Category: home buying

How Much Are Closing Costs in Orange County, California?

Closing Costs for Orange County Home Buyers in 2021
When you buy a home in Mission Viejo or anywhere else in Orange County, California, there’s a host of additional items besides your mortgage that you need to cover. You will also find a number of other costs involved with purchasing a home, which are called “closing costs”. The uncertainty home buyers have is how much will they have to pay.

Home buyers in Orange County (and other cities and counties in California) for the most part spend from 1% up to 3% of the contract price of the home in closing fees. What this means is that a high-priced home in Laguna Beach for $2 million could end up with higher closing costs starting near $20,000 and the same is true for lower priced homes.

According to Zillow, the median home price in Orange County was around $792,000 as of Nov. 2020 showing a 7% gain year over year. So, the buyer’s closing costs on a median-priced property in the city could range from $7,920 to $23,760.

Based on ClosingCorp. , a real estate statistical reporting company, California ranked number nine for the top 10 states with the most expensive closing costs. This is despite having a 1.05% average closing cost on a home. A low percentage is good but a higher average selling price makes up for it.

Home buyers throughout the golden state pay an average of $6,537. However that’s dependent on an average home price of $622,881, which “was the average” for the whole state in 2019. As of now, the average home price is $640,300. Houses are more expensive in the Orange County area so naturally closing costs will be higher there too.

How much you’ll actually end up paying in closing costs in Orange County depends on several factors. If you want the lowest interest rate, are you willing to pay points at closing? It’s one of numerous factors that can determine the total amount you pay on the date of closing where you get the keys.

Mortgage lenders and brokers will provide you a loan estimate of your Orange County closing costs in the beginning. Some lenders go a step further by providing guaranteed closing costs. Once the lender fees are disclosed they are guaranteed to not change unless you choose to get a lower rate later in the process.

Third-party fees such as settlement agent, title insurance, appraisal are also supposed to not change. The loan estimate gives you a more accurate snapshot of your total costs to have funds ready for the final closing date.

The following are some of the usual items that reflect a home buyer’s closing costs:
• Fees for running the borrower’s credit report(s).
• Fees for loan or broker origination
• Fees for loan processing.
• Underwriting fee, which covers the cost of evaluating the loan and borrower.
• Discount points or fees, which borrowers may use to get a lower interest rate.
• Home appraisal fees (many times these are paid in upon ordering).
• Title search and insurance fees, for the lender; optional for home buyer.
• Property survey to confirm property lines, encroachment, etc.
• Attorney / legal fees, in some cases.
• Recording fee paid to Orange County County Clerk for recording new ownership records.

This list may be incomplete but it shows you some of the common closing costs when buying a home in Orange County, California. Extra fees and changes may be necessary in certain situations.

Still Have Questions About Closing Costs in Orange County?
Are you all set on the topic of closing costs in Orange County or are you ready to apply for a mortgage, we’ll be glad to help you and refer you to our recommended licensed professionals.

Is it Time for You to Own a Home and Stop Renting?

There are lots of advantages as a homeowner. Although buying a home isn’t the correct choice for everyone or for every situation, there are many perks of homeownership that usually remain consistent over time. These include building equity, lower overall monthly cost, pride of ownership, and freedom to do what you want to your property.

Owning a home is the American dream for most people, offering prospective homeowners the pride and satisfaction of having a place to call their own. Then again that’s not the only factor to thinking about stop renting and becoming a homeowner. There’s no doubt that homeownership is a large investment, but ultimately, it’s an investment that pays for itself multiple times over. Just review these reasons to learn how.

1. Less Costly
Homeownership usually costs less every month. In some areas, rent is still affordable, but in many places, it’s equal to or higher than a mortgage payment, especially when you factor in that mortgage interest and property taxes are tax deductible. As long as you get a fixed-rate mortgage, currently around 3% or less.

2. Building Value
Homeownership offers more value for your money.  While renting property is an expense, a  home you own is actually an investment.

