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How Much Mortgage Can You Afford?

 

Are you thinking about buying a home but don’t know how much you should spend? In this video, I’m going to walk you through how to determine a monthly housing payment you’re comfortable with. By breaking down the costs of homeownership, you’ll be able to make the best decision that will be right for you.

Your Monthly Housing Costs

Buying a house can be an emotional decision, and sometimes emotional decisions can be bad ones. If you’re thinking about buying a home soon, the first and most important point to consider is how much you are willing to spend.

The first place we need to start is to break down all the monthly costs associated with homeownership. In addition to your mortgage payment, there are other costs of owning a home every month. You need to find out what your cap of expenses is that you’re willing to pay every month to own a home.

One way to do this is by reverse engineering. This is the word that I like to talk about with my lender all the time. We want to figure out how much you’re willing to spend each month so we can reverse engineer a purchase price.

Mortgage Payment And Taxes

If you’re obtaining a loan to purchase your home, there are going to be two major components of that payment. First, you’re going to have your principal payment plus your interest. This is going to be a fixed amount every month for you. A portion of that fixed amount is going to be applied to your principal, and the other fixed part of that will be applied to your interest. Your mortgage payment will never change, but certain other variables will depending on the property. Every property is going to have a tax bill, and every tax bill is going to be different.

The reason they’re different is that properties are assessed taxes at the time of sale based on the price. That’s why you’re going to see varying property tax amounts as you’re looking around—even within the same neighborhood—because it’s all based on time of purchase at the price of purchase.

To give yourself a pretty clever estimate of what your annual property taxes would be in San Diego County, you can use a simple equation. Take your purchase price, multiply it by 1.25%, and that’s going to give you your annual property tax. Divide that by 12, and that’ll be your monthly taxes. If you purchase a home for $700,000, your property taxes are going to be roughly $8,750 per year. Divided out into a monthly payment, and that would be $729 a month. Pretty good fast math, huh?

Homeowner’s Association Fees

One of the other things you’re going to need to take into consideration when buying a home in San Diego County is HOAs. If you are living in a condo, almost assuredly you have a Homeowners Association fee every month. Additionally, single-family homes are often built in PUDs, or Planned Urban Developments. These also have a monthly fee.

Your homeowner association fees are used for trash, water, sewage, termite protection, and general building and grounds maintenance. If you have common area facilities like a barbecue area, swimming pool, jacuzzi, a training room, or manned security from dusk till dawn, those are what your HOA fees cover.

Private Mortgage Insurance

Another expense you might incur related to getting a loan is PMI, or private mortgage insurance. If you’re using a loan to purchase the property, this is something a lender might tack onto your loan if you don’t put at least 20% down. They think that, if you don’t put at least 20% of your own money into the loan, it’s riskier.

Once you get 20% equity, you can have your PMI removed. You need to be on top of that; when you know that your home has 20% equity, you want to call your lender and ask to have it taken off your loan. This way, you’ll save more money every month.

This is also something that you want to talk with your lender about when you’re getting pre-approved upfront so there are no surprises. You can calculate PMI into your mortgage payment to make sure you’re comfortable with your monthly housing expenses.

Searching Within Your Budget

Before you start looking at properties, we have to take into consideration your budget. Then, we have to set up a search that stays within those parameters. This will allow us to look at the right properties for you and your budget.

The last thing you want to do is fall in love with a property that’s way over your budget. I’ve been there before and trust me—it’s not what you want to do. We want to do all that homework upfront to make sure we’re looking at things that you can afford. We don’t want you to fall in love with that three-million-dollar house. I guarantee you’ll love it, but you won’t love the payment.

I hope this helped you identify the various costs of owning a home to help you get better prepared for the process. If there’s anything that I can do to help, please give me a call at (619) 925-2322. I look forward to hearing from you.

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How To Decide Where To Live In San Diego

Are you thinking of moving but are having trouble figuring out where you want to go? In this video, I’m going to walk you through where, when, why, and what you should buy when looking for a new home. I’ll help you narrow down your options by considering the three most important things to consider when deciding where to live: price, location, and amenities.

