July 06--Among the slew of new state laws that took effect last week is one that aims to make it easier for home-buying newbies to scrape together down payments.
HB331 lets Virginians set aside up to $50,000 in credit union or bank accounts, mutual funds or other financial products and avoid state taxes on as much as $100,000 in investment earnings -- provided the money in the account goes toward a first-time home purchase. Parents or grandparents can set up plans on behalf of would-be buyers.
The state's real estate and financial services lobbies pushed for the legislation. Tighter lending requirements and mounting student-loan debts have made it tougher for many young people to come up with down payments and closing costs. That's played a big part in the anemic housing market recovery in Virginia and other states over the past few years.
California, Connecticut and Montana have similar initiatives, as does Washington, D.C.
Andrew Sinclair, government affairs director for the Hampton Roads Realtors Association, said Virginia's home-buyer savings plan law is more flexible -- permitting just about any type of financial instrument as the savings vehicle. "We really tried to streamline it to allow a much broader use," he said.
One caution: Using the investment earnings toward something other than a home purchase down payment or closing costs could trigger the state tax, plus a 5 percent penalty. Click here for more information.
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