The reason why is because with homeownership it allows you to build equity over time, so although up-front fees may seem excessive, buying a home usually becomes a better value in the long run.

3. Cost Control
With renting, you have no control over whether the cost of rent going up once your lease term is up. Oftentimes it leaves the renter with moving to another place. With homeownership, you’re in control.

You can create a budget to for your mortgage payment just like a rent check but you will feel comfortable knowing that your home will remain yours after a few years, 10 years or 20 years. You can move when you want to move. It is not based on someone else’s decisions.

The majority of mortgages are fixed so you are going to make the same payment each month. This should last for the next 30 years of your life. Even if the value of your home were to increase in value, your payment is still the same. For example, if you purchased the house for $175,000 and 10 years later, the home may be worth $299,000.

4. More Privacy
If you are paying rent in a multifamily building such as an apartment complex or a condo, it is very likely that you share walls, ceilings or floors with neighbors. Neighbors can be very loud at times, or even you, but it has to be endured because you are so close. People who buy a detached home becomes a more preferred option if you want to play your music loud or you can make your living space a very peaceful place.

5. Personalization
If you want to remodel your bathroom or kitchen, change your flooring or add an extra room it is not a freedom you in control of. As the owner of your home, the decision is yours to make, and you can redesign your home in any way you choose on the interior ar an extent subject to an HOA, local building codes and ordinances.

Some landlords or owners of the building you are renting will give you permission to make modifications as long as you return the property to its original form once you terminate the lease. Sometimes they will allow you to improve/modify it but all at your expense and possible rent reduction if it adds value.

How to Get the Advantage in a Bidding War in Orange County?

Bidding wars are one of the annoying situations when you’re trying to buy a home. A bidding war may happen when there’s multiple buyers very interested in buying the same home listed for sale.

Sellers and listing agents love it because these are motivated buyers competing against each other. It is very similar to an auction, where the highest offer ends the war and one buyer gets to move-in while the others must continue their search.

Not surprisingly, a bidding war isn’t a process that most prospective home buyers look forward to subjecting themselves to. With that being said, buyers should still take the time to learn how to put themselves in the best possible position as the winner because bidding wars could take place in practically any market.

Plus, major metro areas in California, such as Irvine and Orange County, have more bidding wars than other cities. If you’re thinking about buying a home in Costa Mesa, Newport Beach, or Irvine, it’s a very smart strategy to know how to be ready for a highly desirable home that will receive multiple offers.

Despite the fact that Southern California markets have cooled down in the last year, there is still a good possibility that buyers may experience a bidding war. Irvine and South Orange County are highly desirable areas for schools, work, overall quality of life.

Quick Look at the Orange County Market
As of December 2019, Orange County has a median home value of roughly $733,900 according to Zillow. That figure actually represents an increase of 1% from the prior year.

It is predicted that Orange County will experience an increase in home values of about 1.6% following another 12 month period. During the 2013-2017 period when Orange County had double-digit price gains on an annual basis, buyers were bidding against each other for a home most of the time.

Glimpse of the Irvine Market
The Irvine real estate market currently has a median home value of about $864,493, as of January 2020. This represents a decline of 0.8% from the past year. However, the city of Irvine is forecasted to have homes rise approximately 0.5% in the next 12 month period.

If you’re looking to buy a home in Irvine, you should be well prepared if a bidding war takes place. The public schools, UC Irvine, and it being an employment hub are very attractive.

Tips for Success to Outbid other Buyers in Orange County
While the Orange County housing market has officially been in a cooling phase for about a year, buyers are still prone to very motivated buyers with strong offers in certain neighborhoods. One strategy – which makes logical sense – is to put in an offer with your highest price. If the seller counters your offer along with other buyers, simply respond by raising your offer price aggressively to the list price or slightly above.

