Archive for the ‘Home Buyers’ Category

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.


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.




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.


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 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!


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Why A Great Home Inspector Is So Important

san-diego-home-inspection-importantOver the years, I have been a part of lot of home inspections with home buyers. Doing this teaches me a lot about homes and what things to look out for. I often see and point out problem areas to home buyers and sellers, but I add that a qualified professional should have a look.

There is a big difference between a good inspector and a bad one. The good home inspectors have some experience, the really great one have a lot of experience. Great inspectors take pictures of various items to put in their report. They describe what the picture is about and how the item should be addressed. Each home and each inspection is a little different and each experience teaches us something new.

The best home inspectors are able to anticipate and recommend future repairs and maintenance, along with estimating costs. They can tell the potential buyer a lot about the home and how it has been previously used and cared for. A home buyer’s inspection should not be just about finding problem areas, but also being educational so that the buyer(s) understand what they are buying. Home inspections also serve as a bargaining chip when it comes to asking for seller-paid repairs.

To be honest, I don’t always have a lot of faith in the home inspection franchise companies. I tend to have the best luck with the self employed small inspection company inspectors. Perhaps since they own their own business, they always to do a great job in keeping their clients happy. This is unlike an inspector having their franchise to fall back on. One of the best ways to find a good home inspector is to ask friends and family who have recently purchased homes, online review sites, or by asking a local real estate agent.


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Making An Offer On A Home

Your strategy for making an offer on a home, and handling the follow-up negotiations, can depend on several factors. These include the sales prices of comparable homes in the area, the favorability of the market for home buyers, the number of other people bidding on the home, as well as the overall condition of the home.

California real estate purchase offerBefore you start negotiating, set a firm ceiling on what you are willing to pay (or can afford). That will help you keep your cool if you become caught up in a bidding war or in a series of counteroffers. Shop for homes below your maximum price, just in case you have to pay more than the seller’s asking price. In a buyer’s market, when sales are slow, you can get away with looking at places higher than your budget a bit. Sellers are more willing to negotiate a lower price, along with other concessions.

 A real estate agent can provide recently sold property prices in the area , as well as prices of comparable homes currently on the market. Making a low-ball offer can sometimes pay off in a buyers market, but you have to feel out the market and the individual seller’s situation. However, some sellers can just as easily dismiss you for undervaluing their home and not even wanting to send you a counteroffer.

You’re going to have to put up some earnest money into escrow, typically 1% to 2% of the purchase price in San Diego. The more you put down, the better your chances…since it suggests you’re a more serious buyer. The earnest money in the end becomes part of your down payment, so it doesn’t add to your out-of-pocket cash to buy the house.

Of course, if you are lucky enough to be paying with all-cash, you will have an edge over other buyers. If you’re financing the purchase, your best move is to get a pre-approval letter from a bank, which will be sent in with your offer. Without this letter, you will be overlooked by most every seller.

If the home sellers won’t come down to a price you like, you might ask them to cover a portion of your closing costs. If you’re flexible about the closing date, offering the owners a rent-back period can be smart, since they can live in the home for a given period after the closing. If you want to make an emotional appeal to the owners, you could write them a letter describing how much you love and why you want the home. For some homeowners, it’s not just about the money, it’s about selling it to a great individual or growing family.

After the home inspection, you may find that the home needs repairs. At this point, you can ask for certain repairs to be done, or a credit back at closing. Most sellers are willing to oblige with repairs (such as a broken garbage disposal), but not upgrades (such as replacing all the plumbing, simply because it’s old).


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4 Myths About Buying A Home

Myths Of Buying A Home

So you’re in the market for buying a home. It’s both, an exciting time and a scary time. All that money you have saved is about to be spent, for the intended purpose, of course! You have spent countless hours consulting various blogs and other how-to resources arming yourself with the most prudent and up-to-date information. Most likely you have come across many do’s and don’ts when it comes to buying a home, below are four common myths that I would like to debunk.

