Buying a home can be exciting: the open houses, the conversations with neighbors, and all of the coffee offered at real estate offices and realtors who are showing off their shiny properties. In the city of Las Vegas, new homes are built constantly, and it’s easy to find a great home. When you find a great home, though, you might find, like most people, that you’ll need to take out a mortgage to pay for your new home. While this is a normal part of the process of home hunting, before you enter your first open house, you should have all of your purchasing credentials ready to go when you think you’re ready for your new home. The process of purchasing a home can be complicated – for example, if you’re interested in a desirable home located in a popular area, prepare to enter a bidding war. You may not have to, but everyone is looking for more space for less money, and to be close to schools and local amenities.
Las Vegas is one of the fastest-growing markets, too, with more people moving there every day. With all of the competition from people moving in from out of state, native new home buyers, and those shopping for investment properties, it’s easy to become overwhelmed, so the best thing that you can do for yourself is ensure that you are competitive for the property of your dreams. Working closely with your bank and a local real estate agent will help you through the crucial first step before choosing your home: evaluating your credit.
Why Does Credit Matter in Las Vegas?
Credit is a financial institution’s main way of evaluating your risk as a lendee. Your credit measures how likely or unlikely you are to pay your bills, in this case, your mortgage, on time, and in full. If you’re paying cash for your home, or have another arrangement with the homeowner, your credit might matter less. Don’t count on this, though: anyone can pull your credit report, so long as they have your information. A person selling their home to another person may want to check your credit before entering into a payment arrangement with you, but most people do not have the good fortune to be able to pay cash for their homes.
This is where credit matters. As your financial institution works with you to help you with the purchase of your new home, your credit will be central in determining whether or not they will be able to help you with a mortgage. If your credit is very good, meaning a FICO score of over 700, it is relatively easy to find a bank that will offer you a mortgage. With a credit score of less than 600, you may be able to find a bank that is willing to give you a mortgage, but it will be much harder, might not be your bank of choice, and your rates will inevitably rise.
So, you see, not only could your credit score put a serious cramp in your Las Vegas style, it can potentially stop you from buying the home that you want for you and/or your family.
What Credit Score is Needed to Buy a Home in Las Vegas?
The answer to this question is far from simple, but there are some basic guidelines that can help: First, understand that there are financial institutions willing to assist those with below-average credit. For reference, the average credit score of a homebuyer, in or out of Las Vegas, is around 695 – good enough for most mortgage situations, but just low enough to keep you from getting the best-possible rates for your mortgage.
The reason this is a big deal has to do with the amount you pay for your monthly mortgage, but also has to do with the total amount of money that you pay for your home. Over time, a person with a higher credit score with a low-rate mortgage will pay less in fees and interest than a person with questionable credit. Even in the great City of Las Vegas, where the new homes are plentiful, and some have even been on the market longer than expected, a high credit score will get you more bang for your buck.
Second, understand that, though some will, not all financial institutions are willing to work with someone with a below-average credit score. Perhaps this doesn’t need to be said, but always consider that as you’re planning to shop for a new home. There is another way to get a safe and affordable mortgage, though, if your credit score is below what a bank can provide to you. FHA loans could be the move that puts you in the home you’ve been waiting for.
What are FHA Loans?
Simply put, FHA loans are the home loans for everyone, even if you’re eligible for a mortgage from a bank. FHA loan rates work in virtually same way as bank loans – high credit scores will have more and better options. Unlike traditional home mortgages, though, FHA loans are willing to work with home buyers with credit scores as low as 500. Before you get too excited, though, know that, before you can actually purchase your home, you have to pay a downpayment. People with excellent credit may be able to get a home for very little down, but lower credit scores with spotty credit histories may be asked for as much as ten percent down. The magic of FHA home loans, though, is that you have a new opportunity to rebuild your credit over the life of your loan. While there’s no guarantee that you will be able to improve your current mortgage rates, it is possible that later, with a better credit score, you’ll be able to refinance your home. Refinancing your home could possibly yield a lower interest rate, a lower overall mortgage payment, or a fixed-rate mortgage.
Buying a Home in Las Vegas
Wherever you go, buying a home is a new adventure. It will always be important to be mindful of paying your bills on-time, and to choose an affordable home, but always make sure to utilize all of your options. For additional questions about purchasing a home, whether it’s your first, or your fifth, reach out to a well-reputed local real estate agent.