Financing San Diego Homes & Real Estate
Mortgages for Houses, Condos, Residential Properties
There are many financing options when purchasing real estate in San Diego CA. Different lenders specialize in different types loans for houses, condos, and multiple-unit residential properties. Choosing between a conventional, FHA loan, fixed rate, adjustable, conforming or jumbo mortgage can be confusing. As long-time San Diego Realtors we have relationships with the best mortgage specialists in San Diego County. Together we will help you determine the type of financing that will best suit your situation.
There are websites online that quote mortgage interest rates, but we recommend obtaining a loan through a local San Diego bank or mortgage broker who understands local customs, knows local appraisals, and who will be your advocate. REMEMBER: One type of lender will be there for you when closing day arrives, and the other type of lender will just quote you a rate – then disappear when the closing day arrives and the moving van is in the driveway! It happens ALL THE TIME.
Mortgage brokers are highly popular today because they can help you shop for the best home loans being offered by many lenders. This not only saves you time, can save you money. Mortgage brokers have access to loan programs offered by the whole spectrum of public and private investors across the country – loan programs tailored to your specific needs.
Bank lenders and mortgage brokers will review your income, debt, late payments, bankruptcies or foreclosures (if any). They also check employment status. If you are self-employed, you will probably be asked for two years of tax returns. Without them, you may need to supply a larger down payment. A larger down payment can make you a “quick qualifier”. This means that the lender will consider factors beyond salary or income when making a decision to loan you money. The additional factors include the strength of your credit report, previous mortgage history, your investments and assets.
Types of Financing
Adjustable Rate Mortgage (ARM): Over the life of the loan, the mortgage interest rate changes, as often as once a month or as little as once a year. The ARM loan carries more risk to the borrower, as the interest rate may increase over the life of the loan. The advantage, depending on the market, is that the borrower can usually get a lower introductory rate and thereby qualify for a larger mortgage.
3/1 ;5/1 ;7/1 ; 10/1: These are fixed-rate mortgages for a period of time (usually three, five, seven or ten years), which then become ARM loans which adjust once a year. In other words, after the initial 3, 5, 7, 0r 10 years, the interest rate fluctuates. The advantage is that the initial interest rate is usually lower than a 30 year fixed rate mortgage, and payments remain stable for the initial period. This is a good option for people who plan to move within 5-7 years, or who may refinance the loan in the near future (for example, after remodeling and reappraising the home).
30 Year Fixed Rate Mortgage: The mortgage payment and interest rate remains the same over the life of the loan. This is a good loan for conservative purchasers who do not plan to sell the property or refinance loan within the next 5 to 8 years. The disadvantage is a slightly higher interest rate, because the lender has no possibility of raising the interest rate when the economy changes. Also, the higher interest rate means the borrower qualifies for a smaller loan than they would with either an ARM or a 3/1; 5/1; 7/1 or 10/1.
Important Considerations When Selecting Financing:
Current employment situation: Is it steady? Do you have sufficient reserves if your job situation changes?
Price of the Home: Sometimes buyers find a dream home that costs more than originally planned. The increased mortgage amount may require alternate financing, with different monthly payments. For example, instead of a 30 year fixed rate mortgage you may only qualify for a 7/1 mortgage.
Type of Property: Lenders my restrict loan choices based upon the property at issue. For example, if you are buying a condominium with five percent down, an ARM may be your only financing choice.
Financial Condition of the Seller: Some sellers may be willing to ‘carry paper’ meaning that they may loan you the money to purchase the house. Seller financing might include the entire first mortgage or a smaller second mortgage. A seller’s motivation to make a loan is often a function of the strength of the real estate market. However, a seller may also realize favorable tax consequences by providing financing, such as an installment sale to defer the seller’s taxable capital gain from the sale. Seller financing may be an ARM or a fixed rate loan as outlined above. It usually will be for a shorter period (10-15 years) and may have a balloon payment at the end of the loan period.
Financing (or refinancing) San Diego homes and investment properties can be complicated and there are many options. The outline above is broad in scope, and may not include important information that you need. Please seek consultation from your personal real estate consultant, mortgage broker, accountant, or attorney.
Contact Geoffrey Schiering, your personal San Diego real estate consultant, for additional information (619) 200-7612.
Helping Families Buy Real Estate In San Diego Is What We Do Best! Why?
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Geoffrey Schiering, J.D./M.B.A.
San Diego Realtor / Broker
CALL DIRECT: (619) 200-7612