There are many choices to make when you’re buying a home. One of those choices is whether to buy a brand new home from a builder or to find a resale home. There are pros and cons of each plan.

One of the most obvious differences is the shopping experience. It’s kind of fun to go look at model homes. They’re beautifully decorated, music is played and someone has obviously set things up so that people looking at the homes enjoy the experience. You don’t have to drive around a lot, because you can see 4 or 5 model homes in each tract, and often several tracts are built in the same immediate area.

When you look at resale homes, you are usually driving from home to home with a Realtor. Most resales are occupied while they’re on the market, so the current owners are trying to make the home presentable and get out before you arrive. There are a few seller who have learned from the success of model homes and try to copy that by staging their home when they put it on the market. This is far from the norm, though. In the case of a distressed sale, the homeowner may make little or no effort to make the home look nice or to be absent for a showing. In the cases where there are people living in the home, they may not be motivated to stop what they’re doing, make the home look good and leave so you can see it.

Other differences between a private seller and a professional builder become apparent when you choose a home and submit an offer. Builders act more like sales people. Their goal is to sell houses and they know how to do it – by making it easy for you to buy. Builders often put together a team of professionals that makes it easy for you to get a home loan, title insurance and anything else you may need in one place. They may offer special incentives to clear homes out of inventory at the end of the year or when things are slow. Homeowner sellers are personally attached to the home. They might get insulted if you ask for a carpet allowance to replace the carpet that they selected. Also, the cost of repairs, concessions and closing costs may come as a surprise to them. Home builders see these as costs of doing business and they know what to expect. Even the price at which a home is listed may be very different for a resale vs. a new home. Home builders price their product in accordance with the market. They know what their competition is and they stay competitive. Oftentimes unsophisticated homeowner sellers price their homes based on other things, like how much they need to walk away with in order to buy their new home, or how much time and money they’ve put into this house. These factors are unlikely to influence how much you are willing to pay for a home.

One of the obvious differences between a brand new home and a previously occupied home is its condition. New homes are, well, new. They have brand new water heaters and carpet, paint jobs and thermostats. Nothing is going to need to be repaired or replaced any time in the next few years. On the flip side, your new house will need an infusion of cash for landscaping and window treatments right away. You also don’t have to live with the previous owner’s choice in carpet and paint. Many cosmetic features are customizable, so for the price of a new home, you’ll get your choices in counter tops, carpet and bathroom fixtures. Existing homes sometimes come with outdated features or things that are not to your taste.

When a new community is built, it needs infrastructure like roads, schools and fire stations. The money for these things comes from property taxes on the new homes in the area. This means that the property taxes are going to be higher on a new home. This is sometime called a Mello Roos tax.

Neighborhood is a key factor in selecting a home for your family. A resale home is in an existing neighborhood that already has characteristics. Do the homeowners have block parties every month? Is it a quiet street? Are there kids the same age as your kids? Is there a neighbor who has frequent disagreements with other homeowners? Are the schools good? If you’re looking at resale homes, you can look at these neighborhood factors to determine if it’s a good fit for you. A new home in a new subdivision is like a clean slate. All of the new buyers will determine the personality of the new neighborhood.

Most home buyers look at some new homes and some resales before making a final decision. Being aware of the pros and cons of each option will help you make the right choice for your family.

If you live in Southern California, be sure to see these new homes in Chula Vista.

When you shop mortgage lenders for current mortgage rates, how do they determine what rates to quote you?

A loan officer typically gets daily rate sheets from their secondary marketing department or from “wholesale’ mortgage lenders. These mortgage rate sheets are not for public view, because they show the price of a loan before the retail mark-up, similar to how retail stores buy and sell goods.

Rate Sheet Pricing Example:

* 5.500% – (1.000) * 5.375% – (0.750) * 5.250% – (0.250) * 5.125% – 0.000 * 5.000% – 0.250 * 4.875% – 0.500

In the above example, each mortgage rate corresponds to the cost of the rate expressed in terms of “basis points”. One point is equal to one percent of the loan amount.

Internal Mortgage Rate Pricing

The above rates with numbers in parenthesis next to them indicate “rebate” points paid to the lender for selling a loan at a premium. The rates without numbers in parenthesis show the lender’s “cost” to sell a loan at that particular interest rate. The rate with corresponding zeros is the “par” price, which means the lender incurs no cost and they receive no rebate points for that interest rate.

Raising the rates will have lower short term costs because the mortgage holder will earn more in interest over the life of the loan, rather than points paid up-front. Conversely, lower rates have a higher up-front cost because the mortgage holder earns less interest over the term of the loan.

Retail Mortgage Rate Pricing

To quote a specific mortgage rate, a loan officer has to add points to the rate sheet pricing, which is essentially the lender’s profit. The lender normally sets a policy on the minimum and maximum points the loan officer adds to the rate sheet cost. The loan officer has the flexibility to price a loan within the allowable range. Most loan officers are paid on commission, which is usually based on a “split” of the points divided between them and the lender.

