While a lot has changed recently, the desire to own a home remains strong. Bank of America’s Homebuyer Insights found that over four-in-five (85 percent) prospective homebuyers said saving for a home remains a priority. In fact, 56 percent say they are either accelerating their home purchase timeline (14 percent) or are still on course with their original plans (42 percent).
That said, it’s no surprise that the Las Vegas housing market has recovered and is ascending to new levels this year. The demand for homes continues to increase in Las Vegas as people relocate to the valley from higher-priced areas. This trend increased during the pandemic setting the highest pace for home sales in the area for 14 years.
However, some would-be buyers self-select out of homeownership, assuming they can’t afford a monthly mortgage payment or the upfront costs. Others simply don’t know where to start. To help future buyers better understand what’s possible, we’re debunking some of the most common misconceptions.
MYTH: I NEED TO HAVE A 20 PERCENT DOWN PAYMENT
Many mistakenly believe you need a 20 percent down payment when, in reality, the median amount was 6 percent for first-time buyers in 2019. Still, 71 percent of prospective homebuyers believe they will need assistance to save for a down payment.
There are many solutions to help prospective buyers overcome this hurdle. Bank of America recently tripled its affordable homeownership initiative from $5 billion to $15 billion through 2025, aiming to help more individuals and families to purchase homes. The initiative includes innovative low down payment mortgages, as well as down payment and closing cost grants, to help creditworthy borrowers in Las Vegas who are struggling to save for a home.
For example, America’s Home Grant program provides up to $7,500 for nonrecurring closing costs and the Down Payment Grant program provides buyers 3 percent of the purchase price (up to $10,000) for a down payment — both are available to those in Clark County. In addition, the city of Henderson First Time Homebuyer Program provides up to $10,000 for down payment and closing costs to first-time home buyers within Henderson’s city limits.
MYTH: THERE IS A RIGHT TIME TO BUY
First-time homebuyers may be holding off for the “right time,” but there is no such thing because homebuying is such a personal decision. While there is no secret formula to assessing emotional and financial readiness, it’s never too soon to begin establishing a savings discipline and researching the homebuying process.
Bank of America’s First-Time Homebuyer Online Edu-Series provides an easy-to-understand road map to buying a home and allows you to go at your own pace as experts provide guidance and tips to prepare your finances, make an offer, apply for a mortgage and more. The more informed you are about the homebuying process, the better prepared you are to find the best options.
MYTH: FIND A PLACE YOU WANT BEFORE APPLYING FOR A LOAN
A common misstep is window shopping for houses before understanding how much you can afford. While 44 percent of prospective homebuyers will apply for mortgage preapproval, more than half (56 percent) don’t think it’s necessary or don’t know what loan preapproval is. Prequalification can help you set realistic expectations when it comes to buying a house by providing an estimate of how much you could afford. Taking it a step further, you can request preapproval by providing more extensive information, which your lender will confirm. You’ll then receive conditional approval for the loan type and amount you qualify for and can begin your house hunt with confidence.
Some people avoid prequalification and preapproval out of fear they won’t measure up, but it’s important to know where you stand — and easier than ever to find out. Interactive digital tools allow prospective homebuyers to answer questions online or via their mobile banking app and get their prequalification or preapproval quickly.
While purchasing a home is a major decision there are many benefits, including learning financial discipline, enjoying tax benefits and protection from rising rental rates. This, combined with the fact that Las Vegas real estate appreciation rate has been averaging 8.8 percent per year, often leads to increased wealth for homeowners. That can mean building equity for future uses like college tuition or even retirement.
While homebuying may feel overwhelming, taking the first steps can help you understand your readiness for homeownership and ensure that you’re planning is on track. If you’re close to buying, a specialist can also review assistance programs you may be eligible for. With a little bit of guidance, the house of your dreams is within your reach.
Erik Mckenzie is a local Las Vegas area lending manager and vice president at Bank of America, helping individuals and families plan for and finance their homes.