Buying Your First Home Was Already Hard. Then COVID Happened.

Photo illustration to accompany article on COVID-19 first-time home buyers Photo courtesy of Olivia Bernard/Shutterstock

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Olivia Bernard always knew she wanted to own a home, so she planned her life accordingly. 

At 18, she started saving her money in high-interest savings accounts, and at 23, as a registered nurse, her coworkers came to her with questions about the stock market. 

“I’m always about future Olivia,” says Bernard, now 24, who also owns the earring company Thrillobe and films YouTube videos. “I always try to own over letting someone own me. I hate having a middle man. They’ll take my money, they’ll take my money, they’ll take my money, and next thing I know, I don’t own nothing when I wake up.”

Only a year out of college, Bernard didn’t expect to become a homeowner so soon. It was February when she found her dream home, a three-bedroom townhouse in metro Atlanta. 

Then COVID-19 happened, and the way forward became uncertain. She said her lender, perhaps spooked by the rapidly changing economic environment, started replying more slowly  with each passing day. 

That anxious moment was reflected in several recent interviews with people who had been considering homeownership this year—and are now facing a housing market in limbo. Are prices expected to drop? Will interest rates stay low? When will all the houses come back on the market? Can I get a deal? 

For Bernard, luck was on her side. Armed with a grant from the county, a grant for nurses, and a deferred loan for purchasing a new-construction home, she said she saved thousands on the down payment and drew less than she’d planned from her personal savings. Her steady employment also offered her lenders assurance. 

“I literally locked in my rate the day the market was at the complete worst,” Bernard said. Instead of the estimated 4% rate she was quoted prior to the pandemic, her rate ended up at 3.1% for a 30-year fixed-rate mortgage on March 12, which at that point was the worst day for the stock market in over a year. The 3.1% rate is still half a point lower than the average rate in early June. 

It was a deal. Despite the turbulence of the pandemic, Bernard’s financial preparedness and the grants she received put her in a strong position to buy a home. 

Now, many Americans who had their sights set on homeownership in 2020 wondering if now is still the time to buy a home, or if they should hold off.

We asked a financial counselor and three real estate agents for their outlook on the market and their advice to first-time homebuyers. We also compiled a list of all the programs, grants, and services first-time homebuyers should know about. Our experts acknowledged that while there’s no crystal ball or real estate Nostradamus to predict the future, we can still make choices now that set us up for success.

How Has COVID-19 Affected Real Estate?

The real estate market depends heavily on where you live. But in general, sales have gone down because of social distancing and rising unemployment, while prices have remained steady, says Gay Cororaton, research director for the National Association of Realtors.

According to a monthly survey conducted by the NAR in April, half of agents were conducting virtual tours in lieu of or in addition to in-person showings. Cororaton notes that a greater portion of sales were first-time buyers (36% of sales versus 32% at the same time last year). People were also more interested in suburban areas than usual, since the areas are less densely populated.

Those who sold or were selling their home during the pandemic were usually already in the process.

“I’m seeing more that someone was already moving or someone has already moved. I’m not seeing anybody that’s waking up one day and trying to sell their house right now,” says Jacqueline Cooper, president and executive director of Financial Education Associates in Boston.

Due to fewer homes on the market, Cooper says, sellers are fielding more offers and closing on sales quicker than usual. Many first-time home buyers she’s worked with are buying investment homes that were already empty. 

On the buyer side, lenders and down payment assistance programs raised their qualification standards for mortgages in the early months of COVID-19. At the beginning of the pandemic, lenders were changing standards and guidelines “every other day,” says Miss-Ashley Kendrick, Esq., associate broker and attorney with the Maricopa Real Estate Company in Maricopa, Arizona.

“Borderline credit knocked out a lot of people,” Kendrick says.

One of Kendrick’s clients was told by a lender that, had they closed weeks earlier before COVID-19, their credit score wouldn’t have been an issue. 

“It was almost like they were nervous to lend. Here you had a qualified buyer — ready, willing, and able, with a credit score where it needs to be, a job, everything lining up, and lenders were still nervous to move forward. Since then, clients struggling to close have closed,” says Kendrick. “The lenders have relaxed a lot, and credit score requirements have stabilized — back to where it was pre-COVID.”

Pro Tip

If you’re considering buying your first home this year, we’ve compiled a list of eight down-payment assistance programs, grants, and loans you should be considering, as well as resources for all 50 states.

Should I Still Buy a Home?

With quarantines relaxing across the country, daily life is starting to return to normal for many. What does that mean for your own home ownership goals?

Steady employment should be the main factor in your decision making, Cooper says. “If you’re not currently working, and you’re unemployed, this is not the day to apply for a mortgage.”

On the other hand, says Yawar Charlie, an estate director at Los Angeles real estate agency Aaron Kirman Group, “If someone has job security, I’d say do not wait. If you haven’t found what you’re looking for, keep looking and have your ducks in a row so when you are ready, you can pull the trigger.”

In March, the Federal Reserve slashed interest rates, sending mortgage rates to historic lows. For people who are steadily employed, “economic conditions have never been better for buyers to purchase homes,” says Charlie.

But the unexpected financial challenges many have faced this year are a good reminder of why it’s important to have your budget in working order first. Before buying a home, it’s a good idea to have plans and preparation in place for retirement and emergency saving, in addition to the costs of a down payment and the closing process.

Cooper hedges the interest rate optimism, saying that rates were not high to begin with. However, the rate cut does “allow people to buy more [home]. A little but not a lot.”

Cooper also offers a more practical outlook on the housing market: “Sometimes people think of a house as being an investment. I think of it as a roof over my head. Is it gonna offer them long-term stability or affordability? If you think you’re stable, you should keep looking. Looking doesn’t cost anything.”

Even as the worst of the first COVID-19 wave has been subdued in many parts of the country, social distancing conditions may still affect the home-buying process. In Bernard’s case, most of the closing process in April was conducted virtually. It was understandable, but it was a “strange” day when she signed the paperwork — normally a time of celebration.

“The lawyer sat way across from me, had a glove and mask on, and slid the paper across the table. I couldn’t take my picture with my lawyer saying I bought a home,” she says. It just wasn’t the same.

Bernard and her boyfriend are now settled into the house, which became a sanctuary when the pandemic forced millions inside. 

“It allowed me to stay home and do my thing. There’s no pressure to go out or have friends come over,” she says. “I’m happy I got it when I got it.”