The House
MONEY MEETS TAX · EPISODE 04
Anaheim · March 2024
Money & Tax in this episode
First home purchase · Down payment and cash reserves · Mortgage interest and property taxes
Daisy sent Evan the listing at 8:12 on a Thursday morning.
No message.
Just a link.
Evan opened it between meetings.
$699,000
Three bedrooms. Two bathrooms. A little over 1,500 square feet.
Anaheim.
He scrolled through the photos.
The kitchen was old.
The bathrooms were older.
The backyard had more concrete than grass, and one of the bedroom photos had clearly benefited from the camera angle.
He texted Daisy.
Kitchen is rough.
Her reply came almost immediately.
I know.
Bathrooms too.
I know.
Evan waited.
So why did you send it?
Three dots appeared.
Look at the floor plan.
He went back to the listing.
They scheduled a showing for Saturday.
The house looked smaller in person.
Evan said so before they were fully through the front door.
Daisy was already walking toward the windows.
The living room faced the backyard, and the afternoon light came through two large panes that looked original to the house.
The floors creaked in a few places.
The kitchen cabinets had been painted white at some point, not especially well.
Daisy opened one.
“It’s solid.”
“It’s crooked.”
“The door is crooked.”
“That seems related.”
She moved into the dining room.
Evan followed with the listing open on his phone.
The agent talked about the neighborhood.
Daisy stood in front of the wall between the kitchen and dining area.
Evan checked the property-tax estimate.
Outside, there was a small patch of grass near the fence and an orange tree that looked healthier than anything else on the property.
Daisy walked to the edge of the patio.
“I like it.”
Evan looked up at the roof.
“You like the house?”
“I like parts of it.”
“That’s different.”
“I know.”
She looked back through the sliding door.
“The kitchen could be really good.”
“How much does ‘could be’ cost?”
Daisy smiled.
“I knew that was coming.”
They had been talking about buying for almost a year.
Not urgently.
Their Los Angeles apartment was fine. The rent had gone up, but not enough to force them out. They liked the neighborhood. Their commutes worked.
Buying was something they were going to do eventually.
Then eventually started showing up as saved listings on Daisy’s laptop.
That night, Evan opened a spreadsheet.
Daisy was on the couch watching television.
“What’s the payment?”
“I’m working on it.”
“That means bad?”
“That means I’m working on it.”
The lender had already sent them a rough estimate.
With 10% down, they would need about $69,900 for the down payment, plus closing costs.
The loan would be a little over $629,000.
And because they were putting down less than 20% on a conventional mortgage, the estimate included private mortgage insurance.
About $240 a month.
Evan had circled that number.
Daisy noticed.
“What’s PMI again?”
“Insurance.”
“For us?”
“For the lender.”
She looked at him.
“We pay for insurance for the lender?”
“Basically.”
“That’s nice of us.”
“It’s because we’re not putting twenty percent down.”
“So what happens if we put twenty percent down?”
“No PMI. Smaller loan. Lower payment.”
“Okay.”
Evan changed the spreadsheet.
Twenty percent was $139,800.
Before closing costs.
Daisy looked at the number.
“We don’t have that.”
“Not comfortably.”
Getting there would mean waiting longer, saving more, and probably selling investments.
Evan preferred twenty percent anyway.
It was cleaner.
No PMI.
Less debt.
Lower monthly payment.
The sort of answer that looked better in every column until he added time.
Daisy pointed at the screen.
“So the choice is ten percent now or wait.”
“Pretty much.”
“How long?”
“I don’t know. Maybe another year.”
“And this house?”
“Probably not this house.”
She nodded.
That was the part the spreadsheet couldn’t keep still.
The house might sell.
Rates might change.
Prices might change.
They might find something better.
Or they might spend another year looking at listings and have the same conversation with larger numbers.
Evan changed one assumption.
Then another.
Daisy watched for a while.
“How much cash would we have left if we put ten percent down?”
He showed her.
“And twenty?”
“We’d need more cash first.”
“So why are you comparing them like we can choose either one today?”
Evan looked at the spreadsheet.
“I want to know what twenty percent would save us.”
“Okay.”
“And whether waiting makes sense.”
“Okay.”
She stood up.
“For this house, I want money left after we buy it.”
Evan looked at her.
“Because of the kitchen?”
“The kitchen. The windows. The floors.”
“The floors are fine.”
“One of them moved when you stepped on it.”
“It creaked.”
Daisy picked up her water.
“Keep some cash.”
The next morning, Evan opened the spreadsheet again.
He deleted two columns.
He kept the 10% scenario.
The PMI still bothered him.
So did the higher loan balance.
