Down payment for buying a home

Courtesy of Ken Doss' (Fantastic loan officer with Community West Bank) newsletter:

Mortgage News Home Buyer's Down Payment FAQs
With today's combination of lower home prices, some of the lowest interest rates the industry has ever offered, and the $8000 tax incentive for first-time buyers, buying a home has never been so attractive. The only real hurdle left for many Americans is coming up with a down payment. With this in mind, we've put together some of the most frequently asked questions we get about down payments in today's market. Q. Are there any no-down payment programs left? Yes. While it's true that most of the popular no-down payment programs disappeared in the wake of the subprime mortgage collapse, there are still two longstanding government-backed programs that offer mortgages with no down payment: the USDA Rural Development Program and the VA Loan Program. A USDA Guaranteed Loan is a government-insured, 100% purchase loan. This means there is no down payment required if you – and the house you intend to buy – qualify for the program. Not all areas qualify, but you'd be surprised at how many neighborhoods in your area do. There are income and other limitations, but if coming up with a down payment is challenging, you might want to consider this program. If you or your spouse is a military veteran, you may qualify for a 100% financed loan from the US Department of Veterans Affairs. More than 29 million veterans and service personnel qualify for this service benefit. Give us a call to find out if you're one of them. Q. Are there any other government-insured programs that can help someone struggling with a down payment? Yes. In 1965, the federal government created the FHA loan programs to encourage homeownership throughout the country. FHA-insured mortgages offer many benefits, including a minimum down payment of 3.5%. FHA-insured loans have grown in popularity recently due to the seller's ability to pay closing costs up to 6% and a temporary increase in loan limits up to $729,750 in certain high-cost areas, which allows more potential buyers to utilize this program. Q. May I use a gift from family members as part of my down payment? Yes. In many cases, immediate family can provide monetary gifts to be used as a down payment. There are restrictions of course, and strict documentation will be required, but we will gladly walk you through the finer details of this process. Be sure to mention this option when you're filling out an application with us. Q. May I use funds from my IRA for my down payment? Yes. First-time home buyers can use funds from an IRA under certain circumstances for a down payment. The rules regarding this option, however, can be complicated, especially with a Roth IRA, and it's important to understand any and all tax implications before tapping into these accounts. Please talk to your tax professional before making any decisions. If you don't have one, we'll gladly refer you to one we work with on a regular basis. Q. May I use the $8,000 tax credit as my down payment? No. At the time of the writing of this article, qualified first-time home buyers do not have direct access to the $8,000 credit to use as a down payment. In May, HUD officials made an announcement to the contrary, but statements backing the announcement were quickly withdrawn from the HUD website. This doesn't mean that HUD and lawmakers will not allow this in the future. We're following this issue closely and will let you know if anything changes. Just keep reading our newsletters and other materials we send to you or give us a call and we'll let you know if any progress has been made.

Home Insurance in Santa Barbara

I just got off the phone with Paul Cashman at Statefarm here in Santa Barbara. He is an established and well-respected insurance agent who also is the president of the Fire Safe Council here in town.

While the insurance community is still figuring out how to address some of the recent fires in Santa Barbara (Above Cathedral Oaks, Foothill, APS, East Valley, etc), they are still offering insurance packages. If the homes in those areas meet some basic requirements (like not having a wood-shake roof, being with 5 miles of a fire station, etc), home insurance costs would be the same in those areas as on the Mesa, downtown, or other areas of Santa Barbara. While insurance rates will obviously differ based on the characteristics of the house, how much coverage you are getting, etc, here are some ballparks:

$500k of coverage: $75-100/mo
$1,000,000 of coverage: $150-200/mo
$2,000,000 of coverage; $300-400/mo.

Those numbers are fairly linear and "scalable", but be sure to speak to your insurance agent about potential discounts like:
1) Packaging difference types of insurance, i.e getting your car insurance as well as home insurance with Statefarm or similar insurance company (could reduce your home insurance rate as much as 20%+
2) Purchasing a newer home, or a home with emergency response/fire safe features (could reduce your home insurance rates by 15-20%)

Most insurance agents, if they have an emphasis on customer service, will also take a trip out to the property you are considering buying so they go over the full insurance situation with you before purchase. I hope that is helpful. Again, this just general information, ballparks, and generals, so be sure to confirm this with your insurance agent.