Ryan Blanco San Diego real estate agent

Interest Rate Vs. APR – What Is The Difference?

Understanding the difference between annual percentage rate (APR) and interest rate could save you thousands of dollars on your mortgage. But if you’re like most homebuyers, you probably don’t know that the interest rate and the APR measure 2 important, but different, costs associated with your home loan.

Your interest rate is the cost you will pay to borrow money. It only includes the interest percentage you will be charged for borrowing the money, and it does not include any other fees you might be required to pay on the loan—like the origination fees, mortgage broker fees, closing fees, documentation fees, etc.  The APR of a loan gives you a more detailed idea of how much you’ll pay when you borrow money for a loan. Basically, it’s the total price of borrowing money expressed in terms of an interest rate. That means it includes the cost of interest plus additional fees. They are always expressed as a percentage.

Video: How To Pick A Lender

Why have both?

The main difference is that the interest rate calculates what your actual monthly payment will be. The APR calculates the total cost of the loan. A consumer can use one or both to make apples-to-apples comparisons when shopping for loans.”

How To Pick The Right Mortgage Loan

For example, a 30-year fixed rate loan with a 4% rate will have a lower monthly payment than a loan with a 5% rate. Likewise, the total cost of a loan with a 5% APR will be less than one with a 5% APR. Separately, the interest rate and the APR have their limits. But together, borrowers should be able to use both figures to determine their monthly payments, as well as their total costs. The trick is to understand the interplay between the 2 figures. If you are only focused on getting the lowest monthly payment, they should focus on the interest rate. If you focused on the total cost of the loan, then they can use the APR is your best comparison tool.

Mortgage intrest rate vs. APR for San Diego homebuyers

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Should I Buy Down The Rate?

Points, also known as “discount points,” are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can, in turn, lower your monthly mortgage payments.

A point is equal to 1% of your mortgage amount (or $1,000 for every $100,000). You’re essentially paying some interest up front in exchange for a lower interest rate over the life of your loan.

The general rule is that the longer you plan to own the home, the more you might benefit from buying points, because you would realize more interest savings over the life of the loan. When you consider whether points will be right for you, it helps to run the numbers. Here’s an example:

discount points in a mortgage loan

CLICK TO ENLARGE – Source: Bank Of America

 

Ryan Blanco-Realtor-San Diego Real Estate BlogAbout Me: I am a full time agent and I dedicate 100% of myself and my time to my valued clients in addition to the San Diego communities that I serve. It is imperative that I continuously evolve with local and national trends in addition to always looking ahead of the industry. It is a must to always provide the best service to my clients, their families and friends.

619.384.2248
Ryan@RyanYourRealtor.com

 

 

San Diego Housing Market Update-March 2017 Sales

San Diego Housing market update for home salesBelow is my monthly analysis of the San Diego housing market. It will show many different metrics to help us get an accurate “feel” for what is happening in our local real estate market!

We can comfortably consider the first quarter to have been a good start for
residential real estate in 2017. There was certainly plenty to worry over when
the year began. Aside from new national leadership in Washington, DC, and
the policy shifts that can occur during such transitions, there was also the
matter of continuous low housing supply, steadily rising mortgage rates and
ever-increasing home prices. Nevertheless, sales have held their own in year-
over-year comparisons and should improve during the busiest months of the
real estate sales cycle.

Activity Snapshot:

One-year change in closed sales

One-year change in median sales price

One-year change in homes for sale

-2.7%

+8.1%

-30.0%

Closed Sales decreased 1.2 percent for Detached homes and 5.4 percent for Attached homes. Pending Sales increased 5.5 percent for Detached homes and 4.8 percent for Attached homes. Inventory decreased 28.7 percent for Detached homes and 33.4 percent for Attached homes. The Median Sales Price was up 5.0 percent to $575,030 for Detached homes and 8.5 percent to $390,500 for Attached homes. Days on Market decreased 13.5 percent for Detached homes and 16.7 percent for Attached homes. Supply decreased 32.0 percent for Detached homes and 33.3 percent for Attached homes.

The U.S. economy has improved for several quarters in a row, which has helped wage growth and retail consumption increase in year-over-year comparisons. Couple that with an unemployment rate that has been holding steady or dropping both nationally and in many localities, and consumer confidence is on the rise. As the economy improves, home sales tend to go up. It isn’t much more complex than that right now. Rising mortgage rates could slow growth eventually, but rate increases should be thought of as little more than a byproduct of a stronger economy and stronger demand.

