By Brandon Scott
Everyone has a reason for everything. A reason or an excuse, there’s a fine line between the two. Personally, 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. Over 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 the Marriott and Macy's are already reporting 10’s of thousands of layoffs. US Airlines, in another report, estimates there's roughly 750,000 people who are being threatened with losing their job because of the number of individuals that are not flying as a result of Covid-19. This virus, this pandemic has impacted every sphere of life and we're all feeling it one way or the other.
People who are renters, all my renters, I love you dearly, but at some point, you have to ask yourself, 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 place over my head. So…let me agree with you. Yes, you have a place over your head, but the name of the game is stability, right. Whom do you think has more options in a situation like this? If we’re keeping it real, landlords are people with 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? Write-in with your comments because I'm interested in knowing your thought process.
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 that 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 a 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 refinance 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, as a homeowner, you’re saving $150 or more dollars every month on your mortgage payment. A few hundred dollars can make a difference in a household.
Renters, unfortunately, you don't have much of a recourse. The best option that you have is to talk to your landlord, but if your landlord is in a situation where they have been living a lavish lifestyle, then you're kind of stuck between a rock and a hard place. If you don’t believe me, landlords are having these very discussion out in the public.
As a homeowner, other benefits like tax credits exists 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? Great question. A forbearance is where your bank will reduce your monthly mortgage payment, or they'll suspend your monthly mortgage payment all together 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 bureau.
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. What's the loan modification? Another great question. A loan modification is where you loan servicer takes the arrearage, the outstanding balance you owe, and incorporate 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
1. Having your own space
2. Stable monthly payment
3. Tax advantages
4. Pays the same or nearly as much as your rent
5. 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 to 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 DC, Maryland, and 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 Washington, DC, Maryland and Virginia. His license hangs with Coldwell Banker Dupont-Logan, DC. He’s been involved in the mortgage finance industry for the last 16 years in various fields. You can reach him by email at Brandon@bmscott.com. Subscribe to his YouTube Channel at RealTeaDMV.