Bay Area Home Purchase Incentives, The Good & Bad

This San Francisco Chronicle story on home purchase incentives offered by Bay Area cities has been sent to me a few times today. This is a good piece reviewing options and highlighting some success stories.

But people should note that these city programs pose a some challenges. To use San Francisco programs as an example, the biggest challenge is the formula they use to calculate income for down payment assistance, teacher and other programs often results in disqualified borrowers.

On these programs, they have a tight debt-to-income ratio range a borrower has to fall within (can’t make too little but also can’t make too much), and then they also take year-to-date income and annualize it to arrive at a monthly qualifying number. This can push out borrowers like teachers who sign on for after-school or summer-school programs because that extra income is paid only at certain parts of the year, and if the income is calculated at that time using a year-to-date figure, the resulting monthly will be too high. So in getting extra work to earn more and afford a home, the teacher gets disqualified.

For this example specifically, educators looking to buy a home in 2010 should do it early in the year before too much year-to-date income is posted to their paycheck.