 

According to Bankrate.com, interest rates have continued to stay near the 4% level, despite the Federal Reserve Bank finally raising the fed funds rate to .75%. They are currently at 3.98% for a 30-year fixed loan (they were at 4.11% at this time last month). This is well below the historical average of 6% or so, which is great for home buyers. To calculate your potential mortgage payment or see what you can afford, go HERE.

 

The San Diego Association of Realtors analyzes housing market data for San Diego county every month. Below is their monthly report for home prices. The figures represents ALL property types.

San Diego Housing Market Update for March 2017 sales

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Ryan Blanco-Realtor-San Diego Real Estate BlogAbout Me: I am a full time agent and I dedicate 100% of myself and my time to my valued clients in addition to the San Diego communities that I serve. It is imperative that I continuously evolve with local and national trends in addition to always looking ahead of the industry. It is a must to always provide the best service to my clients, their families and friends.

619.384.2248
Ryan@RyanYourRealtor.com

 

 

5 Cheap Home Improvements Before Selling Your Home!

Before selling your home, knowing what upgrades have the best payoff is important. Of course, there are countless ways to spend money on a property, from knocking down walls to replacing floors to adding new windows, so thinking through them can be tough. How are you supposed to choose? Where should you start? To help make the decision easier, here’s a look at 5 of the most high-impact and cheap home improvements that can increase your home’s value. Whether you want to invest in your property for the long haul— or for a fast sale— here are some good places to start.

  1. Replace the Front Door: Believe it or not, replacing your front entry with a steel door is one of the best investments (in cheap home inprovement upgrades when selling-front doorterms of resale value) you can make in your home. The front door is a home buyer’s first impression walking into your home, and the last thing they see when exiting. It’s known as the best cost-versus-value upgrade for your home. And since swapping out the front door can cost less than $1,000, it’s not an unbearable change for the pocketbook, either.
  2. Paint: Fresh paint makes a home feel fresh and new— exactly what buyers like. Choose a neutral color that is calm and soothing and paint fresh coats throughout the main living areas and bedrooms. This upgrade isn’t too pricey, especially if you do the work yourself, yet it will go a long way toward making your home more attractive. Even if you aren’t planning to move any time soon, fresh paint can give you a bright and new feeling to your home.
  3. Strategic Kitchen Upgrades: In today’s real estate markets, kitchens are hot. Buyers want beautiful kitchens and are often willing to pay for it. To make upgrading your cooking space an affordable improvement, focus on budget-friendly changes like replacing the sink faucet, upgrading cabinet hardware, updating old light fixtures and finding low-cost ways to make the entire kitchen feel clean and cohesive. Another tip is that buyers like appliances to match.
  4. Bathrooms: Anything you can do to modernize your bathrooms is a step in the right direction, value-wise. So rather than spending tens of thousands of dollars in full remodels, try instead to make small but significant changes like swapping out a cabinet sink with a pedestal model, or re-grouting the aging tile. Other ideas: replace the toilet seat, lay new floors over old ones or replace tired showers and tubs with upgraded options.

cheap home improvement upgrades when selling-curb appeal5. Get Out the Green Thumb: Curb appeal is important because it sets the first impression of your home to potential buyers. Take proper care of your landscaping by mowing the lawn, tending to flowers & shrubs, and taking care of your walkways. For small improvements with a lot of impact potential, consider adding new sod, new shrubs or colorful plants and flowers. Even if you have to pay a landscaper to make some changes, the payoff can be well worth it.

 

By making some simple, smart improvements to your home can reap big rewards, now and in the future. When the day comes that you decide to sell, use the five ideas listed above as a starting place for where it’s worth spending your hard-earned money. It may make all the difference in how you enjoy your home, not to mention how quickly it can go off the market!

Find Out How Much Your Home Is Worth Now!

Ryan Blanco-Realtor-San Diego Real Estate Blog

About Me: I am a full time agent and I dedicate 100% of myself and my time to my valued clients in addition to the San Diego communities that I serve. It is imperative that I continuously evolve with local and national trends in addition to always looking ahead of the industry. It is a must to always provide the best service to my clients, their families and friends.

619.384.2248
Ryan@RyanYourRealtor.com

 

 

What Will Be My Homebuyer Closing Costs?

 

The cost to buy a house depends on lots of things, including the type of loan, the type of property, the final sales price, and even your credit rating.

