Have you been looking to buy property in 2022? If so, you will know that prices are extremely high. Chances are that you have started looking at a condo unit as the most cost-effective option. A condo is certainly a great way to get started in a place of your own without spending more than you can afford.
But how has COVID-19 impacted your chance of getting a mortgage on a condo? Take a look at this guide to buying a condo if you don’t already know the process. Then, consider how COVID-19 may have made life easier or harder based on the following measures.
People who have not followed the housing market over the past two years would be forgiven for assuming that it was struggling. After all, millions of Americans lost their jobs and the economy crashed. Who had money to buy a home?
However, in reality the opposite happened. A number of factors converged to drive home prices upwards, and condos were not spared. In 2022, condo prices are higher than they’ve ever been. In this sense, the pandemic has made it more difficult to get a mortgage on the condo you want.
But the cost of a condo only makes sense in the context of your mortgage cost. If you get a low annual percentage rate (APR), you will ultimately pay a lot less for your condo over the next three decades. For the majority of the past two years, low APRs have allowed people to buy expensive homes with relatively low monthly payments.
This is because the Federal Reserve lowered interest rates to stimulate economic growth. They were at record lows until recently, when the Fed started raising them to deal with inflation. So, up until a few months ago, the pandemic may have helped you get a mortgage with a low APR. Today, you will be paying a premium for the condo, along with a high mortgage rate.
Another important factor you need to take into consideration when buying a condo is the deposit needed to secure the place. Ideally, you are able to pay a 20% deposit on the condo. However, first-time homeowners may be able to get by with as little as 3%.
Unfortunately, many people drained their savings during the toughest months of the pandemic. With a tough economy and hundreds of thousands of businesses closing down, unemployment was high. Many people had no income for months. They may not have planned on touching their savings but had no other option.
If you have no savings, it will be difficult for you to get a condo until you have built up enough to pay a downpayment.
People who suddenly lost their jobs had the difficult reality of paying bills with no income. Savings may have helped them along the way, but at some point certain payments would have had to be put on the backburner. While landlords and certain industries were not allowed to take action over nonpayments, other unpaid parties may have reported people to credit authorities.
If you struggled with your bills and saw your credit score hit by nonpayments, you may struggle to get a mortgage. Some lenders may take the pandemic into account and be more forgiving about credit scores that suffered during that time, but others may be indiscriminate.
At one point during the pandemic, people were able to afford condos due to nothing but the low mortgage rates on offer. However, with interest rates rising and costs of property still high, the effects of the pandemic will create a number of challenges for prospective condo buyers.