The city of San Diego is home to 50 miles of Pacific coastline. This hard-to-beat feature may be why more than 35 million visitors seek it out each year. The area boasts a variety of activities, including watching sea lions at La Jolla Cove and visiting the world-famous, 100-acre San Diego zoo.
Located in San Diego County, the city has a population of 1.4 million and a bustling tourism industry that employs more than 13% of residents. Other industries with a significant employment presence include health, government and education services. The city also enjoys a low unemployment rate of 3.3%.
With all that working in its favor, it’s no wonder San Diego is a popular spot for homebuyers, despite its $674,900 median home sale price. That’s more than twice the national median of $285,700, reported by the National Association of Realtors in June, and it’s rising. The Greater San Diego Association of Realtors reported median home sale prices were 3.2% higher in June than they were last year, with sellers typically receiving 98% of the price they listed for.
Houses are sitting on the market longer, averaging 34 days this year compared to 28 days in 2018. This despite fewer homes being available than in prior years.
A love of San Diego can convert someone from frequent visitor to resident. But before taking the plunge and buying property in San Diego, you should learn some of the rules and costs of buying and owning a home in this sunny metropolitan locale.
To ensure that buyers know exactly what they are getting in a San Diego home purchase, the state of California requires sellers to complete both a real estate Transfer Disclosure Statement (TDS) and Natural Hazard Disclosure (NHD). In some areas of San Diego, sellers may be required to disclose additional information about potential erosion issues, groundwater seepage and other area-specific concerns. Finally, all sellers must disclose that buyers can obtain a list of registered local sex offenders online and from law enforcement agencies.
In the event that you’re unable to make your mortgage payments, you should know San Diego primarily uses non-judicial means to foreclose on a property. This means the lender can begin foreclosure proceedings without involving the courts. While this offers a faster foreclosure process than judicial methods, it does allow delinquent homeowners 90 days after receiving a notice of default to get payments on track or work out an arrangement with the lender and prevent the home from being auctioned.
San Diego is in a community property state. That means a home purchased during a marriage or registered domestic partnership would be considered the property of both parties. Upon divorce or dissolution of the partnership, each partner owns 50% of the property and is responsible for 50% of the debt. This may also impact you during the homebuying process as some lenders, particularly for government-backed loans, will consider the debt of both spouses in a community property state, even if one spouse will not be on the mortgage or live in the residence.
Some states require an attorney to handle the closing process, but California does not. In San Diego, escrow can be handled by a company licensed to deposit and/or deliver escrow. It can also be managed by a bank, attorney, title company and certain licensed real estate agents.
To transfer ownership of property in San Diego, the seller must pay a transfer tax of $0.55 per $500. The total amount of this tax should be disclosed by the lender once you’ve selected a property.
Property tax rates in San Diego are about 0.61% of the assessed fair market value of a property, according to Tax-Rates.org. On San Diego’s median home value of $674,900, that results in an average property tax of a bit more than $4,100 per year. San Diego residents can enjoy many property tax exemptions offered by the state of California, including a $7,000 homeowners exemption for primary residences and a disabled veteran’s exemption of $100,000 for their principal residence. If the veteran has an income of $40,000 or less, the exemption may be raised to $150,000. You can find out more about property tax exemptions in San Diego here.
In California, conforming loan limits vary by county, stretching from $484,350 to $726,525 for a single-family homes. In San Diego County, the limit for a single-family home is $690,000.
Conforming loan limits dictate the amount you can borrow to get a loan backed by government-sponsored enterprises Fannie Mae and Freddie Mac. The limit for most of the country is $484,350, but pricier areas, such as San Diego, can have higher limits. The Federal Housing Finance Agency sets conforming loan limits each year.
Having a high median home price doesn’t mean an area won’t have any special programs to help buyers purchase a home. San Diego has many.
This program gives first-time homebuyers with low incomes a 3% simple-interest loan for down payment and closing cost assistance. The loan is restricted to:
To qualify, borrowers must:
Home loans through the CalVet program feature lower interest rates, low or no down payments and more generous eligibility requirements than a traditional home loan. Further, there are no requirements that the borrower must have been a prior resident of California.
To qualify, borrowers must:
Borrowers who earn 80% or less of the average median income for San Diego may qualify to receive a closing cost assistance grant of 4% of the price of the home (up to $10,000). The income of all household members aged 18 or older is considered for eligibility.
To qualify, borrowers should:
This program helps lower-income buyers secure a house for less than the fair market value of the property. With this program, homes are subject to resale restrictions for up to 55 years. These restrictions require that the home continue to be sold for less than fair market value.
Program requirements include:
Understanding the potential tax, disclosure and other requirements of the area where you want to buy is a great start in the overall homebuying process. Another step to take — one that’s going to impact your overall spending — is shopping for rates among lenders. When you do, here are four tips you should follow.
Contact at least three lenders on the same day
Because rates can vary day by day, it’s important to contact multiple lenders on a single day in order to get a fair comparison of rate offers. Another reason to contact multiple lenders in a short window of time is that it helps protect your credit rating. Multiple credit inquiries for a home loan within a 45-day period will show up as a single inquiry, which means they will have a lesser impact on your FICO score than if you spread your inquiries out.
Give each lender the same information
It’s impossible to get a true comparison of lender offers if you give each of them different information. Instead, provide every lender the same information about the:
Add up all the lender fees to confirm the costs
There are a variety of different fees lenders might charge. From origination fees to appraisal fees to title fees, each figure charged by a lender adds an expense to your overall San Diego home purchase. In addition, you need to consider other fees, such as home insurance, flood insurance and property taxes, to determine whether a property will truly suit your budget.
Know when to lock in the rate
A rate lock allows you to lock in the interest quoted by your lender, so it will still be in place at the end of the homebuying process, even if interest rates rise. Typically, rates are locked for 30 to 60 days, although you may be able to file for an extension past the expiration date, sometimes for a fee. Some lenders may offer a float-down provision that allows you to adjust your rate if interest rates decrease after you lock in a rate.
The information in this article is accurate as of the date of publishing.