Ten Signs That Show You're Ready to Buy in Las Vegas
A man's home is his castle, or so the saying goes -- but figuring out whether you're ready to buy can be pretty daunting. Whether you're a renter taking that crucial first step towards home ownership in Aliante or a seasoned homeowner moving up in Summerlin, these ten signs show that you're financially ready to take the buying plunge.
1. You've Been Saving
Back in the early 2000s, pre-housing bust, a borrower could access loans of 100 percent of the property's value. Some lenders -- rather like athletes and American Idol contestants -- were giving 125 percent or more. The logic behind such extravagant lending was that house prices would continue to rise and, once the homeowner sold at a profit, everyone would be a winner. We all know how that turned out.
Today, most lenders require a significant down payment. Low-down loans are still available, typically through government-backed schemes, but those options will cost you as well. FHA loans generally require a 3.5 percent down payment. In addition, you may have to pay extra for private mortgage insurance or agree to a higher interest rate.
Don’t forget to factor in closing costs, such as taxes, title insurance, points, and financing costs along with the down payment. The appraisal and home inspection is also paid for by the buyer.
If you haven't been saving, you're not ready to buy.
2. You're Attentive
If you've been keeping an eye on the listings for the neighborhoods you're interested in and have a realistic view of how much your dream house is likely to cost, you're ahead of the game. But if you've set your sights on a three-bed 2,500 square foot condo at One Queensridge Place with no idea whether you can afford it, you may want to brush up your market knowledge. Check out my stats for more.
3. You Have Good Credit
While you don't need perfect credit to be a homeowner, a score of around 720 to 740 generally qualifies you for the lowest mortgage rates. Missed payments, high credit balances, civil judgments, bankruptcy, evictions and foreclosure seriously damage your score. By law, you're entitled to one free credit report each year from each of the three main credit bureaus - Equifax, Experian and TransUnion. Use this to your advantage.
4. You Have A Reliable Source of Income
Those crazy lenders, they want to know that you can pay back your mortgage loan -- and not just for now. As well as showing at least a two-year employment history, you'll need to bring in a steady income for at least the next few years. If you're planning on going back to school, going freelance, starting a new business or starting a family in the next three to five years, ask yourself -- how are you going to make your repayments when the money stops coming in?
5. You Know How to Budget
A good salary is one thing -- watching it dribble out of your wallet to pay credit card bills, auto loans, student loans and child support is quite another. Before they'll give you a mortgage, lenders take a look at your debt-to-income ratio -- the amount you earn versus the amount you pay out to creditors. Generally, if you can add your monthly mortgage repayment, property taxes, homeowner's insurance and HOA fees to the rest of your debt, and the total debt load stays under 40 percent of your total pay, your affairs are in good shape.
6. You Can Make A Long-Term Commitment -- Financially
Even in a stable or rising market, I urge buyers to look beyond the short-term. Typically, you need to stay put for at least 3 to 5 years in order to recoup your buying expenses. Sell within the first couple of years, you likely will lose money. Even if you don't, you'll have to pay capital gains tax on the profit.
7. And to the Community
That edgy, urban district looks great when you're single and childless, but quickly loses its appeal when there's nowhere to park and you're trying to lift a stroller on to the bus. Take a look at your three to five year plan. If your needs are going to be different, consider holding back until you're ready to buy that longer- term house with school districts, commute times and outdoor space in mind. A chic condo with Strip views sure is cool now, but what about with two dogs and a 3 year old in tow?
8. You're Handy At DIY
Owning a place comes with a ton of new responsibilities. If something breaks, you're the one who has to fix it. There's no landlord to call when the toilet clogs up or the roof blows away in a storm. Maintenance costs run from 1 to 4 percent of the home's value each year. If that jams a wrench in your budget, you're probably better off renting.
9. You Have An Emergency Fund
Before you devote all your savings to a down payment, take a look at the bigger picture. Buying a home is a long-term investment: you can't just leave whenever your personal situation changes. Savvy homeowners build a financial cushion in case of financial setback, like an unexpected layoff or serious illness. If you've managed to save an emergency stash, or have the financial capacity to do, you're one step closer to buying your dream home.
10. You're Prepared to be Flexible
I get it -- your home's a big-ticket item and you want it to be perfect. But if you're overly rigid with your selection process, you'll end up disappointed. And so what if your home doesn't have all the bells and whistles you’re looking for? Once you own it, you can fix it up to suit your needs. In a few years, you can sell up and move on -- and you might even take a nice slice of equity with you.
Now that's something you'll never get from renting.