For example, if the lender’s standard policy is to charge a minimum of one point and a maximum of two points per loan, the loan officer has the ability to negotiate mortgage rates according to how competitive they need to be. Based on the rate sheet pricing above, the retail cost of a 5.125% rate may be one to two points, while 5.5% may have a cost of zero to one point.

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Urgency created by the federal home buyer tax credit is gone, and home buyers are now looking for lower prices.

Even though mortgage rates remain low, the volume of new mortgage applications has dropped. The Mortgage Bankers Association is reporting that applications for loans to buy homes have substantially decreased.

With no incentives such as a tax credit to influence a buying decision, home buyers are taking their time and being more selective. There seems to be a general expectation that many home sellers are desperate to sell, and will settle for a lower price.

If home sellers are not forced to sell, they tend to think their home is worth top dollar. Even if they wanted to, many home sellers cannot consider a low offer because they don’t have enough equity to cover all the costs of selling the home and moving. If sellers are not able sell for a sufficient price, they may have to negotiate a short sale with the lender.

The contrast in perceptions is a primary cause for collapsed transactions. Estimates of 15 to 17 percent of sale transactions in some areas are falling apart as sellers prove unable or unwilling to give buyers what they want. In a normal market, the figure is about 5 percent.

Buyers can’t be faulted for holding out for a bargain, they just want the best deal. Market perception for sellers may have been influenced by the increase in demand caused by the federal tax credit. It may take some time for reality to set in that a recent boost in home prices was only temporary, and sustainable gains need to be supported by real job growth and sufficient household income

Over time, the housing market naturally makes price corrections based on supply and demand. Unless job growth quickly improves, government incentives that were meant to support home sales, may have just delayed the inevitable price corrections.

Written by R. Smith: Mortgage, New Homes in Chula Vista

A potential rise in mortgage rates during the course of 2010 could impact the ability of some borrowers to qualify for buying a home.

The mortgage market group at Fannie Mae provides analysis of current and historical data, and forecasts economic trends in the housing and mortgage finance markets. Their economic outlook for 30 year fixed mortgage rates predicts increases through the end of 2010.

If you are thinking of buying a home, there is more to consider than just a higher monthly payment if mortgage rates increase, especially if you are on a tight home shopping budget. Higher mortgage rates in the near future can also influence your ability to qualify for your desired loan amount and your maximum home price.

One Example:

If you were to apply for a home mortgage with a loan amount of $350,000 on a 30 year fixed interest rate of 5.25 percent, the monthly principal and interest payments would be about $1,927. If mortgage rates were to increase by half of one percent, the monthly payment for the same loan amount would be about $2,048 per month.

In this example, the increase of $121 would affect more than just your monthly mortgage expense, it also means that your gross monthly income would have to be about $390 higher in order to qualify for the same loan based on the conventional 28% mortgage debt ratio.

Another way to look at it; if you don’t have the additional monthly income, the maximum loan amount you could qualify for in this example would be about $20,000 less at the higher rate.

Some mortgage borrowers are pushing the debt ratio limit, so this could be the difference between getting qualified for a loan, or not. If you plan on buying a home or refinancing sometime this year, you may want to re-calculate your ratio at a higher interest rate just to know where you stand.

Get mortgage, rates and loan information, and check out new homes Chula Vista.

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San Diego is following a positive and upward trend when it comes to the real estate market after fifteen months of slight increases. A couple of reasons exist for the slow but stable home price increase. One is the fact that many retirees are retiring close to the San Diego’s coastline due to its sunny and warm weather. Another reason why the market is holding steady is because homes are now more affordable than ever due to special mortgage loans and rates that are favorable towards purchasers. A lot of investors are also currently buying property due to the low prices.

Professionals and experts in the field of residential real estate are guessing that the prices of homes in the county will either remain steady or possibly even increase slightly within the near future. Homes in the SD area are heading more towards a normal market whereas Orange County has a much higher percentage of distressed properties (36.4 percent versus SD’s 26.9 percent).

Actually, SD has actually made it to number three on the top ten list of most desirable markets for careful residential investors. Now would be a great chance to check out homes listed for sale in the area due to the favorable market.

When it comes to the job market, it looks as if that is heading towards a positive direction as well. For example, Christmas retail jobs for the holiday seasons are improved for 2010 versus 2009. Retail stores in the area are expecting sales figures to be much higher this year compared to last year. Tourism has also picked up during the summer months and auto sales have increased for 2010 as well.

To conclude, it appears that residential values are holding even and the economy is slowly heading towards a more favorable direction. More and more individuals are purchasing homes, even in an uncertain fiscal period of time due to special mortgage programs. If you are looking to obtain a home loan, it doesn’t get better than San Diego, a beautiful place with a gorgeous coastline, palm trees and bright blue skies.

Written by Jacqueline Star: San Diego New Homes, Chula Vista New Homes