5 Step - Rent Vs. Buy Decision Process

1. Check out the individual market trends online using Trulia or Zillow 

This is a simple way to analyze any real estate market, and you can actually get super granular and zoom into more defined neighbors to do you own specific rent/buy calculations. Zillow and Trulia do not provide up-to-the-minute data like a Real Estate Agent but you can get some preliminary information to start your search. I highly recommend getting connected with a real estate agent. 

Diving a bit further into the data it shows that the Las Vegas market is growing like most real estate markets in the US have been growing over the past few years. So while you wouldn’t be buying at the bottom of the market, the data is pretty compelling that buying a house is more affordable than renting – even if you only live in the place for 2 years.

2. Determine how long you are going to live there (it can be less than 5 years)

MYTH BUSTING TIME. Some say that you should ONLY buy a house or a condo if you are going to live in it for at least 5 years. This is just plain wrong! I think it makes sense to buy even if you are only going to live in a place for 2+ years in some markets.

And even if once you do all of the calculations that say you should be renting instead of buying, buying probably still makes more sense. Who knows, maybe you will end up living your city longer or you could keep your home and rent it out if you have to leave. Always lean towards buying a home if the numbers work.  

 Click here for our mortgage calculation and affordability app.

3. Determine your potential down payment (it doesn’t have to be 20%)

ANOTHER MYTH: Too many people wait to save up 20% before buying a home. You don’t need 20%. After I had a client having only $200.26 in their bank account,  I finally had helped her save up a decent amount of money to afford at least a 3% down payment with some additional padding for an emergency fund.

Yes, she only put 3% down on a condo and she bought as quickly as she could because she was certain that prices were going to keep going up. Yes, she had a lot of advantages buying when the market was still level, but if she had waited one year until she had 20% saved then she would have missed out on at least $125,000 in growth.

The reason she felt comfortable doing this was because she was confident in her  income growth in the future. Think careful if your job is secure and if you can afford to buy a home (3% down payment + 3 months of expenses saved + stable job). Once she had those three locked down, she went searching for a property immediately.

Click here for our mortgage calculation and affordability app.

4. Get pre-qualified for a mortgage before decided whether to rent or buy

This may answer the question for you. It’s a lot harder to get a mortgage now after 2008 mortgage crisis and even if you have awesome credit and a great job, you still might not get approved. It’s just weird sometimes. So I recommend that you contact us first and see what kind of mortgage you can pre-qualify for. Then you can see what a bank is willing to lend you and at what rate.

ALWAYS SHOP AROUND. Just some simple shopping and calling around for 30 minutes will help you make sure you are making the best decision and not settling for the first person you talk with.  

I KNOW FOR A FACT that a lot of people don’t shop around for mortgage rates and just use the bank they bank with. This is a big mistake, especially if you bank with one of the big banks because they tend to have the strictest requirements and the highest rates AND fees.

Getting pre-approved will also help you best leverage the mortgage calculators because you will have specific rates to use. One mistake a client of mine made was assuming he had great credit and that he could get the best mortgage rates that are published online. There is always a catch to those rates and they are typically the lowest rate possible they could offer, but for some reason with an 817 credit score I couldn’t get them? If you haven’t yet, you should check out your credit score.

Note: Mortgage rates still remain close to historic lows so if you are considering buying a home in the next few years I would recommend doing it as soon as possible. Rates will go up and so buying any home will cost you more money.

 Click here for our mortgage calculation and affordability app.

5. Check the two best free rent vs. buy calculators

So what about the popular rent vs. buy calculators? We tried 7 different rent vs. buy calculators (each with their own methodologies) and the ALL TOLD ME TO RENT. Did I listen? Nope.

But they are worth checking. My two favorite free rent vs. buy calculators from Zillow and My App. Let’s check out the results below (making a some assumptions about salary as a policeman and using the average home price + 20% to give him some flexibility!)

New York Times Rent vs. Buy Calculator – Buy!

Zillow Buying vs. Renting Calculator – Buy!

We’ll there you have it. You should definitely be buying in Las Vegas.

FYI: It’s a no brainer to buy a multi-family home and renting part of the space where you live. There are some properties for sale in the Las Vegas market that have 2-4 units, so renting one out and putting that rent towards the mortgage makes buying an even better decision.