Cost to Buy a House: Upfront Out-of-Pocket Costs

Earnest Money Deposit (EMD)Earnest money depoit to buy a home in san diego

As soon as the seller accepts your offer to buy a home, you will need to submit an Earnest Money Deposit (EMD) to the escrow officer.  This shows that you are a serious buyer. You have money, and you are committed to buying this house.  You specify the EMD amount in your original offer to the seller, which averages around 1% of the offer price. These funds are held by the escrow company in their trust account.

Home Inspection

As soon as you open escrow, you can hire a home inspector to check for any issues. The home inspection fee depends on the size and type of property, and the inspector you choose.  Most home inspections cost between $300-500. Your home inspector may recommend further inspections, such as for the roof or pool.

Appraisal

If you are taking out a mortgage to buy your home, the lender needs to have an appraisal done. The appraisal ensures the property is worth at least the purchase price. Your lender usually asks you for a credit card to pay for it. Effective December 1, 2016, the appraisal fee for California VA borrowers is $600. For all other borrowers, appraisals usually cost between $400-$500.

 

Cost to Buy a House: Closing Costs

All other fees and charges are paid upon close of escrow. About a week prior to close of escrow, you will submit a wire or cashier’s check to the escrow company, who will pay for everything on your behalf. All of these charges are called closing costs.

It’s difficult to know exactly how much you will need to pay ahead of time. The final closing costs aren’t calculated until after the title is transferred to your name. When the escrow company asks you for the wire or check, they add a few hundred dollars’ padding, to ensure they have enough to cover all expenses.  As soon as the final costs are calculated, they will send you a check for any over-payment.

Here is a list of common fees, to give you a general idea of the total cost to buy a house in San Diego County. I have also included an example at the end, for someone buying a $500,000 house with a $400,000 mortgage.

Closing costs are either non-recurring (one-time), or recurring (pro-rated,on-going).

 

Non-Recurring Closing Costs

Lender Fees

Here’s a list of some of the lender fees for a conventional mortgage. Keep in mind that some loan programs charge only some of these, and others charge only one flat fee.

  • Loan Processing Fee
  • Loan Underwriting Fee
  • Tax Service – the County will contact the lender if a buyer doesn’t pay property tax, so the lender can pay it and not risk losing the house to a tax lein
  • Origination – this can be a flat fee or percentage of loan.  If a lender is charging 1.00 point for origination, this is 1% of your loan balance.  1.00 point of a $500,000 loan equals $5,000 in fees.
  • Discount Points – You might have the option to pay discount points, in exchange for a decrease in your interest rate. Each discount point is 1% of the loan balance.  A lender charging 2.00 discount points on a $500,000 loan is charging $10,000 in fees.
  • Mortgage Insurance – Required if the Loan-to-Value ratio is higher than 80%. Your lender might give you the option to pay your mortgage insurance in one lump sum at the beginning, instead of paying monthly.
  • Credit Report Fee ($20-25)
  • Flood Certification Fee – to determine if the property is in a flood zone.
  • Appraisal

Escrow Fees

The escrow company provides buyers with a Closing Statement, which is the Final Settlement Statement that lists out all closing costs. They handle all the funds in a real estate transaction.  The escrow fee is based on the purchase price, which is approximately $2 per $1,000 purchase price, plus a $200 base fee (around $1,200 for a $500,000 home).  Smaller additional fees may include courier, document preparation, loan tie-in, HOA transfer, and other services provided over the course of the escrow.

Title Fees

The title company provides title insurance to both the buyer and the lender.  The seller usually pays for the buyer’s owner’s policy, while the buyer pays for the lender’s title policy.  Title insurance protects a policyholder against challenges to rightful ownership of real property, which arise from circumstances of past ownership.  The lender’s title policy premium is a one-time fee, based on the mortgage amount. Other title charges include sub-escrow, endorsement, notary, and County recording fees.

 

Recurring Closing Costs

The cost to buy a house includes recurring charges. Recurring costs will continue after escrow closes.  Closing costs usually include mortgage interest for the current month, HOA fees (if any)  for the next two months, any property taxes the seller has already paid, and the annual homeowner’s insurance premium (if any).

Impound Account

Many borrowers have impound accounts, which are attached to their mortgage.  Some loan programs require them. The monthly mortgage payment includes a contribution to the impound account. The lender uses this impound account to pay for homeowner’s insurance and property taxes on your behalf. They want to be sure  you don’t miss a payment, so they do this for their own piece of mind!

Your first impound account deposit is often the second highest cost to buy a house, after your down payment. The impound account payment out of escrow may include 3 months of homeowner’s insurance and at least six months of property taxes.  This money accumulates to pay for these large bills when they come due.

