Archive for the ‘Home Buyers’ Category

What Are The True Costs Of Buying A Home?

additional costs of buying a home san diegoIt’s time to buy your first home. You’ve saved up for your down payment and gotten a pre approval from a lender.  You’ve got a great realtor and  are ready to find the perfect home.  Once your offer is accepted, you’ll need to be aware of additional out-of-pocket costs you will incur over up to, and immediately after closing, some you may already know, some not:

Home Inspection

Having a home inspection is not required, but it is something you should definitely have done.  Costs vary, but generally average around $375, depending on square footage and services added.

Appraisal

Your lender will order the appraisal and you normally will have to pay for it upfront.  Expect somewhere between $400-$500 for single family home.

Homeowner’s Insurance

You are required to purchase homeowner’s insurance in order to close on your home.  This protects you, as well as your lender from the inevitable. Homeowner’s insurance prices vary from $700-$1500.  Basic insurance coverage for the area you want to live in may not be adequate.  For example, if you live in an area designated as a flood zone or fire zone, you should insurance for those as well.

Additional Repairs/Improvements

Sometimes, sellers won’t or aren’t financially able to assist with repairs so they sell the house as-is.  If you really want the house, you might need to save money for things you will need to do in order to make the house livable or updated to your tastes. Make this budget beforehand for unexpected repairs or home improvements you want to make. This could be adding a fresh coat of paint, new carpet or adding in hardwood floors, is a good idea.  Costs can vary widely.

Appliances

Normally all appliances are included by the seller, with the exception of the refrigerator and washer/dryer. This is normally written into some real estate contracts as being sold with the property. With that in mind, plan ahead to have money budgeted for a refrigerator, washer/dryer.  If you like some of the seller’s appliances, specify which ones you’d like to remain since everything is negotiable.

Moving

Whether you’re hiring a company or renting a truck, moving costs can be more than you think. If costs of buying a homeyou are renting hourly, build in an additional two hours to your projected costs. Don’t forget to include in your budget calculations, the deposit, which although you get it back, can temporarily decrease the cash in your pocket.

Utilities & Security Alarm

Depending on your credit, some utility companies require deposits and there may be other miscellaneous fees to transfer or start services.  Costs will vary.

Move in Day!

After closing, you may want to visit the house and start cleaning before you have the movers or your rental truck arrive.  It’s much easier to do this before all your stuff arrives. Remember to include cleaning supplies or the cost of a cleaning service in the budget.  Don’t forget your toiletries, light bulbs and extra batteries.

Blinds

Depending on your agreement with the seller, blinds are not always included in the sale. If not, now you feel as though you’re living in a fish bowl. Putting up old sheets in your brand new home is no good and a huge eye sore for your new neighbors. Visit your local home improvement store for temporary blinds.  Temporary blinds cost around $12 and up.

Rekeying your Home

Before you get handed keys for your new home, keep in mind how many other hands they have been in during the whole process. It ranges from the sellers, to real estate agents, to contractors, utility companies, etc. Don’t risk it, have you home rekeyed. Costs for rekeying all your locks by a locksmith can run anywhere from $75-$200.

New Furniture

Shopping for new furniture for your new house can be fun and exciting. If you are moving into a bigger space, you may not know how little furniture you had until after moving.  Anticipate buying accent chairs, art, rugs, mirrors, etc. Costs vary.

Happy House Hunting!

 

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com

How To Pick A Great Mortgage Lender

Let’s be honest, when buying a home, there are so many things to think about! One of the most complicated decisions you will likely make will be which lender to pick. Today there are tons of lenders out there ready to accept your loan application. But just because a lender accepts your application doesn’t mean they are the right one for you. Since you’ll likely be paying on this loan for years to come, it’s important to make sure you shop around and choose the right lender (and loan) that fits your needs. Here are five tips for picking the right mortgage lender.

1. Decide whether you need a mortgage broker

There are benefits to working with a mortgage broker because they have access to multiple mortgage lenders, which saves you time. However, there are some drawbacks you should be aware of when working with a mortgage broker. They earn their profits by arranging the deal between the lender and the new homeowner. So essentially, they are a middleman, which can work to your advantage, however. Good mortgage brokers will choose from the best performing banks, knowing which ones are most likely to close without a hitch.