The problem is sometimes even if you come out as the winner, just hours or days later it’s at a price that makes you a bit insecure.  It feels like you paid a premium price simply due to other buyers.  To deal with this issue, you may want to use a different method.

An additional method is to write a personal letter to the seller.  Create a letter that clearly lets the seller know that owning a home in this particular neighborhood has been a goal of yours for a long time. Tell the seller what they should already know that the nearby park and schools are great for your young kids.

Also, if your job is positive for society let them know the commute time is shorter and it would be a perfect transaction. Another approach you can use is to remove any loan contingency periods. Oftentimes, the other buyers make an offer which includes a contingency on the appraisal value, loan terms, physical inspection, or selling their own existing home first.

Not surprisingly, sellers prefer to accept an offer from a buyer without a lot of stipulations.  Therefore, you can improve your chances of getting an accepted offer by waiving some of the usual contingencies.

However, there are risks involved with this tactic because if you can’t secure financing or the appraisal comes in low. Your earnest money deposit is likely to be awarded to the seller if you cannot complete the transaction.

Last but not least, one more strategy you can use to beat out other buyers for a home in Irvine is to insert an escalation clause in your offer. How this works is you are promising to raise your offer above the competing offers by a certain percentage but only up to a maximum limit.

For example, if your offer is $875,000, you could have an escalation clause that is .50% above other offers and with a maximum bid price of $925,000.

An escalation clause can be a very helpful tool in situations where a bidding war may arise. It lets the seller know you have the funds to close and are extremely motivated to buy the property. This is precisely the kind of buyer they want to purchase their home no matter if the market is competitive or not.

Reasons to Buy Orange County Real Estate in 2020

2019 was still a competitive year for Orange County home buyers, and it left a lot of prospective buyers frustrated as they continued to be renters. However, since the summer the market has become more balanced for both buyers and seller, setting up new possibilities for those seeking a home, townhouse, or condo in Orange County for sale.

Interest rates remain historically low and are less than they were at the end of 2018. With that in mind, there are quite a few beneficial reasons 2020 could be the year you become a homeowner in Orange County. Let’s dive in more.

Less Demand for Orange County Real Estate
After several years of practically extraordinary levels of demand, there’s been a change in the Orange County housing market, and it’s positive news for home buyers. In 2017 demand had sellers reviewing multiple offers, which brought on bidding wars and some buyers would simply pay noticeably above the asking price.

Because of this market condition, a lot of buyers decided to search outside of Orange County in Corona, Long Beach, or even North San Diego. They were motivated as they did not want to continue renting with landlord raising rents. This mass departure of buyers has helped correct the extreme demand that’s been discouraging home buyers for the last couple of years.

A Lowering of Mortgage Rates
Most prospective home buyers hear about interest rates moving lower or higher and either step forward or back depending on the market. So, during periods when rates are forecast to remain low, like they are estimated to in the first few months of 2020, the pool of buyers rises considerably and the quantity of days a house is listed for sale drops. This type of market condition changes the buyers and seller balance.

New Residential Construction
Not many cities are seeing the surges in residential home building that Irvine or Trabuco Canyon are having in Orange County. What does this mean for home buyers? Buyers have more supply as well as additional options in South Orange County that are very nice.

In Southern California, many communities may all look the same. That is the not case with the new luxury detached condos in Deco at Cadence Park in Irvine. These 3-story new homes are distinct  in a number of ways; offering homeowners a great rooms, stainless steel appliances and a large island in the kitchen with quartz slab countertops, subway tile in the master bathroom walk-in shower and private courtyards or decks and close proximity to UC Irvine, Woodbury Town Center and Disneyland. Deco Park, one of the newest condo buildings in the Irvine will provide its residents access to a 77-acre park, junior Olympic pool, yoga lawn, and sports park with bocce ball, basketball, and volleyball and shuffleboard courts.

Home Property Tax Deduction
If you are a homeowner in Orange County, the city offers a residential tax exemption as long as you live in the property as your primary home. The exemption gives Orange County homeowners a reduction on their yearly tax bill, basically lowering the annual tax rate by a minimum of $70 per year.