 

Closing Costs: Examplewhat-are-my-closing-costs in san diego to purchase home

Here is an example of the cost to buy a house for a $500,000 purchase and $400,000 loan amount. This does not include any HOA, Mello-Roos, or Private Mortgage Insurance fees.

  • Lender processing, underwriting, and appraisal: $2000
  • Escrow fees: $1200
  • Title fees: $1000
  • Prepaid interest, 12 days: $600
  • Homeowner’s insurance premium, first year: $650
  • Impound Account – Homeowner’s Insurance: 2 Months $100
  • Impound Account – Property taxes:  6 Months $3000

Total Closing Costs: $8550 (not including down payment, mortgage insurance, HOA or Mello-Roos fees)

Your lender can give you a closing costs estimate, based on the loan program you choose.

 

The Bottom Line

When you plan to buy a home, be sure to budget for closing costs.  The cost to buy a house includes one-time fees for lender, escrow, and title. Planning for these expenses ahead of time will make the process easier.

The Consumer Financial Protection Bureau released a new toolkit to guide consumers through the process of shopping for a mortgage and buying a home. The Home Loan Toolkit is a helpful tool to help you plan your purchase.

 

Ryan Blanco-Realtor-San Diego Real Estate Blog

About Me: I am a full time agent and I dedicate 100% of myself and my time to my valued clients in addition to the San Diego communities that I serve. It is imperative that I continuously evolve with local and national trends in addition to always looking ahead of the industry. It is a must to always provide the best service to my clients, their families and friends.

619.384.2248
Ryan@RyanYourRealtor.com

 

 

How Much Are Seller Closing Costs?

As many seasoned home sellers know, there are costs associated with the sale of a home (seller closing costs). For most sellers, these costs are simply deducted out of your net proceeds by your Escrow company, and the check you receive already has these amounts deducted. A Realtor can provide you a very accurate “net sheet” to show how much you would net at various sales prices.

1. Realtor Commissions

In California, it is standard for the seller to pay the Realtor commissions for their own agent as well as the buyer’s agent. Commission is one of the largest the cost of selling your san diego houseexpenses associated with the sale of a home. Currently, 5-6% of the sales price is the most common amount brokers charge. Find out about my 4% discount commission listing plan!

2. HOA Fees

If you live in an HOA community, sellers normally pay the HOA transfer fee and the HOA document fee. These fees vary, but I’d budget $300-$600 total.

3. Recording Charges

This fee is about .01% of the sales price. It is the cost associated with transferring the title at the county recorder’s office from your name to the new buyers’ name.

4. Escrow/Title Charges

The seller must pay for a portion of the Escrow charges (normally they are split 50/50 with the buyer). For example, a $500,000 house would be around $1,200 for each side. They must also pay for owner’s title insurance, to help protect the buyer from any possible clouds on the title of the property they are purchasing. These charges normally total somewhere between 1/2 to 1% of the total sales price. 

how much is my san diego home worth

5. Property Taxes

Depending on the time of year of the sale, there may be unpaid property taxes, which are pro-rated until close of escrow.  If property taxes have already been paid in advance, the buyer will credit the seller a pro-rated amount from the date of sale.

6. Home Warranty

If a buyer requests a home warranty policy and the seller agrees, you must pay this expense through Escrow. In San Diego, the policies usually range from $400-$600. They cover appliances/systems in the house, and if the buyer has a maintenance issue arise, they can call their home warranty company, which will send a licensed professional out to take a look at it and potentially remedy the problem.

7. Additional Charges

The Residential Purchase Agreement (the buyer’s offer) outlines the terms of the sale.  Terms can include a seller credit towards buyer closing costs, or a buyer credit towards seller closing costs. Buyers often request a natural hazard disclosure report ($100), and a termite inspection ($85). Buyers may also request that the seller complete repairs, such as fixing a plumbing leak, replacing a roof, or clearing a termite infestation and repairing termite damage. Repair requests are negotiated between the buyer and seller after inspections are completed.

 

A Closing Cost Example Document

Here is an example of the final Closing Settlement Statement (formally the HUD-1) you will get from escrow. This home sold for $650,000 with a HOA:

Escrow Closing Disclosure Statement.pdf

Finally

As a seller, you’ll pay your real estate commission percentage, plus 1-2% of the sales price in closing costs. Since you are selling, you do not have lender fees associated with the transaction like the buyer does. A Realtor can work with their Escrow company rep to give you a very accurate breakdown (called a “Net Sheet”) of how much you will pocket from the sale of your home!