Happy house hunting!

Click here for our mortgage calculation and affordability app.

How To Buy A House When You Have Student Loan Debt

Student loan debt can be a drag, especially if you’re trying to buy a house. Fortunately, there are options. By taking advantage of the right loan programs, working on your credit and debt to income ratios and teaming up with the right partners, you can improve your chances significantly (not to mention, lower the cost of buying a home — both up front and for the long haul). 

The common outlook is bleak: student loan debt is preventing borrowers everywhere from living The American Dream.

Here are 8 ways to maximize your chance of buying your dream home -- even if you have student loan debt.

Here are 8 action steps you can take right now:

1. Focus on your credit score

FICO credit scores are among the most frequently used credit scores, and range from 350-800 (the higher, the better). A consumer with a credit score of 750 or higher is considered to have excellent credit, while a consumer with a credit score below 600 is considered to have poor credit.

To qualify for a mortgage and get the best mortgage rate, your credit score does matter.

2. Manage your debts

All lenders evaluate your debt-to-income (DTI) ratio when making credit decisions, which could impact which loan and the interest rate you receive.

A debt-to-income ratio is your monthly debt payments as a percentage of your monthly income. Lenders focus on this ratio to determine whether you have enough money to cover your living expenses plus your debt obligations.

Since a debt-to-income ratio has two components (debt and income), the best way to lower your debt-to-income ratio is to:

• repay existing debt;

• earn more income; or

• do both

• Pay off the balance if you have a delinquent payment

• Don't skip any payments

• Make all payments on time (if not early) 

• set up automatic balance alerts to monitor credit utilization

• ask your credit card to raise your credit limit (this may involve a hard credit pull so check on this first)

• pay off your balance multiple times a month to reduce your credit utilization

3. Pay attention to your payments

Payment history makes up 35% of your FICO so it's super important. 

Since your payment history is one of the largest components of your credit score, to ensure on-time payments, set up autopay for all your accounts so the funds are directly debited each month.

FICO scores are weighted more heavily by recent payments so your future matters more than your past.

4. Get pre-approved for a mortgage

Too many people find their home and then get a mortgage.

That's backwards!

Get pre-approved with a lender first. Then, you will know how much home you can afford.

To get pre-approved, lenders will look at your income, assets, credit profile, employment, among other documents.

5. Keep credit utilization low

Lenders also evaluate your credit card utilization, or your monthly credit card spending as a percentage of your credit limit.

Ideally, your credit utilization should be less than 30%. If you can keep it less than 10%, even better.

For example, if you have a $10,000 credit limit on your credit card and spent $3,000 this month, your credit utilization is 30%.

6. Look for down payment assistance or grants 

There are various types of down payment assistance, even if you have student loans.

There are federal, state and local assistance programs as well so be on the look out or ask your mortgage expert to see which ones you are eligible for. 

7. Consolidate credit card debt with a personal loan

Option 1: pay off your credit card balance before applying for a mortgage.

Option 2: if that's not possible, consolidate your credit card debt into a single personal loan at a lower interest rate than your current credit card interest rate.

A personal loan therefore can save you interest expense over the repayment term, which is typically 3-7 years depending on your lender.

A personal loan also can improve your credit score because a personal loan is an installment loan, carries a fixed repayment term. Credit cards, however, are revolving loans and have no fixed repayment term. Therefore, when you swap credit card debt for a personal loan, you can lower your credit utilization and also diversify your debt types.

8. Refinance your student loans

When lenders look at your debt-to-income ratio, they are also looking at your monthly student loan payments.

The most effective way to lower your monthly payments is through student loan refinancing. With a lower interest rate, you can signal to lenders that you are on track to pay off student loans faster. There are student loan refinance lenders who offer interest rates as low as 2.50% - 3.00%, which is substantially lower than federal student loans and in-school private loan interest rates.

Each mortgage lender has its own eligibility requirements and underwriting criteria, which may include your credit profile, minimum income, debt-to-income and monthly free cash flow.

Student loan refinancing works with federal student loans, private student loans or both.

If you follow these 8 things, you'll be better equipped to manage your student loans and still buy a home.