcases creditworthiness. It helps the lender in determining your credit limit and interest rate. Due to pandemic or COVID 19, it is wise to scan your credit report/ score regularly. If you have accumulated a lot of debt or have become jobless, or missed your monthly payments due to the pandemic, your credit score might have dropped. So make sure to rebuild your credit score (by maintaining monthly payments, paying off the debt, keeping credit balance below 35%) before applying for a mortgage.
3.Pay Off The Debts.
Apart from credit score, lenders also consider the Total Debt Service (TDS) ratio, which should be less than 42% before determining your mortgage amount. Make sure to clear all the debt you might have taken during the pandemic, to drive up your TDS ratio, thereby increasing your chance of approval of mortgage application.
4. Scrutinize Your Budget
Covid-19 has undoubtedly taught us the actual worth of many simplest things of life, like steady income, a house, food, comfort.
Before applying for a mortgage, it is vital to have a good look at the budget and scrutinize it, considering something worse happens. Like if you and your spouse lose your respective jobs, will you both be able to afford monthly mortgage payments? If yes, then for how long? In the era of COVID-19, it is imperative to examine, evaluate the actual financial potential or budget for a new home.
The ideal thing would be to lower the maximum purchase price, pay off the pending debts, give a bigger down payment, and stock some emergency fund.
It is always essential to hope for the best but be prepared for the worst.
5. Ask for video and virtual tours
As a precaution to prevent the spreading of COVID-19, many companies are providing video or virtual tours of the houses.
Thankfully, in the era of digitalisation, apart from pictures, you can request for digital tours, live chats for a better experience.
Companies today are producing panoramic 3D tours of the house which will give to an authentic or real experience. It is an incredible technology for complete house tours without actually visiting the property. This technology has gained popularity since the advent of pandemic and is a boon for buyers and sellers.
6.Secure Reliable Employment
Before COVID-19, secure, steady employment was crucial for a mortgage, and even during the pandemic, it continues to be so.
Without a full-time regular job, your mortgage application needs to be put on hold. Pandemic has led to massive lay-offs; if that is your case, have a secured career for at least six months and then move ahead with the mortgage application.
7.Avoid Applying for New Credit
Another critical aspect that is essential to keep in mind before applying for a mortgage includes a good credit score and no recent credits. As current extra credit can signal financial instability, giving a red flag to the lenders. Managing new credit during a pandemic can be challenging due to a shortage of funds, periods of unemployment, and lower wages.
So, either avoid applying for any new credit or put your application on hold if you require extra credit, as it can become more challenging during the pandemic.
The procedure of home buying is not very different from pre-covid times. It is just that more work has become online, management of finances has changed, rates have become volatile.
If you feel ready to buy now, Contact MMC, and we will help you make fiscally responsible choices.