In 2020 home buyers can expect to see a larger supply of Orange County homes for sale, and because they will have considerably less competition than the past few years, they’ll have additional negotiating power on the asking price. So if you’ve been delaying the purchase of real estate in Orange County, 2020 may be your opportunity to make the most of economic conditions and shifts in the market that will cause Orange County homes to be more affordable compared to previous years.

For more information regarding Orange County real estate, or to speak with an agent about what to expect from the home buying process and the 2020 Orange County housing market, simply contact us.

Important Steps to Take When Buying a New Construction Home

Moving into a newly-constructed home is similar to getting a new car, but several happy levels higher. No outdated kitchen cabinets, old and bland looking carpeting, or smells from a smoker or their dogs.

Everything in the home is new, clean, and waiting for that personal touch. While these points may put you on cloud nine, there are things that do require your undivided attention with new construction. The following are some things to watch for when looking to buy a brand-new home.

The builder’s real estate agent
When you drive into the new home community and park, you’ll notice how easy it is to first be guided to the builder’s office before you get to see the model homes. That person sitting in the office is a licensed real estate sales agent for the seller (the builder).

You’ll learn what lots or completed homes are available, the community’s amenities and other relevant info. Before you fall in love with a home and sign a long legal purchase contract that tends to be biased in the builder’s favor, do you want the same agent to represent you as the seller?

Although this does happen, and it’s legally okay, is this big purchase with the same agent looking out for the sellers interest in your best interest?  The agent may say it’s okay but you know very well they were selected by the builder and they are their primary interest.  Otherwise, they would not work for the builder.

Solve this problem from the get go by telling the builder’s agent you have an agent representing you.

Some builders are so controlling that once you set foot in the office for the first time, you better have your agent with you or their commission will not be honored by the builder. Your agent needs to introduce you first. If you see the community advertised first, tell your agent.

Many builder’s agents receive a reduced commission or make a salary plus bonus, as they are working on selling a high volume of homes instead of the 2.5 to 3% commission split they’d normally get on sells of 1-3 homes sold per month.

An agent who only represents you will be your trusted advisor.  Your own real estate agent is required to look out for your interests. You’ll be provided with certain state disclosures along with the positives and negatives concerning the transaction.

The builder’s lender
Home builders realize that they need to lure the buyer when their motivation is high and get the process moving forward. Having an “in-house” or “preferred” lender can do just that.

As long as you know you’re getting a good deal with the builder’s lender because you’ve inquired with other lenders there is nothing wrong with going ahead with the process. Just make sure you tried a bank, credit union, and a mortgage broker.

A mortgage broker has the most options and sometimes their wholesale lenders offer specials and rates that beat your neighborhood bank or the builder’s lender. Similar to a listing agent wanting to use their preferred lender, the builder does the same so they can be kept fully informed about the progress of your financing.

Some builder’s lenders will offer an incentive on upgrades but once you go outside the builder’s lender they remove the upgrade incentive which means somehow the builder was getting repaid for the incentive. This practice should be illegal as the lender and seller should not be affiliated.

It is a good idea to check your credit by asking to see a copy of your credit report and FICO scores. You can order a free credit report through AnnualCreditReport.com but if you want scores a lender see, try MyFICO.com for accurate scores versus fake scores from Credit Karma or your banks monitoring service.

The Builder
Lastly, check out the builder’s reviews if you have never heard of them before. The best method is through the Better Business Bureau and your city’s public records for any lawsuits against the builder.

It would be a nightmare for you to have a deposit with a small builder who files a bankruptcy due to pending litigation or doesn’t have the funds to complete your home. Your deposit money will be long gone or tied up at that point.

As you can now see, purchasing a newly constructed home in California has a lot more elements to think about than purchasing an existing home. Be sure you do all of these steps for maximum benefit.