1. A more substantial down payment is always better

Image result for stack of moneyCommon perception says this is a no-brainer. The more you put down now, the less you will pay over time. This is finance 101! While this is true; why use your entire safety net? Down-payments of 3.5% have become immensely popular in recent years. With the proliferation of mortgage insurance borrowers may be able to get lower interest rates than those who put down 20% or more. However the primary reason why putting less money down is due to the benefit of having flexibility. By not having your entire portfolio tied up in your home, you have allowed yourself a safety net in case of emergency such as job loss, home repairs, injury, or family accident. In addition, you may reallocate that money into other endeavors such as financial instruments where even novice investors can turn an 8% yearly profit.

2. Homes in the Suburbs are more worth more

Developers love the suburbs because the land is generally cheaper and therefore you get more home for your money. The homes are also often brand new and attractive. Where you get hurt is buy the “hidden costs.” For instance, in the suburbs you generally live further from your job, schools, transportation centers, and entertainment venues. The “savings,” from your cheaper home, are often lost due to the high transportation costs. For instance, take the average communing cost/month for a standard American car:

$210 for 10 milesImage result for homes in suburbs san diego

$389 for 30 miles

$549 for 50 miles

$848 for 100 miles

This does not include parking nor does it include weekend excursions. The average American spends over 100 hours per year commuting! That is pretty much 2 weeks’ worth of work time that you could spend doing activities that are much more enjoyable than commuting.

3. A 30 year fixed mortgage is always the way to go

This is only true if you plan on staying in your current residence for more than 10 years. If you intend on moving  in the next 5-10 years a fixed rate for 10 years would be much more appropriate. This is because, typically the longer your rate, the higher your interest rate will be and hence you would be paying a greater sum of money for absolutely nothing in return. Nowadays, people tend to change jobs more frequently and thus, locations as well. Therefore there is little sense in a 30 year fixed rate if you are young and plan on moving anytime in the future.

4. You should pay down your mortgage as fast as possible

This thinking was formed largely in the 1980’s when many people had double digit rates. Now rates are lower than ever so you should not be in panic mode from the lifetime value of the rate. Instead you should look at the opportunity costs of doing so. Having flexibility could be much more important than penny pinching just to pay off your mortgage. For instance, you could redirect that money towards a different endeavor such as starting your own business, investing in the stock market, or making an additional real estate venture.


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Home Warranty Companies-What Do They Do?

home warranty when buying a san diego homeWhat Exactly Is A Home Warranty Company And What Do They Do?

If you’re purchasing a re-sale home in San Diego be sure to ask for a home warranty. They normally cover you, the home buyer for one full year. Companies like American Home Warranty, Old Republic, and First American Buyer’s Protection are some of the more common ones.

Home Warranty programs are normally paid by the seller. They cover most mechanical systems in a home. They cost from $300.00 to $800.00 depending on the size of the home, options such as a pool/spa, and the company. Most will have a service call fee of around $30.00 to $60.00 per visit.  Home warranties don’t cover structural issues and should never be used in lieu of getting a professional home inspection.

Home Warranties benefit home sellers as well because it reduces their post-sale liability. At times, disputes arise when something goes wrong after close of escrow. Rather than argue about a non-disclosure issue, the home warranty will fix the problem for a nominal fee.

Benefits for buyers include peace of mind knowing that appliances, heating systems, and plumbing are covered.  It’s nice to know there will be no unexpected expenses for that first year. Let’s say your garbage disposal stops working a month after moving into your new home. Instead of paying for a new one along with installation, for the cost of a service call, you now have a brand new one installed!

Home Warranty options can include the following (depending on the plan):

  • Refrigerator – normally considered personal property unless a built-in like a Sub-Zero.
  • Washer & dryers.
  • Roof leaks (Limited)
  • Garage door openers – some provided in upgraded coverage.
  • Pool and spa.
  • Central air conditioning.

The basic warranty plan is normally around $350.00 for a standard size home.  Options run around $150.00 for pool and spa coverage, $75 for washer and dryer, $25 for refrigerator, and central air conditioning around $60.00.  Each company is different, however.

Check the fine print on each Home Warranty Company for coverage and exclusions. Here are three that I have had satisfactory service from.

  1. American Home Shield.
  2. Old Republic Home Warranty.
  3. First American Home Buyer’s Protection.

Notice that I said only SATISFACTORY service.

Just do a Google search on Home Warranty programs to find out many customers are unhappy. This is likely from higher expectations of coverage and the various sub-contractors that the services use.  Sometimes you get lucky, other times you don’t.

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