Home Loans San Diego
Conventional Loans and Government Loans/ Conforming Loans and Non-Conforming Loans
The conforming loan is a loan that meets the requirements prescribed by Freddie Mac and Fannie Mae. Otherwise the loan is considered a non-conforming is it does not comply with the guidelines set forth by the GSEs (Freddie Mac and Fannie Mae).
Features of conforming loan
· it can be adjustable
· It has 30-year, 20-year, 15-year, and 10-year fixed rate mortgages
· It can be a second mortgage
San Diego Home Loans Fixed Or Adjustable
Conventional (Conforming) fixed-rate mortgage
Obtaining a fixed-rate mortgage in San Diego features a rate of interest that will remain the same during the life of the loan. A conforming (conventional) mortgage is adapted to guidelines that have been established according to your financial situation and the size/extent of the mortgage. Usually, the rate of interest on conforming loans is much lower than that on FHA, jumbo, or VA loans.
Conventional fixed-rate mortgage viewed as the best option for borrowers who intend to reside in the same home for a long period of time. This is because the monthly payments don’t change and will remain constant throughout the loan period.
ARM (adjustable-rate mortgage) is viewed as an option for fixed-rate mortgage since it comes with low monthly payments in the initial years. Although many people find a fixed-rate mortgage more secure, ARM is a better alternative if you are likely or certain to relocate within a few years.
30-Year Fixed-Rate Mortgages
30-year conforming fixed-rate mortgage remain a popular option due to its lesser monthly payments and a constant rate of interest. However, considering that the interest payments are distributed over the entire 30-year period, you end up paying more in terms of interest compared to a short-term mortgage.
15 and 20-Year Fixed-Rate Mortgages
15 and 20 year fixed-rate mortgages have a much higher monthly payment than the 30-year fixed-rate mortgage. However, you pay up the loan in a much shorter time and you also build home equity. These loans are mostly used for refinancing.
Requirements and Qualifications
Loan amount – For a conforming loan the total amount for single-family home doesn’t exceed $417,000. However, the amount restriction may be lifted in areas with high home prices. You can exceed the price ceiling placed on single-family homes by opting for a jumbo loan.
Down payment – 5 % down payment is usually the minimum for majority of conventional mortgages. Nonetheless, you can also put in more than 20%. To find mortgages that require low down payments, look at mortgages backed by the government such as FHA and VA loans.
Credit history – Borrowers looking for conventional mortgages need to have outstanding credit. The FICO score should be at least 740. Other guidelines on personal finance details and income are also considered.
Adjustable-rate mortgages in San Diego
The rate of interest on Adjustable-rate mortgages (ARMs) may vary occasionally in relation to the Glossary Term: the level of index linked to the mortgage. Generally, the monthly payments will rise if the rate increases and will drop if it decreases.
Majority of the loan providers nowadays offer fixed-period or hybrid ARM whereby the interest rate will remain fixed initially and normally covers 3, 5, 7 or 10 years. Upon expiry of the introductory period, the interest rates become variable/adjustable for the remaining Glossary term: term layer. Bank of America offers hybrid ARM that has an overall tenure of 30 years. The mortgages are reffered to according to the period the rate of interest stays fixed and also the frequency of the adjustments on the interest rate.
For instance, a 5/1 ARM indicates that the introductory period where the rate of interest stays fixed is 5 years. After the end of the introductory fixed-interest period, the interest rate will be adjusted once annually (1).
Impact of adjustable-rate mortgage on payments
In a hybrid ARM, you will pay lower monthly payments in the introductory period since the interest rate is low. However, after the introductory-fixed rate tenure ends you will pay higher monthly payments because it adjusts to the full Glossary Term: indexed layer rate. You should therefore be financially geared up to adjust to the higher payments.
Likewise, the monthly payment and interest rate may increase or decrease once annually during the remainder of the mortgage after the introductory period expires.
What to Consider When Searching For Hybrid Adjustable-Rate Mortgage
Hybrid adjustable-rate mortgage are not all the same and the effectiveness of each will vary from one situation to another. The following are situations where Hybrid adjustable-rate mortgages are suitable:
-If you intend to relocate within the period covered by introductory fixed-rate and will therefore not be effected by possible rise in rate and payments later on.
-If you believe that your income will increase substantially in the coming years and will cover any possible rise in payments occasioned by increase in rate of interest after the end of the introductory fixed-rate phase.
– You believe that the rate of interest will drop in the coming years.
-You desire a much lower preliminary monthly payment than what is offered through the fixed-rate mortgage.
Shortcomings of Hybrid Adjustable-rate Mortgage:
-The amount payable increases with the rising rates and may not match the rise in your income
-Rate of interest will rise in an environment where the rates are increasing
-In a market where the value of homes is declining, the rising interest rate lowers the Glossary Term: equity layer accumulation.
