Deals, open houses and mortgages: Buying a home during COVID

Sept. 15, 2020 5 AM PT

Good morning. I’m Andrew Khouri, the L.A. Times Business section’s residential real estate reporter, filling in for Rachel Schnalzer to bring you our weekly newsletter.

Despite a pandemic and sky-high unemployment, home sales in California and nationwide have jumped in recent months.

The people who tend to buy homes — those with jobs that pay well — have been less likely to be thrown out of work during the economic downturn. And for them, several factors seem to be driving an increased interest in buying, especially single-family homes. Additional space and a backyard can be very attractive at the moment. And the cost to borrow is at historic lows.

So if I’m lucky enough, how exactly would I buy a home during a pandemic?

As in most industries, more is being done online. When interacting in person, you’ll wear a mask and keep your distance from everyone involved.

When it comes to viewing a house, online listings frequently include virtual 3-D walk-throughs. And agents conduct live virtual showings by going to a property and connecting with clients over video chat.

Bill Lowman, chairman of the California Mortgage Bankers Assn., said lenders still allow people to come into the office if they wish, but they’re increasingly rolling out online applications to minimize contact.

At the closing, the deed of trust and promissory note must still be signed in person, but many lenders are allowing other closing documents to be signed electronically, said Lowman, who is also chief executive of American Pacific Mortgage.

“You are not spending as much time in the closing room,” Lowman said.

Can I visit a home in person?

Yes, but it will be a different experience than before. Traditional open houses, where multiple prospective buyers show up unannounced and stroll through the home simultaneously, aren’t allowed now in California.

Gov Hutchinson, assistant general counsel for the California Assn. of Realtors, said the organization is instructing its members to allow showings only though appointments and to limit those showings to one prospective “buying party” at a time.

Agents are cleaning homes between showings and requiring prospective buyers to sign a form before entering. In signing the form, you’ll promise not only that you’ll wear a mask and socially distance, but also that you don’t have COVID-19 symptoms and haven’t knowingly been near someone with the disease in the previous 14 days.

Some sellers are putting up their own requirements in an attempt to ensure that only serious buyers walk through their home.

“Make sure you have a pre-approval [for a loan] available and ready,” said Tregg Rustad, a Rodeo Realty agent who specializes in Los Angeles’ Westside neighborhoods. “You may be asked to provide it before going into a house.”

When shopping for a newly built house, some restrictions may be less of an issue.

KB Home, one of the nation’s largest home builders, is allowing people to walk up and tour models without an appointment or pre-approval for a loan. You will, however, have to fill out a “wellness confirmation form” and wear a mask. You may also have to wait, since there are restrictions on the number of people allowed in a home at one time.

Will I get a deal?

When it comes to borrowing costs, that’s likely. According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage was 2.86% last week, an all-time low and down from 3.56% a year earlier.

Assuming a 20% down payment, that decline would save $184 on a monthly mortgage payment for a $600,000 house.

But when it comes to the sale price, don’t expect a discount because of the economic downturn. Rents have been declining, but landlords say that’s because vacancy is rising, and they are forced to trim prices to fill units. The opposite is happening in the ownership market: According to Zillow, across Los Angeles and Orange counties, there were 22% fewer homes for sale in July than a year earlier, and prices were up 5%.

“Things are selling in less than a week with multiple offers,” said Ryan Ole Hass, president of the Greater Los Angeles Realtors Assn.

Is it difficult to get a loan?

It’s harder than it used to be. As the pandemic has devastated the economy and thrown millions of Americans out of work, lenders have become especially interested in making sure the borrower still earns money and has high odds of repaying the loan.

While interest rates have plunged, lenders have made it harder to get a loan with a low credit score, tiny down payment or minimal documentation of income, according to the Mortgage Bankers Assn.

Richard T. Cirelli, a mortgage broker in Laguna Beach, said that compared to before the pandemic, borrowers should have more up-to-date income documentation ready.

Lenders “just keep asking for stuff,” he said. “They want to make sure you are still employed.”

Some lower-documentation loans that all but disappeared at the height of the stay-at-home orders are starting to come back, however.

For example, in late March, Angel Oak Mortgage Solutions stopped issuing loans to self-employed people who relied on bank statements as confirmation of their income. But a month later, it started again. Borrowers just had to have a minimum FICO score of 700, compared with 600 before the pandemic.

As of Monday, the company was marketing those loans to people with a minimum FICO score of 660.

Consider subscribing to the Los Angeles Times

Your support helps us deliver the news that matters most. Become a subscriber.

One more thing

California is offering tax credits to small businesses whose revenue was slashed by the pandemic — if they do some hiring. As the Associated Press reports, businesses that qualify must “have more employees working between July 1 and Dec. 1 than they did between April 1 and June 30.” For each additional employee, the company gets a $1,000 credit.

Have a question about work, business or finances during the COVID-19 pandemic, or tips for coping that you’d like to share? Send us an email at [email protected], and we may include it in a future newsletter.