2. Decide what kind of lender you wantchoose lender to buy home in san diego

If you are someone who prefers more personal customer service and a lender who knows your name, you would likely want to go with a smaller local lender. Some people prefer to get a loan where they are currently banking already, thus keeping all their accounts in one place. This is great for convenience, but this might not get you the best rate and terms. Researching the differences between larger lenders and smaller ones will help you decide which fit is best for you.

3. Ask around

A broker is not the only way to find mortgage lenders. Ask your friends, family members or coworkers who have purchased a home within the last few years about their lenders. Getting referrals from those close to you can help you cut through the sea of prospects to find someone you know you can trust.

4. Talk to your real estate agent

A good agent will not limit recommendations to his or her in-house lenders, and smart loan officers take especially good care of customers recommended by real estate agents. Since real estate agents do multiple transactions per year, that’s multiple lenders they come in contact with!

5. Research the lender’s reputation

No matter how you hear about a lender, it is imperative to do a background check. If you can get names of past clients, make sure you speak with them. Google them, check online reviews and don’t hesitate to bring up any questions you have with a potential lender. Learning as much as possible about who you might be dealing with can save you a number of headaches later on.

Most home buyers don’t realize picking a bad lender can reduce their chance of getting an offer accepted in the first place. In a competitive housing market, listing agents will encourage their sellers to pick offers from lenders with a better known reputation. Sometimes this is the main deciding factor when multiple offers are nearly otherwise identical.

Shopping around for the right mortgage lender can be daunting. There are numerous lenders available and more seem to be popping up all the time. It’s important to know what you’re looking for and to do as much research as possible.

 

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com

How Much Of A Down payment Should I Do?

When is time to buy a home, most will take out a mortgage. There are many things to consider when taking on a mortgage loan, including interest rates, closing costs and the down payment. Once you calculate the price of a home you can comfortably afford, you can start looking at properties.

There are several ways to fund what will likely be the biggest purchase of your life. Before you sign any loan documents, it’s a good idea to consider what amount to make for your down payment, and how that will affect you both immediately and in the long run.

how much down payment to buy a san diego homeThe Basics

In case you are buying your first home, a down payment is the amount of cash you pay upfront when buying a home. This money shows the lender that you are capable of saving and willing to risk this money in the purchasing of the home.

Conventional Loans-The Magic Number

You’ve probably heard that 20% is the magic number for a down payment. While some people (like veterans) can qualify for homebuying assistance, most people will have to put 20% down to secure their mortgage without paying private mortgage insurance (thus adding to your monthly payment). Private mortgage insurance (PMI) covers the lender, in case you get into trouble making payments down the line.

With a 20% down payment and buying an averaged price home of $430,000 in San Diego, that would mean a down payment of $86,000. This is quite a bit of money, especially for first time homebuyers. Plus, there are additional closing costs. Luckily, newer conventional loan programs allow as little as a 3% down payment, although private mortgage insurance is must in these cases. 

FHA Loans

While the financial crisis left many homeowners defaulting on their little-to-no-money-down mortgages, the tide has turned again, and now the minimum amount needed for a FHA loan is only 3.5% (there are some zero-down mortgage programs, but with restrictions). FHA loans are great for homebuyers that don’t have stellar credit and lower amounts of cash for a down payment. Private mortgage insurance (PMI) rates are higher with these loans than its conventional counterpart.

Any good lender can tell you if you qualify for a loan backed by the Federal Housing Administration (FHA). You can also look for state and region-specific down payment assistant opportunities through your local government. If you are buying a house with less than the typical down payment needed, it’s important to know that you are taking on more risk, and the loan will normally cost you more in the long run.

Before you apply for a home loan, it’s important to know what your credit score is. The difference of just a few credit score points can mean a lower interest rate and a major savings over the life of your loan.

Your down payment amount makes a big difference both now and in the future, but it’s a good idea to leave yourself enough money to afford your next few monthly payments as well as closing costs and other repair & maintenance expenses the house may need. Remember, this is just the beginning.

 

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com

 

Tips For Buying A Fixer Upper

The single best way to stretch your budget and find the home of your dreams, is to find the right home in the right neighborhood that needs some work.

Fixer uppers allow you to access a more desirable neighborhood than you may otherwise be able to afford. In other words, you are buying one of the worst homes in the best neighborhood possible.

