Sydney's Mortgage Broker Says now is the time for a first home buyer
Is it a good time to buy a home for first home buyers?
A recession or economic downturn largely results in things such as lower industrial output, higher unemployment, a decrease in consumer spending, an increase in loan defaults and bankruptcies, and an absence of household income.
Commonly they have an effect on the real estate market as well. During a recession, you might expect to see an increase in the number of foreclosures, flat or declining property values, a decreased sales volume and houses waiting on the market for longer periods before they sell.
However, according to experts, in spite of bad news for real estate professionals and the industry overall, this can create opportunities if buyers can convince mortgage lenders they can afford to pay their loans even with an economy in turmoil. An approach to an experienced Sydney’s mortgage broker can make your loans as stress-free as possible.
What should you do before buying your first home?
Be honest with your finances before you buy. What concerns us is not how low prices can fall during a recession. But it’s about how much property you can afford to buy before the prices go back up. To pay your mortgage and survive the downturn is at least as crucial as finding a low-priced home.
Be honest about your own financial situations as well—recessions do not just affect homeowners. An unstable job can make bargain homes unaffordable in the long run. If you’re a business owner, determine whether or not you expect your business to continue to flourish in the present economic situation.
Benefits of Buying During a Recession:.
- Lower home prices:. According to supply and demand, where there are fewer buyers, a home seller might lower their price to make their property more appealing. Fewer buyers generally mean longer selling cycles, which can cause difficulties for those looking to sell in a hurry due to financial reasons or because they have other opportunities somewhere else. To escape months of marketing and hosting open houses, they will lower their asking price or accept offers that are lower than their asking price. So, if you’re looking to buy a house, you might come across:.
- Property owners who are willing to offer a lower asking price
- Homeowners who do a short sale to get out from under their mortgage
- Banks that sell foreclosure properties
- Rates Are Lower:.
Recessions tend to bring down mortgage rates along with falling home prices, and the housing industry always plays an important part in the economy. During a recession, the federal government hopes that by lowering mortgage rates, it can boost home sales and make it cheaper for borrowers to borrow mortgages.
- Less buying competition:. When the economy is in a slump, fewer people have the funds to buy a first home or upgrade to a larger one. It may be that, depending on where you are house hunting and what type of house you desire, you’ll have fewer rivals to compete with. In a market with fewer buyers, there is less urgency to make a move immediately for fear your competition will get your dream property before you can make an offer. You can take your time and view more properties, and it may also reduce your sense of pressure to submit a bid that exceeds the asking price in order to make your offer stand out from those of other buyers.
Drawbacks of buying a home during a recession:.
- Selling your current home may be difficult:. If you’re in the market for a new home but need to sell your current house, the price trends that benefit you as a buyer may work against you as a seller. You may need to be prepared for low price offers or longer selling cycles depending on your local housing market. Experienced real estate professionals can help you with pricing your home to sell as well as when submitting purchase offers on a new house. If selling now isn’t an option for you, consider renting out your current house as long as you have sufficient funds for a down payment on the new house. Renting it out could prevent you from selling in a slow market and provide you with steady income lenders might appreciate.
- Tighter lending requirements:. During recessions, rising unemployment and lower household income is common, making it difficult for more borrowers to cover their debts. Lenders, in turn, tend to be more cautious when issuing new loans. They may require more credit scores to qualify for loans, increase down payment requirements for mortgages, and provide greater scrutiny to loan applications.
Looking for the best deal on real estate during a recession is just as important as understanding how solid your finances are. Getting multiple quotes from multiple lenders will ensure you get the best deal.
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