Mar
3
More incentive to buy a new home in California. This one is literally for a new house though. The legislature approved $100M dollars to go towards a tax credit for the new construction. It is state tax credit of 5% of the new home price to the maximum of $10,000. And to think all the squabbling over a budget might actually end up helping me.
This started March 1, 2009 and will end one year from now though I suspect the money will run dry before the date does. The credit will be given in equal amounts over a 3 year period. Other things of note:
- there are no maximum income requirements
- you do not have to be a first time home buyer
- it needs to be your primary residence for at least 2 years
State of California Franchise Tax Board link to the program:
http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml
State of California Franchise Tax Board Application:
http://www.ftb.ca.gov/forms/misc/3528A.pdf
Great info on the new California Home Buyers Tax Credit:
http://www.newhomessection.com/blog/10000-tax-credit-for-home-buyers-in-california/2009/02/21/
Feb
20
Lenders want 20% down to offer you a Mortgage on a house or condo. Yes, you can buy a house for with less down but that does not change their need for 20% down. Depending on the loan, lender and your credit score, some agencies offer the option of getting Private Mortgage Insurance (aka PMI) to cover the difference if you default on your loan.
PMI is an additional monthly cost that can either be paid separately or rolled into the mortgage as part of the interest for the life of the loan. There are advantages to both options.
PMI as a separate expense:
Once you get to the magic number of 80% equity, the PMI is no longer needed. The US Homeowners Protection Act (HPA) of 1998 requires PMI to be automatically canceled by the when the amount owed reaches a certain level, particularly when the loan balance is 78 percent of the home’s purchase price. But you can cancel it at 80% but it normally requires a letter asking the lending institute to stop charging you. Since mortgages are front loaded with interest, it takes years to get to the magic 78% number based on original bank assessment of the house.
PMI as integrated into the mortgage interest:
Sometimes your lenders will offer it as an increase to percentage of the loan, many times about 1/2% or so depending on the amount and the lender. This option can be advantageous because it is then just interest and you may qualify for the tax benefit of a mortgage interest. The downside of this is that you no longer can get rid of the PMI without refinancing the loan.
For example:
Let’s say you are buying a $500,000 house and you are putting 10% down and have qualified for a 5.5% fix 30 year mortgage.
| Loan Principal: $450,000 |
Payments per Year: 12 |
| Annual Interest Rate: 5.5% |
Number of Regular Payments: 360 |
It would take until 7 years* (84 months) until you accumulate $50,000 in equity.
*[I got this number from this site http://www.bretwhissel.net/cgi-bin/amortize]
And your PMI would be an additional $195/month* on top of your $2555 mortgage payment.
*[I got this number from this site http://www.goodmortgage.com/calc_pmi.htm]
Feb
18
I got this text in an email but it is verified by outside sources. The reason why I am writing about his portion of the bill is because I think housing and credit is what got us into this mess and stabilizing the housing market will do more to help the recovery than most of the other provisions.
Read more at: http://www.recovery.gov/
|
“Below are summaries of key housing provisions of the American Recovery & Reinvestment Act. Housing help that’s not in the Recovery Act explicitly but seems likely to fall in the “Protecting The Vulnerable” category (unless it is part of the Treasury plan) is a $50b investment plan for borrowers who haven’t yet been late on mortgage payments but are struggling. This is great for individual homeowners and critical for housing overall to stop the foreclosure spiral and stabilize home prices—foreclosures are estimated to top two million this year nationwide.
“$729,750 Loan Limit Returns: FHA and FNMA Conforming loan limits we saw last year for high-cost areas (including the SF Bay Area) have been restored. But please note that this change will take a few weeks for lenders to implement and price. Remember: the spreads between $417k-cap and $729k-cap loans were a lot wider than the current $417k vs $625k spreads. Note also that reverse mortgage limits have been increased from $417,000 to $625,500.
|
DM’s comments: This is a really good mechanism for people to get a 30 year fixed rate mortgage.
| “First-time Home Buyer Tax Credit: The tax credit for first time home buyers was increased from $7500 to $8000 for homes purchased between January 1, 2009 and December 1, 2009. A tax credit is equivalent to money in your hand, whereas a tax deduction just reduces taxable income. The credit no longer needs to be paid back as long as you live in the home without selling it for 3 years. The $7500 version of the credit expired on July 1, 2009, and required home buyers to pay the funds back over a 15 year time frame. If you bought the home in 2008, the credit remains $7500, and it still needs to be paid back over a 15 year timeframe beginning in 2011 when you file your 2010 returns.
“The credit phases out for couples making over $150k or singles making over $75k. The credit remains refundable. This means that first-time home buyers who owe less than $8000 in taxes for the year are still eligible for the full $8000 credit when they file their tax returns. In that case, the IRS will write you a check for the difference between $8,000 and your actual tax bill. The credit can be claimed on your 2008 tax returns that you file by April 15, 2009, even if you buy the home in 2009. |
DM’s comments: What first time home buyer could afford to purchase a home on their own in the bay area with only making $75K a year? I guess only people with a large down payment i.e. with either an inheritance or a rich uncle.
| “Home Improvement Tax Credit: The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of $1500. Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters. Generally, your home improvement contractor and/or the manufacturer selling the improvements issues a certification that clarifies whether the improvements meet the necessary standards for energy efficiency. Most modern windows, furnaces, and air conditioners meet these requirements. |
DM’s comments: The little eco-warrior in me is tingling with delight.
Further reading: http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home?lid=ronav0019
Jan
28
If you have wondered why I have been so distracted as of late, this is why…
Karen and I are in the process of buying a house in San Francisco. To be more accurate, we are in escrow on a condo in the Mission. I have been hesitant to say anything publicly because it could still fall though. It is interesting how it puts a spot light on the previously unspoken expectations and fears when you start to discuss the reality of a financial commitment of this magnitude. Regardless, we are both very excited.
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