The key for you, the buyer, is to determine the appropriate level of fixer. In general, the more of a fixer, the more potential upside you will get. Homes with water or structural damage can be the most risky. So this has to be balanced with your budget for repairs/upgrades, your knowledge of how to handle issues efficiently, and your appetite for sweat equity. Do you want to manage remodeling the whole home? It has the potential to be very lucrative, but can also be exhausting, even if you are’t the one doing the work.buying a fixer upper in san diego

It’s important to also be aware of the different levels of fixing. Remodeling a kitchen costs the same no matter how old it is – you still need new cabinets, countertops, flooring and appliances. So, when evaluating, no matter how good or bad the kitchen, the cost to remodel it is the same. But – you will probably pay more for a house with a “kind of old kitchen” compared to an “extremely old kitchen.” Bottom line: A really bad kitchen can be a good thing.

Certain things are very inexpensive and produce a high return; paint, a new front door, and landscaping produce the easiest and best return on investment. Other items like system repairs (heating and cooling, electrical, roof and plumbing) produce almost no investment return. Bathrooms, also, generally produce a small return.

One last caution, people tend to overspend to get what they want, and that is totally fine. Just realize it goes past the initial investment goal and into personal valuation. For example, a neighborhood may support a $20,000 kitchen, but you may really want the $35,000 kitchen. It’s fine to upgrade, but when you re-sell, you may lose some of that value. Just make sure you enjoy it along the way.

If you have any questions about fixer uppers in the San Diego area, let me know!

 

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com

9 Things To Consider Before Getting a Mortgage

Applying for a mortgage can be a daunting process for new homebuyers. The best way to prepare for it is to know exactly what lenders want from you — as well as what they don’t want. With that in mind, here are 9 things to consider before getting a mortgage.

1. Your credit score

Any prospective lender will run a credit check, and all lending programs have minimum credit score requirements that depend on how much you’re putting down, how much you have in savings, and other factors.FICO credit score

Conventional mortgages require a bare minimum FICO of 620, and FHA requires a 580 if you’re only putting 3.5% down. Some lenders impose higher standards than these minimums. It’s certainly worth checking your FICO scores before applying, and if your score isn’t stellar, check with your lender to find out their minimum requirements. If you don’t meet them, then it’s time to start working to improve it. Even if you do qualify for a mortgage, it may be worth waiting a year or two while you raise your credit score; this will allow you to qualify for a lower interest rate, which could save you thousands of dollars throughout the life of the loan.

Be sure to check your FICO score from all three credit bureaus. Lenders typically pull all three and use the middle score. I’ve bought three homes in my life, one with an FHA mortgage and two with conventional loans, and this method was used all three times.

2. Black marks on your credit report

In addition to your FICO score itself, lenders take a closer look at the information on your credit report. If you have collection accounts or unpaid legal judgements, for example, your lender may require that you pay these off, or at least document a valid reason why they exist.

The same goes for things like foreclosures, bankruptcies, short sales, previous late mortgage payments, and any other information suggesting that you haven’t always kept up with your debts. Even if you qualify based on your FICO score, these things could get in the way of a smooth mortgage approval process.

job income3. Your income

As you might expect, lenders want to know that you earn enough money afford your payments. Lenders will divide your expected mortgage payment — including principal, interest, taxes, and insurance — by your income. The result is known as the front-end ratio, and the industry standard is 28% or less, although many lenders will approve applicants with higher housing costs, especially in high-cost-of-living areas. If a mortgage would put your front-end ratio above 28%, then you should probably apply for a lower amount — or spend some time working to raise your income.

4. Excessive debt

In addition to your income, lenders will consider your other debts as well. Specifically, any monthly obligations, such as car loan payments, student loan payments, and the minimum payments on your credit cards will be considered, just to name a few.

This is added to your expected mortgage payment, and the sum is divided by your income to calculate your back-end ratio, a.k.a. your debt-to-income ratio. Lenders traditionally like to see a DTI ratio of 36% or less, but it’s possible to get approved with much higher DTI ratios. In fact, a recent rule change allows for DTI ratios of up to 50% in certain cases, specifically to allow consumers with high student loan debt to buy homes.

