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Thinking about Buying a Home? Important Lessons from Recent History

Wednesday, March 2, 2016   /   by Ken Couture

Thinking about Buying a Home? Important Lessons from Recent History

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If you already live in Las Vegas or have paid attention at all to the national news, then you know that Las Vegas has had significant challenges the last several years.

There were many, many reasons for the real estate conundrum in Las Vegas. However, as we continue to struggle with the repercussions of underwater mortgages and home foreclosures, there ARE steps that consumers can take to protect themselves from pendulum swings in the Las Vegas real estate market. While no one can be prepared for every possible future variable, being smart about buying your next home can help you on your way.

What it Means to be House Poor

Being “house poor” is a concept that arose out of the mortgage crisis. Essentially, many people bit off more than they could chew in terms of monthly mortgage debt, in the quest for bigger, better homes. Banks encouraged this behavior with extremely lax lending standards. So much of some homeowners’ net income went into their mortgages, that they were not prepared financially to cope with the demands of owning their properties. Basic home maintenance and upkeep was financed with credit, or neglected altogether. Homeowners struggled just to keep the electricity on, much less furnish their homes. When the mortgage crisis hit, so many were caught in this trap that Las Vegas still feels the aftershocks. With no contingency funds and little savings, many of those homes have been foreclosed or still sit vacant.

How to Avoid being House Poor

Now that 2016 looks like the beginning of a stable year for real estate in Las Vegas, and investors and developers are getting off the sidelines, there is renewed interest in home buying. This is great news for buyers and sellers. However, RealtyTimes offers some suggestions on how prospective homeowners can learn from recent history, and protect themselves from the trap of being “house poor.” If you follow these common-sense steps, you may increase your odds of weathering the next financial storm…and being able to afford a dining room table, instead of eating off the floor.

  1. Don’t max out your budget. When your mortgage lender informs you of your pre-qualified mortgage amount, it’s human nature to get excited looking at the properties in the top end of your range. Not a good idea. Check to make sure your monthly payment will be manageable with all your other expenses. If not, lower your sights.
  2. Consider the ENTIRE monthly payment, and not just the Principle and Interest. Taxes, Insurance and Private Mortgage Insurance can quickly inflate the monthly payment and make it uncomfortable.
  3. Make sure you have enough left over each month after expenses to continue to put away savings and retirement contributions.
  4. Make sure you will have enough cash left after the purchase for a rainy day fund. Don’t wrap up all your liquid assets in the home.
  5.  Think about the additional expenses that might come with a bigger/better home. Can you afford them? Things like increased cleaning fees, pool maintenance, HOA fees, costs of an increased commute…these should all be considered BEFORE you move.
  6. Don’t undertake major renovations right away. You need some time to make sure you are comfortable with your new mortgage payment before you start piling on new debt or add a home equity line.

These are just a few of the tips recommended by RealtyTImes to help ensure you are financially ready for one of the biggest investments you will make in your life. Check out the whole article here.

I am here to help you, too. I can help you find the right home, with the features you want, within a comfortable budget. When you are ready to invest, buy, or sell, visit my website or call me direct, Ken Couture, 702-610-6247.