You should consult with a financial or tax planner before purchasing real estate. Everyone's tax situation is different. In the next paragraph, I will explain how the tax system can benefit you, but you should definitely speak to a certified professional before buying a home.
There are significant tax benefits that go along with home ownership. Both the federal government and the State of California allow you to deduct the interest you pay (not payments on principal) on a home loan. If you are paying $1700 monthly in interest, that's $20,400 per year. If you are in the 20% tax bracket, that's $4,080 per year - $340 per month - the government will return to you. And, the property tax that you pay is also tax deductible. This will amount to hundreds of dollars per month as well, all of which is deductible against income taxes.
How do you get your hands on this money? At the end of the year when you file, you can deduct the interest and property taxes you have paid from your gross income, thereby lowering your taxable income and thus the tax you pay. Or, better yet, you can modify your W-9 tax form to take more exemptions. This will result in less tax taken out of your paycheck, making each paycheck larger to help you pay your mortgage month to month. Again, consult a tax professional.
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