Ryan Blanco-Realtor-San Diego Real Estate Blog

About Me: I am a full time agent and I dedicate 100% of myself and my time to my valued clients in addition to the San Diego communities that I serve. It is imperative that I continuously evolve with local and national trends in addition to always looking ahead of the industry. It is a must to always provide the best service to my clients, their families and friends.

619.384.2248
Ryan@RyanYourRealtor.com

 

 

Understanding Home Loan Types

When it comes home loans, there are many types to choose from. Figuring out which loan is best for your new property purchase can be confusing. So here are some of the most popular home loan types.

Mortgages:

Conforming Loan: When a loan conforms to the guidelines of FNMA/FHLMC (Fannie Mae/Freddie Mac) in both terms that may be purchased by FNMA or FHLMC it is conforming (currently up to $612,950 in San Diego county). Loans that do not match these guidelines are obviously non-conforming loans. If the loan does not conform due to its amount, it is a Jumbo Loan. Conforming loans may have either fixed interest rates or adjustable interest rates.

  • Conventional Mortgage Loan: When the loan amount is within the FNMA/FHLMC guidelines, and the federal government does not insure or guarantee the lender payment through the FHA or VA, the loan is conventional). They can have either fixed interest rates or adjustable interest rates.
  • FHA Insured Loan: Loans insured by the Federal Housing Administration. Borrowers must meet specific criteria to qualify. FHA loans often require lower down payments of normally 3.5% and will go up to $612,950 in the amount borrowed.mortgage broker or direct lender
  • VA Loan: A VA loan is a mortgage loan offered to American Military and veterans guaranteed by the Department of Veterans Affairs (VA), typically at preferred interest rates with little or no down payment required.

Specialty Loans

Reverse Annuity Mortgage or reverse mortgage is a special type of mortgage created for retirees on fixed incomes. They use the loan to generate income from the equity in their homes (and thus adding it to their principal balance). They continue to live in the home but ownership goes to the lender when the last borrower moves from the home.

Mortgage Rate Terms

  • Fixed-Rate Mortgage: A loan secured by real estate that has a fixed interest rate and payment amount for the term of the loan (usually 15 or 30 years) is a fixed rate mortgage.
  • Adjustable Rate Mortgage also called ARM or variable rate mortgage: ARMs have interest rates that can vary or adjust at pre-determined yearly intervals. The starting rate and payment is lower, allowing borrowers to qualify more easily. The adjustment basis is an index, often the LIBOR (London Interbank Offered Rate), or on the prime rate—the lowest rate of interest banks will offer their most credit-worthy customers.
  • Fully Amortizing Mortgage: A fully amortizing mortgage is a mortgage with scheduled uniform payments that will fully pay-off the loan over the term of the mortgage. At the beginning of the loan term, most of the loan payments go towards interest payments. As time goes on, more of the payment amount goes towards paying off the principle balance.
  • Balloon Mortgage: This was most popular before the housing collapse of 2006. Balloon mortgage have balloon loan mortgageshort terms (only a few years) with fixed principal and interest payments at a reduced rate that do not fully amortize (or pay off) the loan. At the end of the term, the entire balance of the mortgage is due in a single payment. Balloon mortgages offer lower payments during the term, because the big lump sum is due at then end. A balloon is useful for buyers that hope to sell within the term or expect to be able to pay the full amount or qualify for a better loan by that time.
  • Graduated Payment Mortgage (GPM): A graduated payment mortgage has payments that are lower in the early years but increase on a scheduled basis until they reach a level of amortization and the borrower can (hopefully) afford to make larger payments.

Short-Term Loans

  • Bridge Loan: When a buyer is also selling and the purchase of the new property depends on the equity in the old property, a bridge loan allows the purchase to complete before the sale is complete. Once the older property sells, the borrower must repay the bridge loan.
  • Construction Loan: Short-term loans to funds construction or improvements are construction loans. Typically, the construction loan is repaid with the mortgage.
  • Home Equity Loan: A home equity loan (or a home equity line of credit) is a loan made against the equity in a home. The borrower may utilize some or all of the loan and pays interest only on the portion used.
  • Nonrecourse Note: A nonrecourse note is a type of note in which the borrower has no personal liability for payment.
  • Open-end Mortgage: An open-end mortgage is a mortgage that may be refinanced without rewriting the actual mortgage contract.
  • Refinancing: Refinancing are the proceeds of a new loan used to pay off an existing mortgage on the same property. This is often done by a homeowner to lower their interest rate and monthly payments.

Any good lender will help walk you through the complicated mortgage world and fit you into a loan program the best fits your needs!

 

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
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