Archive for the 'Finance and Lending' Category
I am very pleased to welcome Otto Kobler of Maximum Mortgage as a guest contributor to Wine Country and Horses. There are so many things going on the in the world of lending, and so many opportunities and challenges that I welcome Otto’s expertise! From jumbo loans to FHA loans for first time buyers and everything in between, Otto has years of knowledge and experience to offer.
Plus he fits the wine country mold–besides being the branch manager of Maximum Mortgage in Santa Rosa and very active in the local real estate community, he and his wife grow highly ranked Syrah grapes on five acres in Green Valley between Graton and Forestville, also known as the Russian River Appellation.
There are lots of lending topics to discuss. Today Otto is going to talk about financing for country property. It may not be as hard as you think.
Often when I talk to people interested in buying country property in Sonoma County, their first question is, “Can I get a loan?”. The perception is that it is so difficult to get a mortgage today, that anything other than a standard subdivision home is not financeable.
Here’s the reality. There are plenty of country properties getting financed today. Horse properties, properties with vineyards and vacation/second homes, they are being bought and sold and yes, financed.
Just recently, a couple from San Francisco wanted to buy a country property as a weekend home. The home was on half an acre and dated. It definitely needed some updating. Interestingly, they were renting a home in San Francisco, so, as first time buyers, they were able to qualify for a low down payment FHA home loan that also provided funds for the updating of their new home.
Financing for horse and vineyard properties had been tougher to get until recently. The reason being is that many lenders were equating the horse/vineyard aspects of the property to commercial activity. Now, it is true that either a vineyard or a horse property can be a commercial venture. But the reality is that smaller vineyards produce very little extra income. Horse properties are similar. It’s much more about the joy of the adventure rather than a big money maker. The grapes from my property go to a small boutique winery. My family name is on the label and the wine has been well received by wine critics. That’s small vineyard success.
In any case, today’s residential mortgage lenders do not want to lend to commercial properties or properties that are commercial in nature. That reluctance to lend has changed recently, so unless it is a massive vineyard or horse facility, good low interest rate financing is available.
To find out what loans are available to purchase your country property please email [email protected] or call 707-694-6604.
Otilia and I have seen several articles that are claiming double tax credits for buyers who go into contract by April 30, 2010. Kathleen Pender in the San Francisco Chronicle last week detailed how some home buyer’s were tweaking their purchase timeline to take advantage of both the federal tax credit and the recently revised state home buyers’ tax credits mentioned here a couple of days ago.
The federal government currently is offering a credit of up to $8,000.00 if a buyer has an accepted purchase contract by April 30th and closes escrow by the end of June. The state of California is offering a $10,000 credit given over 3 years (BIG NOTE: This credit only can be taken against your state tax liability–if you don’t have $3,300 dollars worth each year, you don’t get the full credit.)
The big question is can buyers get the state and the federal credit? The state credit becomes available May 1st while you must be in escrow no later than April 30 to take advantage of the expiring federal credit. Some people seem to think that by closing escrow on a purchase after May 1st, but initiated before close of business April 30th, you can double dip on these tax credits.
However, when each of us read the bill it seems that the authors did not intend buyers to get both credits. ftb.ca.gov/forms/2009/09_3528.pdf This has caused a fair amount of confusion for potential buyers. From yesterday, when we started working on this post, to today, the California State Franchise Tax Board has provided further clarification on their home page.
Tax Credits for New Home Purchase / First-Time Buyer
The New Home / First-Time Buyer Credits are available only for purchases that close escrow on or after May 1, 2010.
It would appear from reading this statement that it may be possible for a limited number of buyers to qualify for both credits. Not only would the terms and timelines of your purchase need to be perfect, but you would need to meet differing criteria for eligibility for each program as they are constructed very differently.
Otilia called the Franchise Tax Board and they recommended that each buyer call to confirm if they are eligible for the state credit. As always we recommend that you consult your CPA for more clarification. They may need to call the state too! Please feel free to email or call us with any further questions!
(NOTE: Today I welcome Otilia Sullivan of Princeton Capital, as a first time contributor to Wine Country and Horses. Otilia has provided sage mortgage advice to many of my clients and I trust her ability to find the right mortgage for my clients in a timely manner. She is extremely knowledgeable about the mortgage markets and what it takes to qualify for a home, or to refinance. Since there are so many changes on nearly a daily basis, please don’t hesitate to contact us with any questions you might have.)
