Nevada First Time Home Buyer Guide

Nevada is one of the fastest-growing U.S. states, both according to the total number of new residents since 2010 and the percentage growth rate resulting from the hundreds of thousands of new Nevadans. All that growth has made the Nevada housing market one of the most exciting in the country.

Like the rest of the country, Nevada’s housing market has been impacted by the coronavirus pandemic, but assuming the state and national economy see improvement in 2023, the state will continue to be an attractive one for first-time home buyers.

For those considering making their first-ever home purchase, let’s take a look at what they need to know about whether Nevada is the best place to go all-in on homeownership.

Nevada First-Time Home Buyer Options

Unless you’ve recently had a really big score at the blackjack table and can just write a check to buy your first home, it’s likely you’ll need to get a home loan, better known as a mortgage. These types of loans tend to come with long terms of 15, 20 or 30 years, and they fall into two categories — conventional and government.

Conventional

• Issued by private lender, such as bank or financing company, and not backed by federal or state authority
• Comes with lower interest rates
• Typically requires buyers to provide a down payment, ranging from 5% to 20% or more
• Requires applicants to have solid credit score, though the specific required number varies by state; first-time buyers should plan to seek a conventional mortgage only after their credit score has reached at least 640. See first time home buyer loans for all credit.

Government-backed loan

• Formally issued and managed by a private lender, but government-backed loans are guaranteed by a state or federal agency; most often that’s one of three authorities — the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) or U.S. Department of Agriculture (USDA). Income and loan limits and other eligibility rules apply and vary by agency.
• Requires lower down payment, sometimes as low as 3.5%
• Typically carries higher interest rate than conventional loan
• Lower credit score accepted, though borrowers should plan on having at least a 580, or they’ll likely be asked to provide a higher down payment

Repayment options

A 30-year, fixed-rate mortgage continues to be the standard way that Americans purchase homes. In fact, it’s estimated that about nine in 10 people have purchased their homes that way. While this is typical, there are other loan options that are popular and may be right for you, depending on your situation. Here are a few of the options you’re likely to see:

ARM: A mortgage with an interest rate that varies throughout the life of the loan, though specific terms vary. These are ideal for buyers who can pay off the loan in full before the rate adjusts and/or those who plan to sell the home before the rate changes. If selling before the rate changes is your plan, be sure you choose a lender who does not issue penalties for buyers who do this.

5/1 ARM: This is a specific type of ARM loan that’s become one of the most popular. With a 5/1 ARM, the buyer pays a fixed rate for the first five years, after which, the interest rate charged changes annually over the remaining years. Similar ARM loans come with terms like 5/5 in which the rate adjusts every five years after the first five. Interest rates on these mortgages are based on an economic index plus an established margin, so the amount you pay tends to rise rather than falling, though that depends on economic conditions.

15-year: Some buyers may be interested in paying off their loan sooner than three decades from now. So, for those who have the financial freedom, a 15-year mortgage gives them a chance to pay one interest rate but retire their loan much more quickly. These loans also offer lower interest rates, but it’s important to do your due diligence with your budget and ensure that you have the income security to afford the much higher monthly mortgage payment.

Other terms to know

Specifics related to your mortgage aren’t the only considerations to make when deciding how to buy your first home. Here’s a look at some other terms you’ll need to be familiar with when you purchase your first Nevada home:

Mortgage insurance: If you make a down payment of less than 20% of the purchase price, you will usually be required to pay private mortgage insurance until the loan balance reaches 80%. Lenders are required to drop PMI after the borrower reaches 78%, and you can request this if you’ve gotten to the 80% mark and remained in good standing.

Equity: The difference between what you owe and what your property is worth is called equity. Having a positive equity number gives you a degree of financial freedom, as it can give you a way to earn some cash. There are two ways to increase your equity — pay down the loan, or increase the home’s value.

Closing costs: These one-time fees are paid by both buyer and seller and cover things like Realtor commissions, title fees, loan origination fees, and more. In Nevada, you can expect to pay between 2% and 5% of the purchase price of the home in closing costs.

