Qualifying for a Mortgage

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Making an Offer
 
Making an offer on a home is an exciting step – you’ve found the house you want and you’re working towards making it your home.

Be sure you’re serious about buying before you make an offer. If the seller accepts your offer, it becomes a legal contract after a few days.

Details and planning are important. Know what you would like to pay but also think about the most you’re willing to pay and the total pre-approved mortgage loan amount. Be specific, and put everything in writing. Also, having a pre approved mortgage loan will place you ina better negotiting posistion when making a real estate offer.

What are the steps in making an offer?

Negotiating a Sales Price
Before you negotiate a sales price, it’s important to determine if you or the seller has the stronger position. Knowing this will help you plan your negotiation.  A mortgage tip to consider would be to offer full price and have the seller buy down your San Diego Ca mortgage loan rate.  This will allow you to qualify for a higher loan amount amd provide you with lower payments.

The seller may have the stronger position if:

The local real estate market is strong and homes are selling quickly.
They aren’t in a rush to move.
Similar houses have sold for close to or above their asking price.
There are other offers being made on the house at the same time as you.
The buyer may have the stronger position if:

The local real estate market is weak.
The seller needs to move quickly.
The house has been on the market for a long time.
When negotiating, more information is better. Look at your notes from when you looked at the house. If there’s anything that needs to be repaired or replaced, you may want to consider including these costs in the negotiation. If you want certain appliances or fixtures to stay, be sure to include them as well. You may also want to make your offer contingent upon your obtaining financing or the house passing a professional home inspection, especially if it is an older home.

There are several steps to negotiating:

Asking price.
This is the price the sellers have originally listed. In a buyer’s market, you may be able to successfully offer below the asking price. However, in a seller’s market you may want to be prepared to offer more. Before making an offer in a seller’s market, know how much above asking price you are willing, and able, to bid in case the seller gets multiple offers.

Initial purchase offer.
This is your first offer. It may include contingencies (such as a requirement that the home pass a professional inspection or that you receive adequate San Diego Ca mortgage loan financing from your lender.)

Acceptance of offer or counter-offer.
The seller can accept your offer or make a counter-offer of a new price or additional contingencies.

If you’ve made a home inspection part of the contingencies and something serious is found during the inspection, you may want to submit a new counter-offer and discuss the situation with your lender. The process may go back and forth several times before you and the seller reach an offer that is acceptable to you both. Remember that in some instances, your lender may not approve your mortgage if the home has serious deficiencies that could affect its value.