Sorting Out Your Needs And Wants

One of the hardest things about moving is figuring out where you want to live. There are so many things to consider, and the process can be overwhelming. Do you need to be near work? Are you looking for a place with the right schools for your kids? Or are you just trying to figure out where in San Diego you can get the biggest bang for your buck? Out of all these questions, trying to decide where to live can be difficult

Buying a new home is like a process of elimination. It’s figuring out your needs versus your wants to decide which way you should go. Are your needs more important or are your wants more important? Do you want that affordable monthly payment or breathtaking view? To narrow it down, we’ll consider the three most important things when it comes to choosing what to buy.

#1: Your total monthly payment. The first thing—and maybe the most important thing—is what your total monthly payment will be. This includes everything associated with the cost of the house, like your principal, interest, taxes, and insurance.

Are there any homeowners association fees? Are there any Mello-Roos fees or other special tax bonds? What are those fees altogether calculated out into a monthly expense? What is that number for you? Where do we need to cap that so that you’re happy? These are all important questions to consider.

#2: Location. The second thing to consider is how important location is to you. Do you need to be really close to work? Do you need to be really close to your kid’s school? Do you need to be within walking distance of grocery stores, the park, bars, or restaurants? Or, is it okay if those things are further away and you don’t mind driving? Do you need to be close to the ocean? Are you a surfer, bro? Do you need to catch some waves in the morning? These can all be deciding factors.

#3: The features of your home. The third thing to consider is what features a home needs to have for you to move forward with it. In other words, does your new home have to have four bedrooms and three bathrooms? Could you settle for less? Do you have to have new construction because you cannot stand the idea of replacing anything? You may want a home to be turnkey and move-in ready. Some people just don’t like shag carpet.

Searching Within Your Budget

The first and most important thing you need to realize is that no one gets everything. You just don’t. It doesn’t matter what your price point is; you’re always going to have to compromise on one of those things. Location, price, and amenities always need to be considered and ranked in their priority order for you.

For example, what if you found a great home with the price that suits you in the neighborhood you want—but the interior needs updating? Or what if you went $20,000 over budget, but you got the house of your dreams in the place that you want and with all your amenities? What if your house came $50,000 under your budget, but you had to sacrifice location?

For most people, the most important factor is going to be price—unless you won the lottery or somebody left you a ton of money and budget is not a factor. If that’s the case, we can go ahead and cross price right off the map. Usually, though, price is the first thing that we have to consider. Once we figure out what your budget is, that will automatically help us with geography. Certain neighborhoods are just going to be exed out because they’re not going to fall within that budget. Conversely, there are going to be a lot of neighborhoods that’ll be put into your search parameters because they’ll fit within your price range.

Amenities And Location

Once we have your budget nailed down, we have to consider amenities and location. It’s up to you to decide what’s most important. Is it the location or is it the amenities that the property is giving to you? For example, if you know you need a fourth bedroom and we’ve already nailed down your budget and monthly payment, that’s going to narrow down the neighborhoods that we can look in for you. It will make your search much easier.

On the other hand, if the location is more important and you are willing to sacrifice some amenities, then we can go ahead and zero in on the location first. For example, maybe you thought you needed a four-bedroom house at first. Now you realize that location is more important, and a two- or three-bedroom will do. That’s going to make our search much easier.

A Process Of Elimination

A good real estate agent is going to help you determine what’s important to you, but fair warning: you may end up with something that was the complete opposite of what you thought you wanted. Sometimes, these things change. In fact, they almost always do.

Finding a new home is really just a process of elimination. The sooner you realize what your needs are, the easier it will become. I hope this helped you understand the most important factors to consider when finding a new home. If you have any questions about buying a house or home here in San Diego, please give me a call. I would love to talk to you and help you narrow down your home search!

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Understanding The Home Buying Process

Have you decided to buy a new home here in San Diego County and want to know what your next steps are? In this video, I’m going to walk you step-by-step through the process of buying a home in San Diego County. I’ll explain everything from finances to paperwork so you’ll know exactly what to expect.

Choosing The Right Agent

The most important part of the home buying process is preparation. This is because homes here in San Diego go fast, fast, fast. The very first thing you need to do is pick a great real estate agent. The reason why over 87% of all homebuyers in San Diego are represented by realtors is that number one, there’s no out of pocket expense, and number two, they keep you out of trouble.

