A Checklist for First Time Home Buyers in Las Vegas

The latest run up was challenging for first time home buyers trying to break into the Las Vegas real estate market. Low inventory, strong demand and cash investors, often made it difficult, if not impossible for this group. Now as the real estate market shows signs of cooling off, first time home buyers will have more opportunities going into 2015. While this shift presents an easier market to navigate, more housing choices and negotiating power, it shouldn't be the main reason you buy your first home. Buying your first home is dependent on a variety of personal criteria, not what the real estate market is doing in Las Vegas and Henderson. This decision should be based strictly on financial, not emotional factors.

(On a side note, the herd mentality has often shown to be destructive financially. Buying real estate, tech stocks or tulips just because everybody else is, has proven to be disastrous throughout our history. Given the enormity of such financial decisions, cooler heads always prevail. I generally have been safe betting against what is in vogue with the majority.)

Regardless of the market, buy when you are ready. Buy when it makes sense to you and your family. Buy after carefully examining the fiscal strength of your household. Never buy on emotion. Ever.

So when are you ready to buy your first home? Here are few things to think about first.

You must have a strong awareness of your monthly budget. 

If you haven't done this already, now is the time to start. It's not just a mortgage payment, but also home owner's insurance, property taxes, upkeep costs and possible HOA fees. Utilities too may also run higher. Create a spreadsheet so you can clearly see how much money is coming in and how much will be going out with these added expenses.

What kind of shape is your reserve fund in? 

Typically I think it's best to have at least six months of living expenses in savings prior to a home purchase. Losing your job, an illness or a family emergency may disrupt your income. In addition to life events, home ownership can also throw you curve balls: A roof may need to be replaced, or the AC may go out during one of our hot summers here in Vegas. Either option could leave you reeling financially if you don't have enough money in the coffers. Don't lie to yourself here; this is where most people get into trouble. Life happens, so it's best to plan accordingly.

Is your debt under control? 

New guidelines for "qualified mortgages" will scrutinize debt levels during the mortgage application process. New legislation wants to make sure you don't get in over your head and lenders want to make sure they get repaid on the loan. It's always a good idea to pay down as much debt as you can six months to a year before you begin your home search. Unless you can pay for a new car or vacation with cash, wait for these until after you've purchased your new home.

Are you prepared for the long term commitment of home ownership? 

I wouldn't recommend buying a home unless you can meet the criteria in this article and plan on staying in place for at least five years. If you own for less time, it is unlikely you'll recoup the cost of ownership and will have gained very little if any equity. (An exception to this would be buying on a 15 year mortgage.) Keep in mind that we've already seen the bulk of appreciation here in Las Vegas over the last couple of years. If you buy going forward, it is highly unlikely you're going to capture another 25% on your home. Ultimately though, you should be buying a home for a place to live, not solely for appreciation.

Your landlord's phone number just so happens to be your phone number! 

Keep in mind the cost of home ownership. Over the years I've done all kinds of things: Replace hot water heaters, basic plumbing, not-so-basic plumbing, swapping out dishwashers, cleaning gutters, laying tile, replacing thermostats, you name it. If it's broken in your house, you are solely responsible to fix it. Do you have the time and energy for yard work and shoveling snow? If you don't have the time, will you have the money to hire help for these tasks? Keep in mind the time, energy and expense of home maintenance prior to your property search. Read more about renting vs. owning here. 

So there you have it.

I believe we have a new real estate market emerging next year for first time home buyers here in Las Vegas and Henderson. With opportunities come responsibility, and the ability to be honest with yourself. Carefully examine your finances, time and energy required for home ownership first. Once you’ve done that, give me a call and I’ll find you a beautiful home.