First-time homebuyer tax credit could mean opportunity for you
Congratulations to Sheet Spokesmodel Tyler Goforth on his recent engagement to local heartthrob Laura Johnson. Though this is an exciting time for the happy couple, it’s more exciting for me, seeing as Goforth is finally moving out of the “Sheet Hole” apartment we’ve been sharing. Don’t get me wrong, I’m happy for the man who finished a close second this spring in the MMSA Mustache Comp, and not just because he’ll soon be donning the proverbial “golden ring of power.” I’m happy for him because now is a great time for the young couple to further set down roots by buying property in Mammoth. This is, in part, due to a federal tax credit for new homebuyers of $8,000. Combine this Obama-cake with a beaten-down real estate market and suddenly Mammoth appears (almost) affordable.
Consider this Goforth: For what the average Mammoth renter is paying per month, you could be paying the same amount, if not less, for a mortgage.
And unlike the depressing exchange of paying rent every month, the best thing about owning a home is that it’s a financial investment.
“There are ways to be creative,” says Pam Hennarty, Executive Director of Mammoth Lakes Housing, “If you plan on living in Mammoth for the next 5 years and you can afford the rents, it makes sense to buy a home. Even if you only expect 3.0% back on your return, there are significant tax benefits to owning.”
Sounds good. But first, you’re going to need a down payment.
A Federal Homeowners Association (FHA) loan is a good option. A buyer with a good credit could secure a down payment at 3.5% of the total cost. However, the FHA loan does come with some strings attached like higher fees, higher mortgage insurance, and higher interest rates. The plus side is it puts first time buyers in homes.
“It’s difficult to get an FHA loan,“ Stanley Lupe of Sierra Mortgage told the Sheet, “because [one of the requirements] 51% of the condo complex’s residents have to be owners.” As many locals know, this type of situation is few and far between. Along with a handful of other regulations, like the fact the condo has to be built under FHA guidelines (which many older condos in Mammoth are not) makes an FHA loan hard to come by, but not impossible.
“If you have good credit,” claims Hennarty, “you’ll be able to get a loan, FHA or not.” Seeing as you currently can’t use the tax credit for a down payment their are still ways to be creative. One way, is through what’s called a bridge loan.
In a recent article in RISMedia’s Real Estate, Ken Trepeta, Director of NAR (National Association of Realtors) Real Estate Services stated, “The principal way to use the anticipated credit for a down payment is through a bridge loan secured through a state housing finance agency (HFA) or other eligible agencies. The HFA gives the bridge loan at closing and the buyer then promises to repay.” Like any loan there are risks involved, but a bridge loan is a possible solution.
But if you’re like myself and are still paying off four great years of skipping class and playing Madden [college], then you might choose not to get another loan. “Your best bet is just putting 10% down,” claims Lupe, “You gotta find a way to get that 10%.”
Since money doesn’t grow on trees, and savings accounts vanished with the advent of iPhone applications, a lot of first-time buyers are tapping the family tree. “Maybe ask Mom and Dad for a loan,” says Lupe “and then pay them back with the $8,000 tax credit.” In your case Goforth this sounds like potential wedding gift from Mom and Dad, considering all you’re getting from me is help moving your stuff out.
But asking the parents for money does come with inherited nagging and obligated family get-togethers, so you may want to start saving. “The best plan is to have a plan,” says realtor Bill MacBride of Coldwell Banker. “Most of the clients that we work with do a lot of homework. There’s no shortcuts, you’re going to need to save money, and do your research.” Now we know a large portion of Sheet readers absolutely hate doing research so we let Lupe and his 17 years of experience crunch the numbers …
From the desk of Stanley Lupe: Imagine you’re a first time buyer making $40,000 a year. Your income would probably allow you to purchase a condo listed for as much as $175,000. With fees and closing costs included, your down payment of 10% would be $22,740. Now lets say you have an interest rate of 5.38% (for 30 years). If you include taxes, insurance and fees your monthly payment would be $1495.62. Tax deductions from interest payments on your condo could potentially save you $400/month. And don’t forget to top it off with a meaty $8,000 federal tax credit!
Currently, there are several one-bedroom condos on the market in Mammoth starting in the $130,000 range.
At Aspen Village, the newest affordable housing complex, Mammoth Lakes Housing just got a grant which is good for $50,000/unit in down payment assistance. In other words, if you can come up with the $20,000 down for a $200,000, two-bedroom condo, they’ll toss in $50,000 so your mortgage would be about $130,000.
Compare the cost to buy vs. rent. Check out Blizzard Property Management’s website and you’ll find condos in Mammoth that are going anywhere from $800-$2400 a month.
“Schwing!” says Goforth. “I should buy!” But don’t schwing too long you curly haired freak, because the federal tax credit for first home buyers expires November 30th of this year.
Since time is running out, realtors are hoping to get the tax credit extended beyond November. MacBride explained to the Sheet that the CAR (California Association of Realtors) and the NAR are currently pushing Members of Congress to extend and expand the tax credit beyond Nov. 30, as well allow it to be used as a down payment.
But hopefully this opportunity will light a fire under your ass, Sheet Spokesmodel Goforth. Whether you choose to spend another year renting from a slum lord or you bust a financial boomshakalaka and purchase your first home, I’m sure you’ll make the right decision. I wish you good luck and I happily anticipate your departure as you find a shiny palace for your queen to be.
On a related note: As Goforth moves out and enters into the marriage shackles of infinite despair he must now step down as official Sheet Spokes Model. So to take his place (as well as blame) we want to fully welcome new Sheet Spokesmodel 2.0 Matt Gushka. Who like myself, would rather pay Lunch rent every month then ask his parents for a 10% down payment.
For more information on the first time home buyers tax credit check out the California Association of Realtors website at www.car.org.