5. Your employment history

Your lender wants to know that you have a steady stream of income to make your payments with, and they also want to see a consistent employment history. Generally, a lender will want to see at least two years of continuous employment, preferably in the same field. In other words, if you’ve hopped between several different jobs over the past couple of years, or if there are significant gaps in employment (think a few months or more), then it could work against you.

Also, if you were in school more recently than two years ago, you’re typically exempt from this requirement, although your lender will want to see a steady employment history since you graduated.

6. New debts after you applynew car debt

This is one of the most common reasons you could be denied a mortgage after you’ve already been approved.

When you get a mortgage, your lender will typically pull your credit report and score at least twice — once when you initially apply for the loan, and again shortly before closing. Any significant discrepancies between the two can create a problem, especially if the recheck shows that you’ve opened new credit cards, charged large purchases, or done anything else that could significantly raise your debt-to-income ratio or lower your credit score.

There are several big expenses that typically come with buying a new house, such as furniture. Wait until after closing to finance any of them.

7. A too-small down payment

It’s a common myth that you need 20% down to buy a home. However, although you can qualify for a much smaller downpayment, paying 20% down can certainly make things easier for you in the long run. You can obtain a conventional mortgage loan with as little as 3% down or an FHA loan with as little as 3.5% down. However, unless you are planning to get a VA loan, USDA mortgage, or some other type of special loan, you’ll probably need to put something down.

The closing costs are another up-front expense that will typically cost anywhere from 2% to 5% of the home’s selling price, and a lender will want to see that you’ll have enough money for your required down payment and any closing costs. In addition, you may be required to show that you have some money in reserves — six months’ worth of mortgage payments is a common threshold.

8. A lack of documentation

Even if you have more than enough income, a rock-solid employment history, and tons of money in savings, none of those will help you obtain a mortgage unless you can adequately provide documentation. If you work for an employer, and you keep your money in a savings account, this shouldn’t be an issue, but for self-employed individuals (especially who deal in cash often) and in certain other situations, it can be tough to thoroughly document everything.

9. Issues with the home itselfmold in home

Finally, another common reason for mortgage denial is a problem with the home itself. Lenders want to make sure the home is actually worth what you’re paying for it so that in the unlikely event that you fall into foreclosure, the lender has an asset it can easily sell to recoup its money. Therefore, if the home doesn’t appraise for enough, it can create a problem. You may need to put more money down or try to negotiate a lower selling price that’s in line with the appraisal.

Condo buyers can be denied because of HOA concerns — specifically, when not enough of the units are owner-occupied. And if the property you plan to buy is simply in poor condition, it could be a cause for denial.

The bottom line here is that there are several potential roadblocks you can face when applying for a mortgage. Some of these can be dealt with fairly easily, while others could be immediate deal-breakers.

A Fixed Rate Mortgage Doesn’t Always Mean Fixed Payments

With mortgage rates still near historical low levels, it’s one of the best times to get a fixed-rate mortgage. A fixed rate simply means that the mortgage lender charges you a fixed rate of interest that doesn’t ever change over the life of the loan. However, your monthly payment can still change!

If you get a fixed rate of 4.00 percent, you will be paying four percent in interest until you sell or refinance the home. The longer you make payments on a fixed rate loan, the more interest you pay down. The bulk of your interest payments is front-loaded into the beginning years of your loan schedule. This is best illustrated in an amortization table (see below). So the longer you own your home and pay on your mortgage, the greater percentage of your monthly payment goes to reduce principal. When you reduce principal, you build equity! san diego amortization table

Even with a fixed rate mortgage, your monthly payment can change in other ways. You may decide to roll the costs of your mortgage into your loan, in which case you’ll be paying the APR rate because the loan amount is higher, yet is still being compressed into the same loan term (in years).

Another way your monthly payment can change is by having private mortgage insurance (PMI). If you put less than 20 percent of your home’s purchase price as a down payment, lenders will require that you pay for PMI. Rates on PMI vary, but you can expect your payments to rise slightly over time.

Finally, if your mortgage payment includes homeowners insurance and property taxes, this can also change. You should receive a statement from your insurer when it’s time to renew your insurance, and your lender will divide the annual amount into monthly payments.

Your tax assessor’s office will send you a new statement annually. Your initial tax basis will be based on the purchase price of the home. After that, the assessor’s office will make adjustments to your home’s value as they feel is accurate. Of course, a change in value means a change in your property tax amount.

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
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