How do they keep you out of trouble? Well, they’re going to answer important questions for you. Are you really making a good move? Have you considered all aspects of the inspection? Do you understand how the home buying process works? It’s your agent’s job to make sure you choose the best home for you. I don’t care where you buy, I care what you buy. If you’re happy with it and it’s a great investment for you, then I’m happy too.

Finding A Lender And Looking At Properties

After you get a good agent, it’s time to get a great lender. How you finance your home is extremely important—which is why you want to start working on that preapproval process with that great lender right away. Depending on the loan product that is right for you, we need to figure out what your down payment is going to be so that we can make sure we’re looking at the right things for you.

Now that you’ve got your financial ducks in a row, the fun part can begin. This is where we go and look at properties. It could take as little as one time, or it could take a year or more. It depends on you and your timeframe. Remember that when you’re buying a home, you’re not just buying a home. You’re also buying into the community as well. You want to make sure that that community serves your needs. Is it close enough to work for you? If you have kids, is it close enough to their school? Is it in the right school district that you want for them?

What about the actual house that you’re looking for? Does your budget match your realistic expectations? Once you find that home that speaks to you and that you love, it’s time to move on to the next step: submitting an offer.

Negotiations And Escrow

It’s your agent’s job to handle all the negotiations for you and get your offer accepted. Once you get your offer accepted, now we enter stage five, which is escrow. Now the real work begins. This is the part of the process where you are under contract but you don’t yet own the property.

Escrow is the time where we do all of our due diligence, like home inspections, title searches, the appraisal, and more. This is also when your loan application can be finalized since the last piece that they’re waiting for is your executed purchase contract. Once they have that, they go to town on doing their appraisal and working with the title company to make sure that they have a clear title.

The average time that an escrow takes from an accepted offer to closing in San Diego County is between 21 and 30 days. Just before the end—usually five days or so before the close of escrow—we’re going to schedule our final walkthrough. This is to establish that the property is in substantially the same condition as it was when you agreed to buy the home. It’s not a condition of the close of sale. The condition, rather, was the request for repairs, binding the seller to do anything that you agreed to.

This is just to make sure that everything has been done. If it hasn’t, it gives the seller a heads up to make sure that it gets done.

Closing On Your New Home

Once we finish our final walkthrough, we’re going to be in our last step: closing. That’s when you’re going to hear from the escrow or title company, and they’re going to arrange a time and place for you to sign your loan documents. The title company will take that title or send it electronically to the County Recorder’s Office. We’ll get an email confirmation that says, “You have confirmation and recording.” That’s when you officially own your home!

I hope this gave you a good idea of the steps that it takes to buy a home here in San Diego County. If you have any questions at all, or are excited to jump into this awesome pool of buying a home here in San Diego, please give me a call at (619) 925-2322. You can also text or email me and I’ll get back to you as soon as possible. I can’t wait to hear from you!

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What Are The Closing Costs For The Buyer??

Are you thinking about buying a house and wonder how much you’ll pay in closing costs? In this video, I’m going to walk you through typical closing costs when buying a home here in San Diego. I’ll explain how understanding these fees will help you budget and be best prepared to snag a great deal.

Down Payment And Title Fees

The good deals in San Diego go fast, so it’s super important that you are prepared. By knowing all about your closing costs, you’ll be ready to rock and roll as soon as you find the house that’s right for you.

Your first and biggest out-of-pocket expense is known as your down payment. While your down payment is not a true cost, it’s going to feel like one when it leaves your bank account. It will go towards the equity in your home and plays heavily into what kind of price range, home, and location you’ll look at.

Aside from the down payment, let’s talk about the actual costs of the home buying process here in San Diego. Some of the first things you’re going to see on your closing statement are title fees. Title fees are charged by a company that searches the history of the property to ensure that you have a clear title. This means that whoever legally owns the house has the right to sell the house. 

With a clear title, the bank feels comfortable lending you the money because they have confirmation that whoever owns the house can legally sell it to you. Since your lender will require that clear title, the title company will charge your lender the fee. And guess what? The lender is not going to pay it. They’re going to pass that on to you.

 

Escrow And Miscellaneous Fees

Another line item you’re going to see on your closing statement is escrow. Escrow is a neutral third party that technically works for both the seller and the buyer like Switzerland. They hold monies, disperse monies, collect documents, and disperse documents. We get charged for all that. 