Don’t forget that the end of the federal home buyer tax credit is in sight. This credit provides $8,000 to first time home buyers. First time buyers are defined as those who have not owned a home in the previous 3 years, so the government’s definition might be different than yours. The credit also provides $6,500 to current home owners.
We have heard nothing about any extensions. Borrowers need to be in contract by April 30 and close by June 30. Click here to find the details of the federal tax credit, or ask your CPA if you qualify.
Also the Federal Housing Administration, or FHA upfront Mortgage Insurance Premium (MIP) is increasing from 1.75% to 2.25% with case numbers issued after April 5. Many first time buyers in the North Bay are using FHA loans since the credit restrictions are not so steep, and the down payment can be as low as 3.5%.
So if your loan is $200,000.00, your MIP would have been $3,500.00 last through April 5th. From today on it will change to $4,500.00. This is not an out of pocket cost. It is rolled into the loan payments, but nonetheless it is an expense of the loan.
There is a lot of talk about how people can take advantage of the newly revised $10,000 California State Homebuyer Tax Credit. We will discuss the pros and cons in our next post! If you can’t wait till then, here is a link to the California State Franchise Tax Board’s latest memo on the revised credits.
I have got to give credit where credit is due..Krisstina Wise is an Austin real estate broker, head of the Good Life Team. Earlier today she followed me on Twitter. I decided to check out the website of her self-described “hip” Austin real estate brokerage. I found it engaging, well-thought out, informative and professionally done. They use video judiciously and well and have some good tools for buyers and sellers. Their blog had a post on the new federal tax credit for first time home buyers. It wasn’t the feds who coined the “Property Virgin”, nor did I, so I MUST give credit where credit is due. Thanks to Krisstina and the Good Life team. Here is a bit of their post:
No joke. The 8,000 reasons to buy today are quantified in terms of real dollars â€” $8,000! Thatâ€™s right. As part of the stimulus package, Uncle Sam is offering â€œFirst-Time Homebuyersâ€ (Letâ€™s call you Property Virgins) up to $8,000 in the form of a tax credit for purchasing a home in 2009.
If you have been on the fence or if you are considering buying a home in the next year or so â€“ you must learn about the American Recovery and Reinvestment Act of 2009 â€“ The First-time homebuyer tax credit. This is a special opportunity that enables you, as a Virgin, to be one of the few who can BENEFIT from this crazy economy.
What is it? As part of the Stimulus package, a Property Virgin who purchases in 2009 is eligible to receive up to 10% of the cost of the house â€“up to $8,000â€“ in the form of a tax credit on their tax return (did we just use stimulus and virgin in the same sentence?). A tax credit means that the $8,000 is a dollar for dollar reduction in what you owe in taxes. This means that if you owed $8,000 in income taxes and you received the $8,000 tax credit, you would owe nothing to the IRS. If you are owed a refund of $1,000, after the credit you would receive a refund of $9,000! And no, you donâ€™t have to pay it back if you live in your new home for at least 3 years.
Actually both the term property virgin and first time buyer are not really accurate. Eligibility for this tax break really focuses on your property ownership status over the past three years, so you may be eligible even if you are not a true property virgin. There are some income restrictions and other guidelines here. This new incentive differs from the one offered last summer in that it is not repayable unless you move out of the home in less than 3 years.
I am not claiming to offer tax advice here, or in any venue for that matter, so be sure to talk to you tax professional to understand the ins and outs of this tax credit and how it might apply to you. And there is a sense of urgency as well. The credit, which can be claimed on your 2008 OR 2009 federal return, applies to homes purchased between January 1, 2009 and December 1, 2009, so maybe it is time to get off the fence! And please contact us if we can help you to find your first home!
Kudos to blog buddy Gretchen Merrick, writing from the South Bay, for calling my attention to this wonderful animation which explains the origins of the current credit crisis in clear and simple fashion. Her post contains a link to an interview on Terry Gross’s Fresh Air Show on National Public Radio, which offers more detail. The Credit Crisis Simplified | South County Real Estate Today
I thought I would offer the video here. I love this form of visual communication when done well!
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