Classification of Hybrid ARMs
10/1 adjustable-rate mortgage
A 10/1 ARM mortgage: The interest rate remains fixed for the initial 10 years. After the end of the 10 years, the interest rate is adjusted once annually for the remaining period of the loan. Your monthly payments rise if the rates increase and reduce if the rates drop.
7/1 adjustable-rate mortgage
A 7/1 ARM mortgage: The interest rate remains fixed for the initial 7 years. After the end of the 7 years, the interest rate is adjusted once annually for the remaining period of the loan. Your monthly payments go up if the rates increase and reduce if the rates go down.
5/1 adjustable-rate mortgage
A 5/1 ARM mortgage: The interest rate remains fixed for the initial 5 years. After the end of the 5 years, the interest rate is adjusted once annually for the remaining period of the loan. Your monthly payments rise if the rates go up and reduce if the rates drop.
ARM interest rate caps and loan indices
In a hybrid adjustable-rate mortgage, the rate of interest payable after the expiry of the introductory fixed-rate period is dependent on a variable financial Glossary Term: layer of index and Glossary Term: layer of margin. You will pay more every month if the rates increase and pay less if the rates go down. For Instance, if the financial index rate of interest is 5.5% and you have margin of 2.25%, then during the adjustment period your rate will be 7.75 %( 2.25 + 5.5).
What you need to know is that indices and margins vary from one lender to another with some indices rising or dropping more rapidly than others. The terms of your adjustable-rate mortgage are what influence the frequency of the payment adjustment in relation to the index. It is therefore paramount to consider the margin as well as index during the search for ARM mortgages.
Both traditional and Hybrid ARM mortgages normally contain a Glossary Term-adjustment “cap” layer. This puts a limit on how high or how low the rate of interest can be in any adjustment period or over the remaining life of the mortgage. But, “payment shock” can still occur if numerous rate caps are permitted. This will occur taking into account that when the introductory fixed-rate period elapses, ARM mortgage interest rate is adjusted once every year.
Questions to ask when searching for ARM options:
-How frequent will the rate fluctuate after the end of the introductory fixed-rate period?
-Is the Glossary Term on the ARM mortgage assumable layer?
-Is a rate cap included in the ARM mortgage you are considering? And if YES, what is the limit/cap on the rate for the adjustment period as well as during the mortgage’s tenure?
-Does paying off the loan early attract a penalty or prepayment fee? Prepaying the adjustable-rate mortgage early enables you refinance in case the rates drop.
All adjustable-rate mortgages rely on money rate indices to come up with the rate of interest on the loan for a given time period. Lenders or loan providers don’t have any power on any of indices used to ascertain the money rate as they are majorly influenced by market forces. However, you can always keep tabs on the performance of the money rate indices by looking at The Wall Street Journal.
The interest rate you will pay is pegged on a specified adjustment period and is computed by summing up the index rate to the Glossary Term: margin layer. The margin layer stays constant from one period to another unlike the rate of index. The adjustable-rate mortgage index that is commonly used is based on the following:
London Interbank Offered Rate (LIBOR) adjustable-rate mortgages
Although LIBOR index changes more regularly, Bank of America ARM only adjusts yearly after the end of the introductory fixed-rate period.
Many people have significantly benefited from FHA loans since 1934. The Federal Housing Administration that is a part of HUD (Housing and Urban Department) insures the loan so that the lender can give you the best deals, which include:
· Low closing costs
· Low down payments
· Easy credit qualifying
What does FHA do?
Financial assistance first time homeowners
If you are looking forward to buying a home for the first time, then FHA will become handy for you. With FHA, you will pay down payments as low as 3.5% of the buying price of the house. The FHA will give you the best deals on 1-4 unit properties.
Financial assistance for elderly
FHA assist those people who are above 62 years who own homes and have low loan balances. The FHA reverse mortgage will be very beneficial to such people because it will allow them to convert a section of their equity into cash.
Help you make your home more efficient
The FHA Energy-Efficient mortgage will help you settle the cost of energy improvement in your house. It caters for all costs incurred in making your home more energy efficient.
Financial assistance in mobile homes and factory-built housing
FHA provide financial assistance for factory-built housing and mobile homes. The FHA has two loan products, one for those who own the land on where the home is on and another one for mobile homes that will be located in mobile home parks.
Contact FHA and you will get more information on their products.
Find an FHA lender
There are a number of reputable FHA lenders, including:
· California Housing Finance Agency (CalHFA) that offer homebuyer programs, including closing cost and down payment assistance, and foreclosure prevention resources.
· U.S Department of Agriculture and Rural Housing that provide assistance to homebuyers in rural communities.
