A helping hand for Lake Tahoe homebuyers
June 26, 2018
Housing affordability is a hot topic. If you're a first-time homebuyer or feel as though you've been priced out of the real estate market, it's hard not to despair about rising prices and escalating interest rates.
But there is a beacon of hope in the form of Down Payment Assistance (DPA) programs because you do NOT need a 20 percent down payment to buy a home.
The DPA programs are available in California or Nevada and feature reduced mortgage insurance premiums, lower interest rates, mortgage tax credits, and cash that can be used toward a down payment and/or closing costs. These benefits can make homeownership a reality for those who thought the American Dream was out of reach.
Here are a few examples of the programs in action: One family bought a home in Gardnerville with a monthly PITI payment ("PITI" means a house payment that includes Principal, Interest, Taxes, and Insurance) of $1,310 per month and only the $550 cost of the appraisal as their initial investment.
A young couple recently bought a home here in South Lake Tahoe with just a $1,900 initial investment and a monthly PITI of $1,470.
Last summer, one happy family purchased a $360,000 newly-built home with an initial investment of $7,300.
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Plus, those homebuyers who qualify for the Mortgage Tax Credit (MTC) will realize an additional annual federal income tax savings of $2,000 or more. This is not a mortgage deduction but an actual dollar-for-dollar tax credit toward your federal income tax due. The MTC is available in either California or Nevada if the household income does not exceed a certain threshold.
The DPAs also have a maximum income limitation but that limit is so high that this is rarely an issue.
The most popular DPA programs (GSFA in California and HAL in Nevada) feature assistance that ranges from 2 percent to 5 percent of the first mortgage amount. For example, if your new mortgage is $250,000 then the 5 percent DPA would provide you with $12,500 of down payment assistance. This $12,500 is a forgivable second mortgage that is secured by the home that you are buying. At the end of each year, one-third of the total assistance ($12,500) is forgiven such that after three years the second mortgage is eliminated completely.
Your number of options increase if you have at least some cash, and eligible sources of cash include your savings, 401(k) (though not all retirement accounts allow for an early distribution), a gift from a close friend or relative, sale of an asset (like that sports car that you hardly ever drive or that boat that routinely drains your savings), etc.
We also can ask the seller of the property to contribute toward your closing costs and sellers are usually happy to help if we structure the purchase offer appropriately.
As always, the best advice that I can offer is to talk to friends and read reviews of local lenders and Realtors (one-size fits all, online lenders and Realtors rarely have the expertise or experience with these specialized local programs).
Find an agent who is trustworthy, knowledgeable, and experienced in our local market because buying your first home can be an adventure and a trusted professional will help you make it to the finish line.
Mark Treiber is with Dignified Home Loans and is licensed in California and Nevada. He can be reached at 530-208-6704.