How Should You Plan to Buy Your Home during the Pandemic

Coronavirus has not disappeared, but fear of catching the virus seems to be wiped off the face of the earth. The onset of the pandemic rang alarm bells forcing the entire world to go under the lockdown phase for a couple of months, which led to a new subject of worries – what about the economy. This is not the first time you all have faced the pandemic, but it has brutally shattered the world economy. This has been the worst time for everyone, but people looking to by their homes the first time suffered a lot.

Now the lockdown has been lifted, and life is coming on track by piecemeal. This is the time you should reconsider your plan of buying your property. Of course, you have to stay home and safe because the virus is still lingering in the air, but you cannot put your property plans on hold until the vaccination comes. If you are always looking to buy your dream home, you need to set it in motion as soon as possible.

Increase your deposit size

You must be aware that there is no such thing as 100% LTV (loan-to-value) or zero percent deposit size. If you want to get your foot onto the property ladder, you will have to arrange a deposit size as a minimum of 5%. You must have been stashing away money if you had already decided to buy your dream house. However, now circumstances have changed. You cannot go to a mortgage lender with your 5% deposit in the hope that you will get your application signed off on.

COVID19 has worst hit the economy, affected everybody, including those lenders who were able to approve a mortgage with as little as 5% of a deposit size before the pandemic outbreak. While some people have lost their jobs, others are relying on freelance and secondary income sources. Income instability has become one of the significant factors to deter lenders from approving first-time buyer mortgages with high LTV.

Now lenders are inviting applications with a higher deposit size. It should be at least 15 to 20%. This is why you need to prioritise your savings. Go through all of your bank statements to know how much cash is coming in and going out. Cutting back on expenses will mean you have additional money that you can add to your deposit size. Even a slight cut in your costs will lead to a significant contribution to your deposit.

Strengthen your income statement

A mortgage is paid off over a long period, and therefore a lender must assess your repaying capacity. You will have to prove the mortgage lender that you can afford to repay the debt you are taking on. Even though your house serves as collateral against that loan that a lender cannot liquidate to release money in case you commit a default, the lender will look over your income statement carefully.

After the outbreak of the pandemic, lenders have become stricter in assessing affordability. They are approving mortgage applications of only those buyers who have income stability. People who have managed to stick to the same job during the lockdown are highly likely to have their mortgage applications signed off on. A good rule of thumb says that you should increase your income. If your current job is not paying you well, you should switch to another job. However, if it is difficult to land a new job, you should work as a freelancer too. A lender will decide after assessing all of your income sources.

Check your credit report

Never ignore the importance of a credit score even if you have a strong financial statement. Before you apply for a first-time buyer mortgage, make sure that you have checked your credit report at least once. Ask all credit bureaus for providing you with a copy of your credit file because you never know who your lender will turn to. You can get a copy of your credit file free once a year.

However, you should not hesitate to pay for it if you have already used this chance. It is paramount that you have a good credit score to have your mortgage application approved. Some lenders are ready to provide you with a mortgage with a bad credit rating, but it can be tough to get them approved during the pandemic time. Make sure that you dive into your credit file. Immediately ask for corrections if you spot identity theft and default that you do not recognise. It may take at least 28 days to make all these changes. Apply for a mortgage only when you are sure that your credit score is good.

If you have found that your credit score is not up to the par, you should try to improve it. Analyse the reasons why it is abysmal. For instance, if you have some outstanding dues, try to settle them as immediately as possible. You had better not to have a default on your credit file because it shows up for six years, reducing your chances of getting your mortgage application approved.

Start searching a house

Although the pandemic has made it a bit difficult to get onto the property ladder, property prices have fallen. Of course, you will start setting aside for a deposit as per your estimation. When you begin searching for a house, you get to know how much you need for a deposit.

However, you must have a mortgage pre-approval document that you will show to the seller. Otherwise, the seller will not entertain you. This pre-approval document shows that a lender will likely approve a mortgage application based on the current income and credit score.

If you are looking to buy your house during the pandemic, make sure that you can prove the mortgage lender that you can afford to repay the debt you are taking on and check your credit file to ensure that it is perfect.