· CalVet Home Loans that offer assistance for veteran homebuyers in California.
A bridge is a short-term loan that is acquired by the borrower against a current property to finance a purchase of new property. Also known as gap financing, interim financing, or swing loan, a bridge loan repayment is ideally for 6 months, but can be extended to 12months. Usually, a bridge loan have an interest rate of approximately 2% above normal fixed- rate products and usually have high closing costs.
Also known as the tax-deferred exchange or real estate, 1031 exchange was created in 1990 by IRS. The 1031 exchange facilitate the sale of an investment property to buy another investment. In this case, a homeowner can offset the capital gain tax by selling one investment to purchase another. In the 1031 exchange, the sold property is known as relinquished property and acquired property is known as replacement property. Before the introduction of the 1031 exchange, the homeowners usually sold their properties before escrow of new properties, which proved very difficult.
FHA streamline borrowers, FHA cash-out refinance loans, Fixed rate FHA loans
Usually, the borrower’s closing costs paid upfront are not considered in the borrower’s minimum 3.5% down payment. Therefore, it is very vital to keep this is mind while budgeting for a new home loan.
· The FHA home loan 203(b)
· Single-family rehabilitation mortgage insurance section 203(k)
· FHA adjustable rate mortgages (section 251). This provides insurance for adjustable rate mortgages
· Single-family mortgage insurance for condominium units (section 234(c))
· FHA reverse mortgage
FHA Jumbo Loans
The new FHA/HUD regulations will provide insurance for the increased loan amounts depending on your county or state. This will allow you benefit from the new maximum limits for the FHA loans. The customers who qualify for this loan can apply for an FHA Jumbo loan to the maximum amount allowed by FHA. One can apply for a home loan with 3% less under new FHA loan limits.
Section 184 Indian Home Loan Guarantee Program
According to the latest statistics from the HUD, there is over $4,171,447,044 of home loans guaranteed in India and approximately 25, 750 loans up to date. The most important thing about section 184 Loan guarantee program, also known as HUD 184, is that it can be offered on and off the native land. Historically, the Native American home-ownership has been unfair market because Indian lands were held in Trust. The section 184 seeks to enable Native Americans to access more capital and also provide funding opportunities for tribal housing agencies.
Current Up-Front Mortgage Insurance Premium
The Up-Front Mortgage Insurance Premium is at 1.75% of the base loan amount. This rate applies regardless of the LTV ratio or amortization term.
Revision of the Annual MIP premium as per Mortgage letter of 2015-01
There will be no change to the annual Mortgage Insurance Premiums for the case numbers assigned on or after 26th January 2015 for the following:
- On loans with the value of less than 78% with terms up to 15 years. However, the annual MIP for these loans remains at 45 basis points.
· On terms less or equal to loan amounts less or equal to $625,500 if the loan value is less or equal to 90%, the annual premium will remain 45 basis points. However, if the loan to value is less than 90%, the annual premium remains 70 basis points.
· On terms less or equal to 15 years and loan amounts less than $625,500 and if the loan to value is 78.01-90.00 % , the annual premium remain at 70 basis points. If the loan to value is below 90%, the annual premium remains at 95 basis points.
There will reduction in premiums in annual mortgage insurance premiums for case numbers allocated on or after 26th January 2015 for the following:
· On terms less 15 years and loan amounts less or equal $625,500 and if the loan the value us less or equal to 95% , the new annual premium will be reduced from 130 basis points(bps) to 80 bps . if the loan to value is less than 95% , the new annual premium will be reduced from 135 basis points to 85 basis points.
· On terms less than 15 years and loan amounts less than $625,500 and if the loan to value is less or equal to 95%, the new annual premium will be reduced from 150 bps to 100 bps. If the loan to value is less than 95%, the new annual premium will be reduced from 15bps to 105 bps.
Making Home Affordable
In the beginning of 2009, a program referred to as Making Home Affordable was proclaimed by the Obama administration. This was a totally different program from Hope for Owners that was initiated in 2008. To get home financing you have to deal with either Freddie Mac loan or Fannie Mac. To get more information on whether you qualify for either of the two financing schemes you need to talk to your loan official, call 1-800-7FANNIE or 1-800-Freddie.
California Public Employee & Teacher Home Loan Program (CalPATH) is a home financing program that is offered in California and is available to Firefighters, Teachers, Police Officers, as well as other Public Employees. The good thing about the scheme is that it targets both existing as well as first time homebuyers.
Benefits of CalPATH Plan:
– Californian Public Employees who qualify for the program pay lower prices and lender fees.
– MI options paid by the lender attract a down payment that may be as low as 5%.
