Analysts are saying that the 2012 Las Vegas housing market is facing a daunting year with the subprime mortgage crisis that is currently hitting Las Vegas especially hard. The highest foreclosure rate in the US is in Nevada, and Las Vegas continues to remain in the top five.

This crisis poses a real risk for further development and growth because it creates a glutton of houses on the market, which in turn will slow the construction of new homes, and effect most property values. However, before we get too down and gloomy, we should recognize that is also creates an opportunity for housing that is more affordable for those who have in recent years priced themselves out of the market.

This crisis has lead to far too many homeowners facing foreclosure and the loss of their houses, because they cannot make their mortgage payment. This crisis is the result of lenders and banks approving loans that were risky, or giving subprime mortgages to those with poor credit scores or unstable finances.

These homebuyers were attracted by the low interest rates being offered. However, because so many of these mortgages were adjustable rate mortgages, also called ARMs. This meant that these same homeowners faced significantly higher interest rates in the future, and that meant payments were almost always impossible to make, which in the end lead to foreclosure. In addition, these same predatory lenders have been blamed for being unfair and making the situation worse by taking advantage of new buyer who were not informed.

There were also a significant number of investors who purchased homes right at the height of this market with the intent of flipping them to make a profit, only to watch the market decline. Las Vegas continues to struggle and grow even through these difficult times.

According to Moody’s Analytics, those Las Vegas home owners who were looking to sell may have to with 9 to get back 50% of their pre-recession value. Homeowners might see a 20 year delay before they are actually able to recover their full home price.

For those in the market to purchase a home the opportunities abound. With the number of foreclosures on the market, and the reduced market value this truly is a buyer’s market. As always, when real estate is involved the market benefits one side of the equation and is at a distinct disadvantage for the other side of the equation. For the time being and into the future analysts predict that it will remain the buyer who has the advantage.

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Las Vegas Home Buying Requirements

 Las Vegas is a great place to buy a home. There are some excellent Las Vegas condos for sale, Henderson homes, for sale and just some all round good buys. If you’ve been thinking of purchasing in this area, you should talk with a Las Vegas real estate agent.

If you are using a FHA loan to purchase your Las Vegas home you should be aware of changes that have occurred for 2011. FHA is the Federal Housing Administration that insures loans made by the primary lenders like Bank of America or Wells Fargo. FHA insures the mortgage against losses that result should a borrower default. Let’s look at the new home buying requirements for 2011.

Las Vegas Home Buying Requirements

Credit Score Requirement

In 2011, the credit score requirement is one of the most important FHA loan requirements. Prior to 2011, it was mostly at the lenders discretion but this has now changed. Borrowers must now have a credit score that is a minimum of 500 to qualify for a FHA home mortgage. To qualify for the 3.5% down payment program the borrower’s credit score must be 580 or higher.

However, FHA credit score requirements are less than those of most lenders who will require you to have a credit score that is a minimum of 620 to qualify for a FHA home mortgage, and some banks such as Bank of America and Wells Fargo have recently increased theirs to 640. Expect to have to meet whatever the banks requirements are for the bank you are dealing with.

Down Payment Requirement

If you are using a FHA loan to purchase your Las Vegas home, you may be able to put as little as 3.5% down, which is also why the FHA mortgages are so popular. Seldom will it get less than this. However as we previously mentioned, your credit score must be 580 or higher to get this rate.

Debt to Income Ratio

Debt to income simply means the amount of money you earn compared to the amount of debt you have. Your gross income (amount before taxes are deducted) is used to calculate these ratios. There are two important ratios:

1. Housing Ratio (front ratio):  It lonely looks at your mortgage related debt. Your mortgage payment should not consumer more than 29% of your gross monthly income. Take the total amount of the mortgage payment (principle, taxes, interest, and insurance) and divide by your gross monthly income. If the number is greater than 29% you could have trouble qualifying for a FHA loan.

2. Back End Ratio:  This ratio includes all your debt (mortgage, car loans, credit cards, lines of credit, etc.). Take this number and divide by your gross monthly income. If the number is higher than 41% you may not qualify for your loan.

It is important to note that these debt to income ratios are not rigid. They are FHA guidelines but for buyers that are qualified in all other avenues allowances can be made. For example if you have excellent credit and a stable income you may still qualify. That said the debt ratio is a key requirement for FHA home loans.

These are exciting times to be considering purchasing a Las Vegas home with plenty of excellent buys that a Las Vegas real estate agent can help you with . Home buying requirements are getting tougher so now would be a good time to consider making that purchase. Talk to an experienced Las Vegas real estate agent today to find out more about the many Las Vegas home and Las Vegas condos that are currently on the market.

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