But the cash left after closing looked like something they could live with.
Not comfortably enough to ignore the house.
Comfortably enough to own it.
They made an offer the following day.
The next week was mostly email.
Updated bank statements.
Disclosures.
Questions from the lender.
Documents Evan was fairly sure he had already sent once.
There was another offer on the house.
Then a counter.
Then a call with their agent.
Eventually, they had a deal.
Evan spent more time with the lender’s estimate than he wanted to admit.
The total monthly cost was a little over five thousand dollars once the mortgage, estimated property taxes, homeowners insurance, and PMI were included.
Daisy found him looking at it one evening.
“You’ve been on that page for ten minutes.”
“I’m looking at the interest.”
“You knew the rate.”
“Knowing the rate and seeing the dollars are different.”
She sat beside him.
The rate was close to seven percent.
Neither of them liked it.
Daisy pointed at the property-tax line.
“Do we deduct that?”
“Maybe. There are limits.”
“And the interest?”
“Potentially.”
“And the PMI?”
Evan looked it up.
“No.”
Daisy leaned back.
“So taxes are not rescuing this.”
“No.”
“Good to know.”
“I wasn’t counting on them to.”
She looked at him.
“You checked.”
“Of course I checked.”
The inspection was three days later.
The report was long.
Nothing catastrophic.
Nothing free either.
The HVAC system was old.
Some plumbing needed attention.
There were electrical items.
A section of the roof needed to be watched.
The inspector found moisture under the kitchen sink.
Daisy looked at Evan when he said that.
She didn’t say anything.
She didn’t need to.
That evening, Evan read the report again.
“So?”
Daisy was sitting across from him.
“This house needs work.”
“We knew that.”
“We knew it was old.”
“That usually comes with work.”
He flipped a page.
“We could still walk.”
Daisy nodded.
“We could.”
Neither of them said anything for a while.
Evan looked at the photos attached to the report.
He had imagined their first house differently.
Cleaner.
More finished.
Fewer highlighted sentences from an inspector.
Daisy leaned over and pointed to a photo of the kitchen.
“That wall.”
“What about it?”
“If we ever redo this, I’d open it.”
Evan looked at her.
“We haven’t bought the house and you’re removing walls.”
“Not immediately.”
“That helps.”
She smiled.
He looked at the report again.
Then at the cash they would still have after closing.
The number mattered more now than it had a week earlier.
They moved forward.
Closing was on a Friday.
By late afternoon, they were standing in the empty living room with two sets of keys and nowhere to sit.
Daisy walked toward the kitchen.
Evan checked the front door.
Then checked it again.
Daisy came back.
“We own a house.”
Evan looked around.
“Most of one.”
She laughed.
“You’re not going to do that every time, are you?”
“What?”
“Remind me about the mortgage.”
“I didn’t say mortgage.”
“You said ‘most of one.’”
Evan put the keys in his pocket.
Daisy walked toward the windows.
The same afternoon light filled the room.
She looked back at him.
“Still think the kitchen is rough?”
“Yes.”
“Good.”
“Why is that good?”
“Because I have plans.”
Evan looked toward the kitchen.
“How expensive are the plans?”
Daisy opened the back door.
“We just got the keys, Evan.”
“That wasn’t an answer.”
“I know.”
The Tax Behind the Story
Putting less than 20% down on a conventional mortgage often means paying private mortgage insurance, or PMI. PMI protects the lender rather than the homeowner and adds to the cost of financing the house. Evan and Daisy’s approximately $240 monthly PMI is a lender estimate for their fictional loan, not a fixed rate that applies to every borrower.
For 2024, mortgage insurance premiums were no longer deductible as an itemized deduction. Qualified mortgage interest could still potentially be deducted if Evan and Daisy itemized, and the general acquisition-debt limit for a post-2017 mortgage was $750,000. Their approximately $629,000 mortgage is below that limit.
Real property taxes may also be deductible when itemizing, but in 2024 the federal deduction for state and local taxes—including state income or sales taxes and real property taxes—was generally capped at a combined $10,000 for married taxpayers filing jointly.
The tax deductions matter.
But they do not make the mortgage, PMI, repairs, or cash needed at closing disappear.
For Evan and Daisy, the bigger decision is how much cash to put into the house on day one—and how much to keep for day two.
Want the tax rules behind the story?
Buying a Home: What Actually Changes on Your Tax Return?
A deeper look at mortgage interest, property taxes, PMI, points and closing costs, itemizing versus the standard deduction, home basis, and the records homeowners should keep from the day they buy.
Next Episode
Nothing Major
The inspection report had warned them that an older house would need work.
It hadn’t said everything would wait its turn.