Programs can help those looking to buy second home

Q: First of all, I wanted to say thank you to Paul Bell for being a faithful writer in the Las Vegas Review-Journal. Second, I would like to welcome Kolleen Kelley to the Review-Journal.

My question is this: We just moved to Las Vegas a year ago and rented our home in Southern California. We are living with our mother-in-law, so we do not have to pay any rent. We would like to buy a home here in Las Vegas, but have been told that it may not be possible until we sell our home first.

After speaking to a Realtor in California, we would be cutting it close as to what we paid back in 2004 ($400,000). We owe $385,000 on the loan right now. We hardly would make anything, or nothing at all. Yet, we still have to pay 5 percent to the agents. Our renters would like to continue renting for now and possibly buy our home in the future. They have bad credit and are in debt so they do not qualify for a loan. We are paying $200 out of pocket to cover the full mortgage, and that's not including the property taxes. The property taxes are $5,600 for the year. My husband is only making about $3,350 a month.

Do we sell or rent? I was told we can apply for a Federal Housing Administration loan and only need to put 3.5 (percent) down, if we sell our home. What about (programs for) first-time buyers in the state of Nevada? Would that help us?

--Elizabeth O., Las Vegas

A: I can't give you an iron-clad answer to all of your questions. But I can say that I agree with your timing. I think it's a great time to buy a home, especially here in Southern Nevada, where homes are as affordable as they've been in generations.

I also know that it's generally more difficult to qualify for a mortgage loan today than it has been in years.

You assume you will "still have to pay 5 percent to the agents" in the form of a commission on the sale of your home. While that's a fairly typical commission, people should realize that all such commissions are negotiable.

As for your questions about qualifying for a loan to buy a new home here in Las Vegas, I enlisted the help of a local mortgage expert. Kevin Savage, a senior loan officer with Evergreen Home Loans, said it generally helps you qualify for mortgage if you sell your existing home.

"In the past, lenders allowed immediate use (up to 75 percent) of rental incomes," Savage explained. "This allowance of rental income was a way for lenders to offset the current home's debts (mortgage, its taxes and insurance costs), so it was easier to qualify you for a new home mortgage payment.

"Unfortunately, lenders now require two years of tax returns showing your income from rents, and the expenses of the property. If you need rental income to qualify for a new mortgage, you'll need to wait and be a landlord another year. My earnest recommendation is to sell the property and fully pay off the existing mortgage."

He added that "an FHA mortgage would be a good choice for the next home. FHA only requires a 3.5 percent down payment, and the seller is allowed to pay up to 6 percent of the sales price to assist you with settlement costs."

He said there is a federal program that could help you buy your next home. The Neighborhood Stabilization Program can supply you with up to $14,999 towards your down payment, closing costs and loan reduction. Some local nonprofit agencies that have information on the NSP program include Consumer Credit Counseling Service, 364-0344; and Housing for Nevada, at 270-0300.

Kolleen Kelley is the 2012 president of the Greater Las Vegas Association of Realtors. Email her at ask@glvar.org. For more information, visit lasvegasrealtor.com.