You will close your property with an escrow company, and your property will be insured with a title company. Escrow fees will vary depending on the purchase price. Everything in real estate is always dependent and is usually a percentage of your purchase price. We’ll talk about that before we go looking at your potential home so you have a great idea of what to expect.

The next nebulous item you’ll see on your closing statement are miscellaneous fees associated with the loan on your purchase. While each lender is going to have their own fees, you’re going to be paying for the lender to process and fund your loan in the end. While all the little steps in between should be line items, some won’t. These are the miscellaneous items. 

Estimates, Taxes, And Inspections

One of the first things you want to do when you go through the pre-approval process with your lender is to find a ballpark figure for your closing costs. While they’re going to be different based on the exact purchase price of your home, you should get a close estimate. This will help you set your expectations as you move forward.

Another line item you’re going to see on your closing statement is the property transfer tax. Just like everything else bought or sold, there is a tax. In San Diego County, the rate is $1.10 per $1,000 of the purchase price. So if you buy a home for $500,000, then you can expect roughly $550 in transfer tax. This will be due payable to the San Diego County Treasurer’s office.

Another cost that you’re going to have (which won’t be on your closing statement) is your home inspection fee. This is part of the home buying process. Did you know that the average time a person spends in a home before they decide to buy it is about 15 minutes? This is why it’s super important to do a home inspection. We’re going to test all the big systems of the house and look at the roof, foundation, electrical, and plumbing to make sure that you’re buying something that works, is functional, and safe.

Your Total Closing Costs

I hope this gives you a good idea of what to expect for closing costs when purchasing a home here in San Diego County. It’s best to budget between 1.5-2.5% percent if you want to be conservative. It’s very doubtful it’ll be more than that. A big share of those closing costs—about  70%–is related to the loan fees. So if you’re going to be a cash buyer, your closing costs will be quite a bit less. 

If you’d like to get a more accurate idea of what your closing costs would be, please feel free to give me a call or shoot me a text or email and I’ll be happy to help. I can give you a more accurate number based on where you’re looking and what your budget is. If you don’t have a lender, I’ll also introduce you to a great one who will make sure that those closing costs are as little as possible. 

And remember, make sure to subscribe to my channel so you never miss a future episode all about San Diego real estate!

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How To Buy And Sell Your House At The Same Time

 

Do you currently own a home that you need to sell before you buy your next home? In this video, I show you how to seamlessly buy and sell a home at the same time. Because there are so many moving parts in this situation, it’s important to time your sale just right to avoid ending up homeless in between transactions.

Planning Your Transactions

Buying and selling at the same time can be really tricky. It requires a lot of planning, and if you don’t plan accordingly and act accordingly, you could be homeless in between transactions—which is not a good thing.

When you’re buying and selling a home at the same time, there’s a lot of moving parts that can be contingent upon each other. We’ll go through exactly how to navigate this type of transaction and keep you out of trouble. Timing the sale of your current house and the purchase of your next house is what’s most crucial in this process.

The first question you need to ask yourself is if you need to sell your current home before you buy your next home. If the answer is no, this just became a lot easier. If your answer is yes, then the situation is a little bit trickier.

The Right Timing

Ideally, you have an offer on your existing home before you make an offer on your next home. Let me explain how that works.

The reason this is important is that you will need to sell your current home and get rid of that debt before your lender will give you more money to buy your next home. In our dream world, we would sell our current home in the morning, and later that afternoon or the next day we would buy our new home.

There are a few reasons why you’ll want to line up your transaction this way. When you make an offer to purchase a home, that seller wants to know that your offer is not contingent on your need to sell something to buy their home. Let’s imagine that you’re the seller and I’m your agent for listing your home. We’re not going to accept an offer from a buyer who has to sell their home first to buy your home. That’s a contingent offer and is not a strong position. However, if they have an offer that is an executed, legitimate purchase agreement to buy their home, then that’s a whole different story.

How To Do It

Here’s the best way that we recommend doing this process. First, you can loosely start window shopping. As we get further on in the process where we’ve listed your home for sale and we have an accepted offer, then we start more aggressively looking. It’s important, as a buyer, to be prepared to write an offer and perform on it, specifically once you get an offer on your property or you are expecting one.

In a perfect world, it looks like this: we get an offer on your existing home, and then we make an offer on your next home—in that order. We want to line up those closing dates so that they can ideally be on the same day, concurrently, or within 24 hours of each other. This is exactly how you end up not being homeless in between two transactions.

