Routing # 256078446
MORTGAGE KNOWLEDGE CENTER
PenFed Mortgage with Confidence
MORTGAGE
Is Getting a Mortgage in a Recession a Smart Idea?
What you'll learn: Examine real estate impacts of a recession and weigh the pros and cons.
EXPECTED READ TIME: 4 MINUTES
October 24, 2022
If buying a home did not already have enough ingredients—sourcing the perfect property, layering on a perfect offer, adding in a down payment—throwing a recession into the mix can really leave a bad taste in your mouth.
But buying a house during a recession is not necessarily a recipe for disaster. In fact, depending on your circumstances it can be a winning combination. Let us look at some common real estate impacts of a recession and weigh the pros and cons from the POV of a homebuyer. Then, you can determine if the time is right or if now is a bad time to buy a house.
Tightened household budgets
Inflation, increased unemployment, and a general feeling of uncertainty during an economic slowdown or recession can cause many families to reduce spending. That creates both opportunity and risk for a homebuyer.
PRO: You may have less competition
When budgets are tight, homebuying tends to be less appealing to consumers. That is good news for someone considering buying a house during a recession. You can slow down and evaluate your options without so much pressure from other buyers. It may also mean you have more property choices.
CON: Hardships can happen to anyone
No one likes to imagine themselves in an adverse position. But even with a stable income, you may still feel the effects of a recession through rising food costs and gas prices. It’s important to consider how your budget may be affected, in both big ways and small.
Decreased home values
When the supply of for-sale housing outnumbers demand, property values tend to decrease. That is the hallmark of a buyer’s market and can work for or against you in the homebuying process.
PRO: You might get a better deal
If a property has been on the market for weeks and is not receiving compelling offers, you may have a better opportunity to negotiate terms in your favor. That could mean a lower sale price, the seller covering some of your closing costs, or contingencies that help you feel comfortable about the sale.
CON: You may have less buying power
In contrast, that higher inventory during a recession can affect your own home value as well. If you are planning to use the equity from the sale of your current home to buy a new one, your funds might not stretch as far.
More foreclosures
Financial hardships can lead to mortgage defaults—possibly leading to foreclosures. When a lender has no choice but to sell a foreclosed property, bargain house hunters can show up in droves.
PRO: You might find a great deal
It is very possible to obtain a home below the market value if you know how to navigate a foreclosure sale. The key is knowing what you are getting and being prepared for the additional paperwork and competition it can bring.
CON: It could be more expensive than you think
Property issues, hidden costs, and delays are some of the reasons many buyers avoid foreclosed properties. You may find yourself dealing with unforeseen repairs, paying back taxes, or figuring out how to have liens removed. The time and expense may not be worth it to you.
Less credit available
Lenders are not immune to business pressures from a recession. Generally, they reduce risk by limiting the amount of money available to borrowers and increasing credit guidelines.
PRO: Interest rates are generally lower
If the Fed lowers the federal funds rate in an attempt to strengthen a waning economy, mortgage rates usually follow suit. That means mortgage rates tend to go down, making buying a house during a recession appealing for many.
CON: It is harder to qualify
Buying real estate during a recession can come down to a single factor: Do you qualify for a mortgage? Lenders may increase their standards for credit score, debt-to-income ratio, and income qualifications to ensure borrowers do not get in over their heads.
Buying a house during a recession: The bottom line
Recessions are a normal cycle of the economy. While there are advantages and disadvantages to buying a home during a recession, it really comes down to what makes sense for you. People buy and sell homes every day, in all economic climates. There is no perfect answer—just what is right for you.
SIMILAR ARTICLES
Spring Real Estate Market Buying Tips
Spring is the best time of the year to buy a house. Discover our spring real estate market buying tips like when the season starts and its busiest months.
Tips for Buying a Home in the Summer
Is summer the best time of year to buy a home? Are more houses for sale in summer? Get these answers and more. Read on for our top summer home buying tips.
Fall Real Estate Buying Tips
Is fall the best season to buy a house? If not, what is the best season to buy a house? Discover top tips and which are the best months.
Winter Real Estate Buying Tips
Is winter the best season to buy a house? Learn about buying in the winter real estate market, whether home prices go down, and holiday seasonality.
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
©2026 Pentagon Federal Credit Union