weather icon Clear

Hike in interest rates may hit first-time homebuyers hardest

Increased interest rates could drive payments up, ultimately deterring first-time homebuyers from taking the plunge, said a Southern Nevada lender.

Mike Gould, senior vice president of mortgage lending for Nevada State Bank, said most first-time homebuyers use a Federal Housing Administration loan to purchase a home and rising interest rates could lessen the dollar amounts they’re able to qualify for.

“You’re limiting the buying power of the consumer,” he said. “Right now, we’re expecting a moderate increase over the next 12 months for mortgage interest rates and as they rise over time, it will impact the first-time homebuyer’s ability to qualify for a mortgage.”

In addition, Gould said many first-time homebuyers are millennials who are coming out of college with student loan debt or have worked two jobs to get through school and have little to nothing in their savings account.

“As they put money down for a home, it depletes a lot of savings they have and you want them to continue to have savings set aside for unexpected events after they purchase,” he said.

Gould added that as interest rates climb, the payment for the house they want will increase and cutting into their residual income.

“You want them to have as much residual income as possible for car trouble or any life events that may arise,” he said. “You don’t want a client pushed to the limit on mortgage and not afford a life event that may occur.”

The 30-year fixed mortgage rate has increased to just fewer than 4 percent from 3.76 at the end of October.

Rick Piette OF Premier Mortgage Lending said another important piece is as interest rates increase, so will debt-to-income ratio, the total income divided into housing expenses and other bills.

“A rise in debt-to-income ratio has also historically built more urgency among buyers,” he said. “Many people get off the fence and purchase homes when rates go up so they can make a purchase before they get too high.”

Henderson resident Jerico Nazareno purchased a two-bedroom, 1½-bath home in March with a Veterans Affairs loan at an interest rate of 3.345 percent.

“I didn’t want to pay rent to someone,” he said. “I was able to purchase my home at a steal.”

According to Nazareno, he said purchasing a home has been one of the best choices he’s ever made.

“I was told that owning a home isn’t an investment but rather a liability and that’s it’s important to not settle when it comes to choosing a home,” he said. “Owning is much better than renting.”

Piette said he’d rather have high-interest rates in a healthier economy.

“It means people are making more bonuses, tips and receiving salary increases, which would offset a smaller 1 percent increase in interest rates,” he said. “A healthy economy would have a positive impact and result in more confidence on homebuying.”

He added that 5 percent interest rates are still a bit down the road for Nevada.

“I don’t think we’ll hit that in 2016 because the economy would have to catapult forward and it’s not,” he said. “I like where we’re at because we’re in a slowly recovering economy so interest rates will slowly increase. It’s best to purchase when rates aren’t on the floor but somewhere in the basement.”

Contact reporter Ann Friedman at afriedman@reviewjournal.com or 702-380-4588. Follow @AnnFriedmanRJ on Twitter.

Don't miss the big stories. Like us on Facebook.
Homeowner says HOA towed his car illegally

Most CCRs list the powers and authority of the board of directors, one of which is to sign contracts on behalf of the association. Although you did not send me a copy of the covenants, it would be most unusual if the association board did not have the right to sign a contract with a towing company. The covenants would not list what contracts can or cannot be signed. The ability to tow a vehicle in 2018 was most likely legal.

Tips on selling your home in the fall

For sellers wanting to close before the holiday festivities begin, below are five tips from real estate company, Opendoor, to help sell homes faster.

Neighbor wants owner to clean up tenant’s trash

If the association does remove the trash, the unit owner can be assessed all of the expenses that were incurred by the association. It also can place a lien on the unit if the owner fails to reimburse the association. In addition, the association can begin a foreclosure action against the unit owner.

Loud garge noise disturbing neighbors

Try contacting the owner one more time and invite him to meet with you at the community so that he can witness the noise. Arrange for some maintenance technician to be present for their suggestion as to how to remedy the problem and the cost.

Grandfathered rentals in HOA protected by law

If your CCRs did not prohibit renting or leasing at the time you purchased your rental homes the association cannot prohibit the renting or leasing of homes.

Don’t park in the handicap spot

Yes, you were wrong. And, no the association does not by law have to provide you any notice for parking in a handicap spot per NRS 116.3102 (1s).

Southern Nevada Health District implements pool regulations

As you are already aware, the new Southern Nevada Health District regulations went into effect July 1. At first the cyanuric acid level (stabilized chlorine) regulation was going to stay the same at 100 ppm, meaning the body of water would have to be drained and refilled as it always has been.

Variety of homeownership programs available

In what’s being called a game-changer in increasing homeownership rates in Las Vegas, Bank of America has included Southern Nevada in a new loan program to provide free down payment assistance to homebuyers.

HOA board member must follow pet rule like everyone else

Your officers and directors are homeowners. They have the same obligations and the same responsibilities in complying with the governing documents of the association. In this case, the management company should be sending a violation letter to the vice president.