Housing Market in Nevada

Nevada is one of the fastest-growing states in the U.S., both by overall numbers of residents added and percentage growth. The 375,000 residents added over the past decade puts the state 14th in the country, while its percentage of growth lofts Nevada into the top 10, according to estimates from the U.S. Census Bureau. That rapid population growth is fueling a housing boom across Nevada.

Top 10 states by percentage growth, 2010-2020

According to the most recent data from Zillow, the median value of a home in Nevada in late 2020 was nearly $334,000 — an increase of more than 35% in just the past five years. That puts Nevada behind only three other states, all of which are regional neighbors.

Top 10 states by increase in median home value, 2016-2020

Rising home values in cities and towns across the state are boosting the state’s overall increase in median home values. Of the 75-plus cities with available recent data, all but four have seen the median value of a home rise in the past five years, and communities in the Las Vegas and Fernley metro areas dominate the list of the 25 highest increases.

Top 25 Nevada cities by percentage change in median home value, 2016-2020

Resources for Nevada Home Buyers

There are many programs set up to help Nevada home buyers, with many specifically for those making their first home purchase. Be sure to take an honest inventory of your financial situation and do all the math to make sure you’re getting the best deal possible.

Home At Last: Funded by the Nevada Rural Housing Authority, this program provides a no-interest loan of up to $25,000 in down payment assistance to purchase eligible properties classified as being in rural areas. The loan is technically a three-year second mortgage that requires no payments and is forgiven after three years if the buyer lives in the home as their primary residence for the first three years.

Nevada Housing Division: A state program called Home Is Possible helps buyers, including first-timers, by providing low-cost loans of up to 5% of a home’s purchase price, which borrowers can use to make a down payment or pay closing costs. A $755 fee is due at closing, and the loan can be paid off over 30 years, and income and other limits apply depending on where the home is located. While that program is for all buyers, the state also has similar programs for veterans and K-12 teachers.

Federal Housing Administration (FHA): Home loans backed by the FHA and administered by private lenders can help people secure affordable housing without facing some of the harsher requirements of conventional financing. The agency has established loan limits that change regularly and vary across the country. In most Nevada counties, the limit is $331,760, but it rises in certain high-cost metro areas and counties like Washoe County, where Reno is located. There, the FHA loan limit for a single-family home is $437,000, far higher than the limit elsewhere in the state. If you’re considering FHA financing, be sure to consult the loan limits that apply in the county or metro area where your new home is located.

U.S. Department of Agriculture (USDA): The USDA Rural Development Single Family Housing Direct Loan Program sets eligibility limits for households based on their income. These limits help determine how much financing a family could receive via a direct USDA loan to purchase a home in a rural area or another eligible community. Here’s a look at the limits to be considered a low-income, four-person family in metro areas and non-metro counties in Nevada:

• Carson City: $60,150
• Las Vegas-Henderson-Paradise: $60,000
• Reno: $63,700
• Churchill County: $60,000
• Douglas County: $65,550
• Elko County: $73,450
• Esmeralda County: $60,000
• Eureka County: $78,500
• Humboldt County: $68,100
• Lander County: $77,600
• Lincoln County: $60,000
• Lyon County: $60,000
• Mineral County: $60,000
• Nye County: $60,000
• Pershing County: $60,000
• White Pine County: $60,000

VA: Military veterans often use the Veterans Affairs department to help them secure mortgage loans, and while the VA does not set a total loan limit, the agency does have limits for the total amount of a loan it will back for veterans. This varies by state, and in Nevada the limit is $548,250.

Conclusion

Making your very first purchase of a new home is an exciting-but-intimidating process. But understanding some key terms and market forces can help ensure you’re making a wise investment and not just gambling with your purchase of a Nevada home.

References

• The Pinnacle List, the Outlook for the Las Vegas Real Estate Market in 2021 and Beyond. (2020)
• Zillow, Housing Data, Zillow Home Value Index by State and City, Median Days to Pending. (2020)
• U.S. Department of Agriculture, Rural Development Single Family Housing Direct Loan Program, Adjusted Income Limits. (2020)

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