The process of buying a home typically involves seeking out a mortgage loan and then shopping for homes that align with your approved funding. If there is a current economic downturn, it may have you questioning whether or not you should proceed. Here are a few pros and cons to consider to help you decide what to do about obtaining a mortgage at such a questionable time.
Pro: You may find a home for less than what you would normally pay.
During economic downturns, regardless of what is causing the issues, it is not uncommon for the prices of some homes to come down. Sellers may be looking more at getting out of their current mortgages because of job losses or income change than being concerned with making a profit. Therefore, it is more common for homes to be priced closer to fair market value without a major markup.
Con: Some mortgage loans may be slightly harder to get.
Some lenders that offer mortgage loans may be a bit more apprehensive about extending loans during an economic downturn. However, if you can show that your current income is likely to stay stable, you probably will not have an issue. Likewise, the lender is going to be a bit more concerned with ensuring the home you are looking at buying is going to retain its value in spite of the economic changes.
Pro: It may be possible to get a far better interest rate.
During times of economic turmoil, it is not uncommon for banks and lenders to lower their interest rates in an effort to help stimulate the economy. More people will be interested in taking out loans when the interest rates are low, which can help attract buyers and borrowers that may otherwise shy away from borrowing. You may get the opportunity to get a mortgage loan for a new home that involves a much lower interest rate. A lower interest rate can mean lower payments and less of a long-term investment.
Con: You have to be careful about monitoring the home's value.
One thing that can be considered a downfall during an economic downturn is the fact that home prices can change rather quickly. For example, if there is a national pandemic causing the problems with the economy and the illness spreads like wildfire through the area, forcing small businesses to sell out and many residents to leave, a property's value may hit a sharp decline.