Source Freddie Mac

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Closing Costs What’s included in closing costs? Closing costs typically average approximately 5-10% of the house price. This percentage may vary, depending on where you live. In general, your San Diego Ca homeowners closing costs will include the following items: Lender Fee – Typically paid by the seller to cover the San Diego lender’s expenses for processing the San Diego Ca Mortgage loan. Title Insurance – Based on the sale price of the home. The percentage of sale price varies by title insurance company. It is the fee charged for property title inspection and insurance policy against policy defects. This will require coverage for both the San Diego County lender and the buyer’s guaranties. Title Search Fee – Fee charged for examining the public record, laws, and the Registry of Deeds to ensure that no individual other than the seller can legally claim ownership of the property. State Mortgage Taxes – Fee charged by the state as a tax on the sale of the home. Settlement Charge – Fee charged by the closing company to cover attorney fees and other expenses incurred. Escrow – Items for which the San Diego Ca lenders require escrow accounts, as they are not monthly fees. Companies usually require two months in escrow at closing. Federal, and in some cases, state law dictate the amount of funds that must be held in your escrow account at all times. Your California realtor or lender can help ascertain these amounts. Items that typically require escrow accounts include: Hazard Insurance – Fee charged for insuring the property against property loss or damage. Property Tax – Fee charged for the property that is based on the assessed value of the property. The tax rate can vary by county. San Diego Ca Mortgage Insurance – Fee required by lenders to insure against the risk of default by the borrowers. This is usually required if the down payment is less than 20% of the mortgage amount. What is included in the closing costs? Settlement or Closing Fee – Fee charged to cover the services of the settlement agent that handles all the payment transfers during the closing. Attorney’s Fee – Fee charged if an attorney performs the functions of a settlement agent. In some states, it is required that an attorney be involved with the closing process. Flood Insurance Fee – Fee charged to determine if the property is in a Special Flood Hazard Area. Home Warranty Fee – Fee charged by an insurance company for a warranty that covers repairs or replaces defective items in the home. Home Inspection Fee – Fee charged for professional inspection of the house to identify any problems associated with the home. Survey Fee – Fee charged for measuring the property to document location, dimensions, and any construction improvements of the property. Notary Fee – Fee charged to cover cost of a licensed notary individual authorized by the state to certify the identity of the individuals signing the documents. Recording Fee – Fee charged for filing closing documents such as your deed of trust at the county recorder’s office. Interest – Prorated fee charged daily for San Diego Ca mortgage interest due from the date of funding until the time of the first monthly mortgage payment. Lender Fees/Charges Discount Points – Finance charges calculated by the lender at closing. Each point is equal to 1% of the loan amount which is paid at closing. This fee is sometimes charged by the lender to reduce the interest rate of the mortgage, also referred to as a “buydown”. One discount point typically reduces the loan rate by an eighth of a percentage point. For example, if the interest rate is 7.5%, you may end up paying 7.25% over the life of the loan and pay the difference in additional up-front costs equivalent to 2 discount points. Discount points are based on the total loan amount and can vary by lender and by lender’s loan products. Loan Origination Fee – Based on loan amount; typically this fee is 1% of the loan amount. San Diego Mortgage Interest – The interest on the loan amount from the date of closing to the last day of the month. Credit Report Fee – Fee charged by lender to request a credit report on the borrower. This fee varies by location and reporting agencies. Appraisal Fee – Fee charged for a written evaluation of the fair market price for the property. This fee varies by lender. Tax Service Fee – Fee charged by the San Diego Ca lender to cover the cost of hiring a tax service agency. A tax service agency monitors the property tax payments for the loan and informs the lender if they are not paid in full and on time. If property taxes are included in the monthly payment as part of the escrow account, the tax service will obtain the tax bills for payment by the lender. Document Preparation Fee – Fee charged to cover the cost of preparing the mortgage loan documents.

Source: Hud . Gov

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Streamline Your FHA Mortgage

Refinancing Your Home
   
 
Sometimes, refinancing your San Diego mortgage can really save you money. You may be able to pay less interest, lower your monthly payment, or convert from a 30-year loan to a 15-year loan (and build your equity faster!). But be sure that refinancing is right for you.

 FHA has permitted streamline refinances on insured mortgages since the early 1980’s. The “streamline” refers only to the amount of documentation and underwriting that needs to be performed by the San Diego lender, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:

  The mortgage to be refinanced must already be FHA insured.
 
  The San Diego Ca mortgage to be refinanced should be current (not delinquent).
 
  The refinance is to result in a lowering of the borrower’s monthly principal and interest payments.
 
  No cash may be taken out on mortgages refinanced using the streamline refinance process.
 
Lenders may offer streamline refinances in several ways. Some lenders offer “no cost” refinances (actually, no out-of-pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, the lender pays any closing costs that are incurred on the transaction.

San Diego Lenders may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, as determined by an appraisal. Streamline FHA refinances can also be done without appraisals, but the new mortgage loan amount cannot exceed the original loan amount. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal.
 Source Hud.Gov

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Owning a home is part of the American dream. But high home prices may make the dream seem out of reach.   (What Is The Solution?)

To make monthly mortgage payments more affordable, many lenders offer home loans that allow you to (1) pay only the interest on the loan during the first few years of the loan term or (2) make only a specified minimum payment that could be less than the monthly interest on the loan. Whether you are buying a house or refinancing your mortgage, this information can help you decide if an interest-only mortgage payment (an I-O mortgage)–or an adjustable-rate mortgage (ARM) with the option to make a minimum payment (a payment-option ARM)–is right for you.