– CalPATH can be consolidated with other programs for down payment such as CHDAP
– In case the rates increase while processing the loan an individual gets a Free One-off Time Float Down
– Home buyer Commitment is keyed in 30 Days
CalPATH is offered to people purchasing homes for the first time, members of CALPERS Retirement fund and also for refinancing CalSTRS.
Veteran Affair (VA) loan is another form of mortgage or home financing that is made available to American veterans who qualify or their surviving spouses. (The spouses don’t qualify in case they remarry). The US Department of Veteran Affairs guarantees the long-term financing and may be given out by lenders who meet certain requirements.
Benefits of VA Home Loan
– If the selling price does not go beyond the assessed value of the home a potential buyer or borrower doesn’t need to pay any down payment.
-Premium on private mortgage insurance is not necessary
– The amount you will be charged for the cost of closing is determined by the VA rules.
-In some instances the seller pays the closing costs
-If you settle the loan much earlier than agreed, you will not be charged any penalty fee.
-When you face difficulties in the course of repaying the loan, VA may offer you some assistance.
Homeowners who desire to take some cash from their home equity and use the funds to fund education, pay off debt, or for home improvement can go for VA Cash-Out Refinance Loan. This loan can also be used by home owners to convert non-VA finance to a VA loan. VA guarantees the mortgage to a tune of 100% of the total home value.
VA Interest Rate Reduction Refinance Loan
VA Interest Rate Reduction Refinance Loan (IRRRL) is used to refinance an existing VA home mortgage and reduces the rate of interest. By lowering the amount of interest payable you also lower the monthly payments on the mortgage. Furthermore, the plan enables you refinance ARM (adjustable rate mortgage) to a fixed rate loan.
Facts about IRRRL
When applying for VA IRRRL in San Diego you don’t need credit underwriting plan or appraisal.
You can turn the IRRRL into a “no-money-out- of- pocket” package by either increasing the rates on the new loan so as to let the provider take-up the costs or incorporating all the costs attached to the new mortgage.
The rate of interest may rise when refinancing the loan as a fixed mortgage instead of the earlier adjustable rate mortgage (ARM).
No loan provider is mandated to offer you IRRRL. But, your application for IRRRL mortgage may be processed by any VA provider you choose.
Veterans are advised to research the market as there are quite a number of lenders whose times vary.
There is no guarantee that you will get cash when the loan is processed.
A new COE (Certificate of Eligibility) is not necessary. You can use the current Certificate of Eligibility as evidence of entitlement. Alternatively, instead of COE an email confirmation can be used.
Disabled Veterans Housing Grants in San Diego
Veterans and service members with total service-connected or permanent disabilities can also be given grants by VA. This enables them build or purchase an adapted home, modify the home to cater for the disability.
VA provides grants to Service members and Veterans with certain permanent and total service-connected disabilities to help purchase or construct an adapted home, or modify an existing home to accommodate a disability.
Special Housing Adaptation (SHA) and Specially Adapted Housing (SAH) are the two types of grants in existence.
1. Specially Adapted Housing (SAH) Grant
SAH grants assists Veterans with disabilities caused by service live independently without any restrictions to their environment. It can be used in any of the ways below:
-Build a specially adapted house upon acquisition of land.
-Construct a home on existing land that has been deemed fit for a specially adapted home.
-Modify an existing home after ascertaining that the land is appropriate for a specially adapted home.
-Use the grant to payoff pending principal mortgage dues on a home that has already been acquired and adapted without seeking VA grant aid.
2. Special Housing Adaptation (SHA) Grant
SHA grants assist Veterans with permanent or certain service-connected disabilities purchase or adapt housing that can accommodate the disability. SHA grants can be utilized in any of the ways below:
– Adapt a home already owned by the Veteran or a member of the family.
– Adapt a home that the Veteran or a member of the family wants to purchase and will be the residence of the veteran.
– Assist a Veteran buy a home that has been adapted for disability living.
As a veteran or service member with total service-connected and permanent disability you can seek SHA (Special Housing Adaptation) or SAH (Specially Adapted Housing) grant. The following table gives an overview of housing grant plans from VA that are available for Veterans and service members with specific service-connected disabilities.
Native American Direct Loan (NADL)
The Native American Direct Loan (NADL) plan offers direct VA home loans to qualified Native American Veterans to finance construction, purchase, or refurbish homes constructed on Federal Trust Land, or to refinance an earlier NADL to lower the rate of interest.
To apply, fill in and also submit a VA grant Form 26-4555 Visit http://www.vba.va.gov or Call 1-800-827-1000 (toll free) or visit VA Regional Office Locations to find the nearest VA office.
Home-buyer Programs Sorted by City: San Diego California
To find out more about all the different San Diego home loans that are available, or any of the down payment assistance programs, speak with a licensed mortgage professional. Our mortgage team has decades of experience behind them, and can guide you along the way.