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By Daisy Simmons
Motivated to reduce the spread of COVID-19, many Americans are staying home—and as a result, longing to spread out a bit themselves. With the kitchen table now doubling as a hub for remote work as well as distance learning, it’s little wonder some buyers are seeking a larger home.
Moreover, 3 million U.S. adults moved back home in April alone, bringing the total to 32 million—the highest number on record of adults living with their parents or grandparents.
These days, who couldn’t use a little more elbow room?
Before the pandemic, the median size of an existing home purchased was 2,060 square feet. Meanwhile, newly-built single-family homes had a median of 2,291 square feet in the first quarter of 2020. Now some real estate experts are predicting the public health crisis will likely boost those footprints even further.
Do you have a client who, like many, is on the hunt for more space? If so, read on for key things they should consider when it comes to securing a mortgage.
Prospective buyers searching for a new home should consider how their desire for more space could affect mortgage needs. The following are essential questions thoughtful agents and brokers can suggest their buyers explore:
Buyers should use an online mortgage calculator early in the game to determine whether they can also take on a bigger mortgage payment along with a larger home. It’s important to look beyond the dollar value of the home itself, and also consider the loan amount, interest rate and the term of the mortgage, which all impact the monthly payment.
Depending on the results, they may need to expand the search to less expensive neighborhoods to get the right square footage at the right price. They may also need to consider how relocating could affect their employment—which could affect mortgage lenders’ decisions.
Finally, buyers should also consider how a bigger home may impact insurance payments or how much cash they need to have on hand for emergency repairs and property upkeep. The bottom line: Suggest your buyers consult with their financial advisor before taking on a larger mortgage.
It’s important for buyers to consider what other costs are associated with buying a home in addition to the purchase price. For example, moving costs, real estate taxes, reserves for repairs and association fees can each have an impact on not only long-term budgeting but also how they qualify for a loan.
According to some research, new owners spend $5,000 more on top of the selling price just for home-related goods and improvements.
It stands to reason that these additional costs stack up even faster in a larger home, too. For example, a bigger home may have higher utility, furnishing and renovation costs than a smaller property.
Buyers should have a pre-qualification or pre-approval letter in hand to move forward with an offer. That’s especially important today, when the combination of low interest rates and coronavirus concerns have created a booming housing market. Buyers should talk to a loan officer before they start looking at houses, so they’re ready to move quickly when they find the right home.
In your quest to help buyers find the homes of their dreams, understanding the ins and outs of a mortgage decision can give them the solid footing they need to make those dreams a reality.
Is your client ready to shop around for the right mortgage? Our paperless applications are an easy first step into the larger space they’re craving.
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