California program will let you borrow down payment at 0% interest
abc7.com
abc7.com
80% of that is $104,692
According to https://www.redfin.com/city/17420/CA/San-Jose/housing-market median home price in San Jose is $1.4M
10% of that is $140,000
So, CA will give $140K free money, to each household in San Jose area making less than $104,692. That is more than a year's salary for free, paid by other tax payers. I'm not sure how I feel about that, but I can say that I'm not very enthusiastic about it.
Will there be Fed and CA income tax on it?
Lol, that's the main reason we are balking at it. It's basically a free cash handout. The article doesn't even say it has to be a first home so you could probably take advantage of it and move every 5 years and get what is effectively a free years wage paid for by uncle sam.
[0] https://www.calhfa.ca.gov/homebuyer/borrower.htm#first-time
I think you’d make more money just holding onto the house as I think the appreciation over three years would be higher than the 10% loan.
My father lobes to bitch and moan about socialism and taxation==theft, safety nets are for the lazy (though he definitely used them when he needed them when I was young!), blah blah. Yet he was first in line for the PP 'loan' though he has no real employees but himself. Something about 'money left on the table' if he didn't.
Sometimes things are so bad people need help. When businesses fail they don't become homeless, destitute, and possibly dead.
Why do we do so much more to protect predatory evil companies than our own brothers/sisters.
Surely this has to be inflationary on prices.
If I compare to the Australian market this would be massive, but I’m led to believe US housing is a lot more affordable, and imagine the loans that would be offered to moderate to lower income earners would also be lower, so it might be akin to first home buyer grants we’ve had for $20k ish.
I wonder what parts of the state (if any) have avaliable housing stock that's cheap enough for the loan recipients that meet the income requirents to make monthly payments.
Maybe somone that's independently wealthy and not working could use this program?
Secondly, it will be abused as all programs are. We’ll be here 12-18 months after this goes live to lament how rich people abused this program. If you think it won’t happen you’re grossly underestimating the tax planning and scheming skills of wealthy advisors.
Finally, this really doesn’t even seem to come close to helping the median earner afford a median house. We’re talking about income limits of around $100k and 7-digit house prices. Free down payment is nice, but what about the monthly payment burden??
My prediction is that a large percentage of people using this program will be rich people with clever accountants.
The problem is that by the time that happens the people responsible for this bandaid driven policy will have long since cashed out to Idaho or wherever and not bear the consequences.
So it may be impossible for an honest person to meet this. Maybe if someone does this right before getting married and then they have a wealthy spouse who can help pay the note.
The monthly p&i on a $900k loan is about $5k at 5%/30 years. So a $100k income can’t make that without some additional income sources.
That last caveat is why I am against this.
They are giving/loaning (PO-tat-O vs PO-ta-TO) $140k to people who have not been able to save up that amount, and may not be able to pay it back in 5 years. There are roughly 669k non-senior adults in San Jose. We know half of them are under $130k a year (~330k). Let's say 2/3 of those are under $104k (~220k). Most of them probably do not own a home (this is an assumption and could be faulty). Let's say half use this program (110k) and half of that use it again each year as new homebuyers reach adulthood. That's $11.44b the first year and ~6b every subsequent year. San Jose's entire operating budget for 2020-2021 was $4.6b.
Forget that this is essentially an extreme example of sub-prime lending if you look at it as a loan. This does not seem to be sustainable in any way, or expandable across CA.
Canada did this with 40-year mortgages (effectively lowering the monthly payment) and what happened? House prices shot up.
This is just feeding more and more money into the housing machine.
Now they've replaced it with a tax-free savings account for first-time buyers.
Nothing like subsidizing high prices so they go even higher.
Similar to student loans where the problem is super high costs. But instead of addressing that, there’s short term things like zero interest student loans and forgiveness. And I think those will drive prices up more.
Medical analogy is a patient is bleeding out from a wound and healthcare is scrambling to keep up with blood transfusions.
This page describes the requirements for the program, which does have some limitations -- importantly this only applies for 'first-time homebuyers'.
One thing that this doesn't note is if the income level has to be sustained through the period of the loan, or if it's only on approval. Only needing to have a low income on application to the loan could open a lot of avenues for gaming this.