Do You Need Help Buying And Selling?

In the past 15 years of my doing this, no two transactions have ever gone exactly the same. While they all have their different roadmaps, one of the most complex types of transactions anyone will ever do is to buy and sell at the same time.

I hope this helped to simplify and explain a little bit about how to buy and sell a home at the same time. Since everyone’s situation is different, feel free to reach out to me if you’d like any advice or help. Give me a call at (619) 925-2322, and I’ll be happy to connect with you!

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How Steve Got His Dream House In Hillcrest On A Budget

Are you looking to buy your dream home but aren’t sure if you can find the perfect place for your budget? In this video, we’re going to look at a case study example of how you can make a smart investment even in a competitive market. I’ll share how I made “Steve”’s dream of getting a single-family home in Hillcrest under $500,000 possible.

Steve’s Story

A few years ago, Steve said to me, “Chris, get me a single-family house in Hillcrest. My budget’s $500,000.” As if that was totally possible! But guess what? Today, he’s living in it.

One of the reasons I love being a realtor is because of stories like this. Steve wanted to buy his dream home in Hillcrest, but he was limited by a budget of $500,000. In this neighborhood, that is a tough budget. I get crazy requests from buyers all the time, and this one was right up there because Hillcrest is not an inexpensive neighborhood. I was pretty darn sure it was not going to happen for that budget. Fast forward to today and Steve is living in his dream home—all because we saw an opportunity and we took it.

Everybody in real estate wants to make a wise investment, and the ones who are truly successful take the time to learn and study the local real estate market they’re wanting to buy into. Or, they just work with a really good realtor who knows all of that for them. But even if I could find such a tall order as a single-family home under $500,000 in Hillcrest, I knew that we would have a lot of other competitive offers. If you’re familiar at all with the San Diego market in the last 5 years, you’re well aware that almost every home gets multiple offers.

I was getting prepared for this situation and also preparing Steve. Once we saw the right property come on the market, we jumped on the opportunity right away.

Getting The House

I knew that we had to fight to be the first ones on this property, as the price range in a very desirable neighborhood would cause fierce competition. We needed to be first and, if not first, at least in the first group of offers. Once we saw the property, we put in our offer immediately. As I suspected, though, we were one of four, other offers.

This means the property had a total of five offers within two days. I knew negotiation was going to be crucial, so I took a little time to research the agent in this case. I found some common ground, and I shared with him some really important credentials that we, as realtors, can get through our education. In the end, that’s what won the day.

The first thing I wanted to do was to build rapport, and as soon as you do that, you start building respect. And as soon as you get respect, you know that your offer is going to be taken seriously. In this particular case, the other agent and I completely hit it off, not only personally but professionally, in terms of our professional and educational experience and credentials.

The best part was our offer wasn’t even the highest price, but from the listing agent’s perspective, it had the highest chance of closing. He knew that I had what it took from his personal experience and education to make the deal happen. You see, in real estate, when you buy smart, you make money—and the story doesn’t end there.

A Wise Investment

A few years later, Steve did so well on his dream home that he was able to take some money out of it. He used that money as a down payment on an investment property, which a few years later in the same neighborhood, he sold to make an even greater profit. This allowed him to pay off his dad, who gave him the original loan for the single-family home in Hillcrest under $500,000.

It was such a huge series of wins for him, and that’s exactly how you should approach real estate. Not only can you find a great place to live and have the lifestyle you want, but it’s also something that’s going to make you money. That will help build your wealth in the future.

So, the next time someone tells you that real estate isn’t the best investment, take it with a grain of salt. I hope Steve’s story has given you a little hope. While we both didn’t have much hope in the beginning, working together and scouring the market allowed us to find him his dream home. Not only did we find him his dream home, but it made him a boatload of money that he was able to translate into an investment purchase years down the road. He was able to then sell and pay off loans that helped him buy the first place, and he still has a nice, six-figure equity.

If you would like any more information on how to become a smart investor—not only to find a home to buy, live in, and have the lifestyle you want but as an investment home as well—please give me a call. You can contact me at (619) 925-2322 and I’ll be happy to connect with you. And remember, make sure to subscribe to my channel so you never miss a future episode of All About San Diego Real Estate!