Lenders have a variety of names for these loans, but keep in mind that with I-O mortgages and payment-option ARMs, you could face “payment shock.” Your payments may go up a lot–as much as double or triple–after the interest-only period or when the payments adjust. In addition, with payment-option ARMs you could face negative amortization. Your payments may not cover all of the interest owed. The unpaid interest is added to your mortgage balance so that you owe more on your CA mortgage than you originally borrowed. Be sure you understand the loan terms and the risks you face. And be realistic about whether you can handle future payment increases. If you’re not comfortable with these risks, ask about another loan product. Skip to content What is an I-O mortgage payment? What is a payment-option ARM? What do you need to ask when shopping for an I-O mortgage payment or a payment-option ARM? Mortgage Shopping Worksheet What are the risks with I-O mortgage payments and payment-option ARMs? When might an I-O mortgage payment or a payment-option ARM be right for you? When might an I-O mortgage payment or a payment-option ARM not make sense? What are the alternatives to I-O mortgage payments and payment-option ARMs? What are some important target dates in an I-O mortgage or a payment-option ARM? Does the type of loan and loan payment plan make much difference? What should I keep in mind when it comes to an I-O mortgage payment or a payment-option ARM? Comparison of Five $180,000 San Diego Mortgage Loans Glossary For More Information What is an I-O mortgage payment? Traditional mortgages require that each month you pay back some of the money you borrowed (the principal) plus the interest on that money. The principal you owe on your mortgage decreases over the term of the loan. In contrast, an I-O payment plan allows you to pay only the interest for a specified number of years. After that, you must repay both the principal and the interest. Most mortgages that offer an I-O payment plan have adjustable interest rates, which means that the interest rate and monthly payment will change over the term of the loan. The changes may be as often as once a month or as seldom as every 3 to 5 years, depending on the terms of your loan.

For example, a 5/1 ARM has a fixed interest rate for the first 5 years; after that, the rate can change once a year (the “1″ in 5/1) during the rest of the loan. More information on ARMs is available in the Federal Reserve Board’s Consumer Handbook on Adjustable Rate Mortgages. The I-O payment period is typically between 3 and 10 years. After that, your monthly payment will increase–even if interest rates stay the same–because you must pay back the principal as well as the interest. For example, if you take out a 30-year mortgage loan with a 5-year I-O payment period, you can pay only interest for 5 years and then both principal and interest over the next 25 years. Because you begin to pay back the principal, your payments increase after year 5.  What is a payment-option ARM? A payment-option ARM is an adjustable-rate mortgage that allows you to choose among several payment options each month. The options typically include a traditional payment of principal and interest (which reduces the amount you owe on your San Diego Ca mortgage). These payments may be based on a set loan term, such as a 15-, 30-, or 40-year payment schedule. an interest-only payment (which does not change the amount you owe on your mortgage). a minimum (or limited) payment (which may be less than the amount of interest due that month and may not pay down any principal). If you choose this option, the amount of any interest you do not pay will be added to the principal of the loan, increasing the amount you owe and increasing the interest you will pay. Interest rates. The interest rate on a payment-option ARM is typically very low for the first 1 to 3 months (2%, for example). After that, the rate usually rises to a rate closer to that of other mortgage loans. Your monthly payments during the first year are based on the initial low rate, meaning that if you only make the minimum payment, it may not cover the interest due. The unpaid interest is added to the amount you owe on the California mortgage, resulting in a highter balance. This is known as negative amortization. Also, as interest rates go up, your payments are likely to go up. Payment changes. Many payment-option ARMs limit, or cap, the amount the monthly minimum payment may increase from year to year. For example, if your loan has a payment cap of 7.5%, your monthly payment won’t increase more than 7.5% from one year to the next (for example, from $1,000 to $1,075), even if interest rates rise more than 7.5%. Any interest you don’t pay because of the payment cap will be added to the balance of your loan. Payment-option ARMs have a built-in recalculation period, usually every 5 years. At this point, your payment will be recalculated ( San Diego lenders use the term recast) based on the remaining term of the loan. If you have a 30-year loan and you are at the end of year 5, your payment will be recalculated for the remaining 25 years. The payment cap does not apply to this adjustment. If your loan balance has increased, or if interest rates have risen faster than your payments, your payments could go up a lot. Ending the option payments. San Diego Lenders end the option payments if the amount of principal you owe grows beyond a set limit, say 110% or 125% of your original mortgage amount. For example, suppose you made minimum payments on your $180,000 San Diego Ca mortgage and had negative amortization. If the balance grew to $225,000 (125% of $180,000), the option payments would end. Your loan would be recalculated and you would pay back principal and interest based on the remaining term of your loan. It is likely that your payments would go up significantly. Back to top What do you need to ask when shopping for an I-O mortgage payment or a payment-option ARM? Use the Mortgage Shopping Worksheet to compare different loan products. Ask lenders or brokers about the details of their loans and about the different loan options they offer. And don’t be afraid to make lenders and brokers compete with each other by letting them know you are shopping for the best deal. Look for a San Diego mortgage that allows you to buy the house and continue to afford the payments, even if payments go up over time.

Source: FDIC .Gov

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