What Does My Monthly Mortgage Payment Include?

It’s pretty important to know what exactly makes up those monthly mortgage payments you’re making.  Most San Diego home owners these days take a pretty lackadaisical approach to not only paying their mortgage payments, but even understanding what all goes into those monthly payments.

monthly-mortgage-paymentContrary to popular belief, your lender doesn’t just take a giant bag of money from you each month, toss it onto a pile, and mark off that month’s transaction before wishing you a nice day — that money is actually divided up to cover various other costs as well.  I thought we’d take a minute today and go over exactly what it is you’re paying each month when you make your mortgage payment, conveniently broken down into four bite-sized chunks:

Principal and Interest

Most homeowners already know that at least a part of their monthly payment goes towards paying down the principal, or original loan balance.  How much of your payment goes towards the principal steadily increases over time and is also tied to the amount of interest that you’re required to pay on the loan.  Which one you pay more fluctuates — while you’ll be paying more in interest fees when you first get the loan, as time goes on, your interest payments will start to decrease and you’ll be focusing more on paying the principal.

Insurance

Gotta have insurance on your home, right?  Well, yeah, it’s kind of required, actually.  In fact, there are many homeowners who are required to carry homeowners insurance if they have yet to pay off their mortgages (which just about covers most of us, anyway).

Where you live can have a pretty big impact on how much you’re paying in insurance each month.  Those who live closer to areas prone to fires or floods will be paying more to insure their homes than those who don’t live around those parts of the country.

Taxes

You didn’t think you could just forget about the tax man, did you?  Well, don’t worry — he remembered you all the same.  And just like everyone of these other categories, the amount you pay each month can fluctuate all over the place, depending on the current assessed value of your home.  It’s important to pay attention to not only your home’s assessed value, but also your local property tax policy, so you’ll always know what you’re paying in taxes each month.

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What is an FHA Loan?

Most new homebuyers on the market for their very first house will look for just about any advantage they can get — including looking at any and every loan option available to them.  One of the most popular San Diego home loans many buyers end up choosing is an FHA loan.

fha-loan

What they are

It’s important to note from the get-go that Federal Housing Administration loans aren’t actually exactly home loans in the traditional sense of the word – the FHA itself doesn’t really make or even guarantee home loans, it merely insures them.  This insurance is used to either minimize or outright remove the default risk that comes from buyers who put down less than 20% for a down payment.  FHA lenders are allowed to take and process loan applications as well as underwrite and close the loan themselves.

Many homebuyers tend to favor them over other loan types because they offer the easiest refinance options, allowing for more flexibility in the homebuyer’s credit rating, their financial income, equity, and (probably most important to many) the amount required for a down payment.

Who they can really help

If you’ve already got a history of bad credit weighing down your chances of getting that home loan you’ve been working towards, an FHA loan is likely just right for you.  Having a bankruptcy or foreclosure (or even just a low FICO score) show up on your report is basically the credit equivalent of The Scarlet Letter whenever you try to borrow money or take out a loan, but the FHA might actually be able to see you through that all and still get that loan.

For example, even though a bankruptcy will remain on a consumer’s credit report for no less than 10 years, you can still apply for and obtain an FHA loan in as little as 2-3 years from the time your bankruptcy is discharged.  The same applies to foreclosures – so long as you’ve only got one on file and have been able to keep your other credit accounts up to date.

Wanna see if an FHA loan is right for you?  We’ve got a whole team ready to help!

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How To Determine Your Current Home Value

Finding out the exact value of your home is something a lot of San Diego homeowners want to know, but can be extremely difficult to determine.  Sure, there are plenty of programs out there that tell you they can determine your home’s value by tracking price and sales trends, but there still is no exact science behind it.

what-is-my-home-valueYour home’s value is determined by a number of factors, including its perception of value which is influenced by the other homes on the market, the current buyer population, and what kinds of homes have been selling recently.

 

 

 

Competition

When a potential home buyer is on the market for a new home, they’re going to be looking at every home on the market — including yours — and comparing them to each other.  You can get a head start on the competition by taking a look at the other homes in your area for sale and choosing a list price that helps you stand out from the current crop of hopeful sellers.

Of course, you’ll want to make sure not to overestimate your home’s worth.  If you list a price of $500,000 one day and a better home goes up for sale the next for the same price, most buyers are automatically going to discount your home, so keep that in mind when pricing.

Current buyer population

Another big factor in determining your home’s current value is seeing just how many people out there are actually buying.  Much like watching the stock market, determining real estate market trends can be tricky as they tend to fluctuate pretty often.  Things like interest rates and the availability of certain homes can help contribute to a sense of urgency in the current market.

Recent home sales

What kinds of homes have been selling recently in your area?  Single story, or two-story?  Maybe something with a pool?  Of course, no two houses are exactly the same — which is why a lot of home buyers seem to prefer homes that have been remodeled or added to, over homes in their original condition.  If you’ve got some fixer uppers that need attending to, you might wanna see to that sooner rather than later.

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