Buy a Home in Grass Valley, California, Yes, You, I'm Not Kidding

I just bought a home in Grass Valley, putting my dollars where my mouth is, or my advice is, whatever. Earlier today I completed my annual report of homes sold in this area, a year-to-year report comparing 2010 to 2009.

Here's a link to that report: http://goldenhillsrealestate.com/2011/01/16/annual-real-estate-report/

(Yes, you will be leaving this page to go to my other blog to read the report. Don't get lost and don't scold me.)

Are you back? Right. Grass Valley is the place. Let me do a calculation for you.

• Assume you can find a modest home in Grass Valley for $150,000. You can. You could also do what I did, buy a fixer at $109,000 and put $40,000 into it. Believe me, when I'm done, that little place is going to be darling. So, $150,000, either way.

• Assume that you can secure a FHA* or USDA* loan with 3% down ($4500).

• Assume closing and loan costs of $5000. So, you need about $10,000 cash in hand to get into the game.

• Assume an interest rate of 4.75% on a 30 year fixed-interest, fully amortized loan..

• Assume home insurance of $900 per year.

• Assume property tax of 1.5% per year ($2250)

• Assume PMI (private mortgage insurance) at 0.52%

What is your total monthly payment with everything (mortgage, tax, insurance, PMI) included?

$1084.55

Don't forget this very important element of the equation: in the first year you will pay $6294.98 of your annual bill in interest on your mortgage. That entire amount is a tax adjustment to gross income. This adjustment is typically a savings of at least 33% or $2077.34 in real dollars, or about $173.11 a month.** Subtract that from your gross monthly payment of $1084.55, and your net monthly payment is $911.44.

*If you are buying the home as an investment rather than a primary residence, you will need a different kind of loan and pay a bit higher interest rate.

**The actual savings depend on your income, filing status and other tax elements that need to be calculated by your CPA or expert tax preparer--not me. It might be more than 33% or less.