Everyone has a reason for everything. A reason or an excuse, there’s a fine line between the two. I believe most individuals don’t initiate or go through the home buying process because they have a certain fear. The fear of the unknown, not having the information they need, or want, to be informed as part of the conversation or discussion. Plus the age old question, how do I know I can trust what this person is telling me?
The fear of rejection is another. Most individuals don’t like to talk to a lender because they don’t have a clear sense of what their credit score is. They don’t understand the process, and 20% is a lot of money down. Most renters psych themselves out and are paralyzed (unknowingly) by fear.
For Renters. More than 10 million people have already filed unemployment claims, and in the United States we’re seeing a staggering increase in the number of individuals, monthly. Huge companies like Marriott and Macy’s are already reporting tens of thousands of layoffs. In another report, roughly 750,000 airline workers are being threatened with losing their jobs because of the number of individuals that are not flying as a result of COVID-19. This pandemic has impacted every sphere of life and we’re all feeling it one way or another.
Renters should ask themselves: Where am I the most vulnerable? And this COVID-19 situation is an example of vulnerability for anyone who is still renting a property and hasn’t decided to plan for homeownership. A reasonable clapback is to ask, “how am I vulnerable when I have a roof over my head?” Sure, you have a roof over your head, but the name of the game is stability, right? Whom do you think has more options in a situation like this? Landlords have bigger bills than you. Period. So, how do you think landlords should, or will, handle tenants not being able to pay rent due to this crisis?
As a landlord, you have your own bills that you have to pay and, while you want to be sympathetic, business is business and personal is personal. One of the best pieces of advice I received was from a mentor, “it’s not personal; it’s just business.” It can be hard to separate your feelings but that’s the name of the game, and that’s the world we live in. And no one pays bills with ‘feelings.’
Homeowners, now and future. As a homeowner, you have options to negotiate with your lender. If you’re in a situation right now where your interest rate is high, you can call your lender or any host of lenders, and they’ll talk to you about refinancing your loan. If you have an FHA loan, then FHA has a streamlined program that allows you to refinance your home loan and it results, typically, in a lower interest rate. You will probably say, well, there’s a cost to refinancing my loan. Well, with the FHA streamline program, you can defer (combine) that cost onto the new loan that’s made. So, you could put yourself easily in a position where you’re saving $150 or more each month on your mortgage payment.
Renters, unfortunately, you don’t have much of a recourse. The best option that you have is to talk to your landlord and try to negotiate a compromise.
As a homeowner, other benefits like tax credits exist and, in times like these, if you’ve been laid off or you’re underemployed, you can talk to your mortgage loan servicer about a forbearance. What is that? A forbearance is where your bank reduces your monthly mortgage payment, or they’ll suspend your monthly mortgage payment to give you the ability to be able to bring your mortgage current within a certain period of time. (This is known as curing the default.)
What happens when the mortgage company gives you that forbearance? Well, you are given an agreement timeframe between 60 or 90 days and sometimes more your lender will not report any late fees and won’t report negatively to the credit bureaus.
You may also have other options. Let’s say you are delinquent now, then your lender can take the delinquent balance and put it into a loan modification, if you qualify. A loan modification is when your loan servicer takes the arrearage (the outstanding balance you owe) and incorporates it into a new loan, with a new payment and sometimes a new interest rate to bring the loan current and puts you in a position to stay in your house. But communication is key along with being honest and living up to the terms of the loan modification.
Renters are commonly told about the standard advantages to owning a home: having your own space; a stable monthly payment; tax advantages; paying the same or nearly as much as your rent; owning an asset. The average renter has a $5,000 net worth, where the average owner has a $200,000 net worth.
All of the above are great reasons to get into a house, but we all hit a bump in the road or a bump finds us, so having options in times like this will only benefit you, and that’s also why I asked you, as a renter, how vulnerable do you think you are?
COVID-19 shouldn’t be a reason why you delay or stop your home buying search. If you’re under-employed or underpaid or you’ve been laid off, any money that you’re saving or have been saving, you may have to spend that on eviction costs or the cost to move from dealing with a less-than-understanding landlord. There are several programs if you’re located in D.C., Maryland, or Virginia. They offer down-payment and closing cost assistance. Even if you’re not in my immediate area, and you’re reading this, there are likely local programs for you to use.
Brandon Scott is a licensed real estate agent in D.C. Maryland and Virginia. His license hangs with Coldwell Banker Dupont-Logan, D.C. Reach him at Brandon@bmscott.com. Subscribe to his YouTube Channel.