John Graham
While the median price of a single family home has slowed, and in fact, leveled in the second half of 2016, affordability is still a major concern. It affects not only those who earn the median household income, but it also affects teachers, veterans and the everyday working person.
The Affordability Index by Month chart shows how affordability has been impacted for the median household wage earner. To fully understand this chart, you need to know that a value of 100 means that a buyer with the median income has exactly enough income to qualify for a mortgage on a median-priced home. This occurred for a short period in June and July 2013. An index of 120 signifies that a buyer earning the median income has 20 percent more income to qualify for a mortgage on a median-priced home. An index of 85 signifies that a buyer has 85 percent the income required to purchase a median-priced home. The calculation uses an annual local median income, a down payment of 5 percent, the historical effective monthly interest rate for the effective term of a mortgage, typically a 30-year fixed mortgage, and a qualifying ratio of 28 percent.
Because the cost of construction, land costs and profit margins, new homebuilders locally and nationally are not building homes in what would be considered the affordable price range based on the Washoe County median household income of $56,382. A quick look at new homesource.com reveals that there are 44 new construction communities in the Reno/Sparks area, which represents approximately 17 builders. In my exploration of this site, while it may not represent all the area builders, it does represent a good sampling. I found that the minimum price of a new single family home in the Reno area (including the North Valleys) is $265,990 and in Sparks (including Spanish Springs) is $260,990. New home construction may be not be the most affordable option for the median household income.
Another issue affecting affordability is the fear and reality of rising interest rates. This concern wasn’t as prevalent over the last couple of years as it is now, but it’s a real concern for buyers who are likely stretching themselves to get what they want. The lack of inventory, affordability and now the worry of interest rate fluctuations could affect a buyer’s comfort level with monthly mortgage payments.
All this might add up to what is a pretty gloomy story, but there are some opportunities out there. The great news: There are some amazing programs offered both federally and on a local basis that can help buyers over the hump and into homeownership.
Here are just a few of the programs available to some of our hard-working northern Nevadans:
Teachers:
$10,000 in bonus money
Usable for down payment and closing costs
Forgivable after five years (if you stay in your home)
Below-market fixed interest rate 30-year loan
No first-time homebuyer requirement
Can be combined with the Mortgage Credit Certificate (MCC) program with program fees discounted
To learn more, contact your Realtor, an area lender or go to: http://www.homeispossiblenv.org/program/home-possible-teachers.
Veterans and Active Military Personnel
Below-market fixed interest rate 30-year loan
Reduces monthly mortgage payment
No first-time homebuyer requirement
Can be combined with the Mortgage Credit Certificate (MCC) with program fees waived
To learn more, contact your Realtor, an area lender or go to: http://www.homeispossiblenv.org/program/home-possible-heroes.
Also for Veterans, Active Duty Soldiers, Reserve and Guard:
Calculate the amount of money the veteran will contribute to down payment, closing costs, earnest deposit and cash brought at closing to determine the grant request amount
This program will match the vets contribution 2-to-1, up to $5,000
To learn more, contact your Realtor, an area lender or go to: http://www.pentagonfoundation.org/site/PageServer?pagename=dream_index.
Available for All Qualifying Buyers:
Up to 5 percent down payment assistance grant available
No first-time homebuyer requirement
Home may be financed through FHA, VA, USDA or conventional through a Housing Finance Agency (terms vary)
Can be combined with the Mortgage Credit Certificate (MCC) program
Home must be located in a rural area (based on population, Sparks, qualifies as rural)
To learn more, contact your Realtor, an area lender or go to: http://nvrural.org/home-at-last/downpaymentasisstancegrant/.
These are just a sampling of programs available in the northern Nevada market. There are a total of 35 programs, all funded, from 24 different housing agencies and some employer assistance programs as well. Of the 35 programs, 22 offer down payment and closing cost assistance and more than two-thirds of the programs do not have a first-time home buyer requirement.
You can see there is no reason to be discouraged. If you are considering homeownership or you have out-grown or over-grown your existing home, there are options available to you to battle the affordability issue.
Home buyers should take time to pre-qualify for a loan with a reputable lender. They should question the lender about down payment or closing costs assistance programs available to them.
If they are not familiar with the programs, they may not be a participating lender, or you might not be talking to the “right” lender.
Do your homework and talk to several lenders. You may be surprised by the outcome.
For first-time homebuyers, your first home may not your forever home, but it is the first step to homeownership. Contact a local Realtor, a qualified lender or one of the agencies named above for more information.
John Graham is president of Reno/Sparks Association of Realtors and a real estate agent with RE/MAX Premier Properties.
