October 3, 2022
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how to buy real estate in california

The Golden State has something to offer everyone, whether you’re seeking for the tranquility of northern California or the bustle and noise of an urban setting like San Diego or Los Angeles. Being a homeowner in this state can be intimidating, though, as it frequently ranks as one of the most costly states in which to reside. But it is possible to purchase a house here. Here’s a look at how to approach the home-buying process in the Golden State if you’ve been dreaming of living in California.

How to buy a house in California: A checklist

1. where to live in California

The exact area of California is 163,695 square miles, as reported by the Census. Take a good look at the map if you haven’t decided on a spot yet. Do you prefer the coastal air or do you prefer to soak up the desert sun? Do you require the room of a single-family house, or would a more compact condo suffice? Do you prefer a man-made skyline with lots of people, or redwood woods and hiking trails? Consider the important questions on what you require for your lifestyle.

2. Calculate the cost of living

You must also take into account your financial situation in addition to what you want. While the price of a home will undoubtedly be a significant factor in that calculation, you also need to take into account other everyday costs, such as the price of groceries and gas. To see how much money you’ll need to make in any of the major California metro regions in order to maintain a good standard of living, use Bankrate’s Cost of Living Calculator.

3. Consider the best places to live

Look at the locations of the data points to identify the greatest areas to reside in California. Although Sacramento topped Bankrate’s most recent list, smaller places might be more suitable for your needs. After you’ve focused your research on a few regions, you should think about suburbs and nearby towns that might provide access to the attractions you’re looking for at a reduced cost.

4. Determine your home buying budget

Speaking about price range, this will serve as the cornerstone of your efforts to purchase a home in California. To see how much you can comfortably spend buying a home, use Bankrate’s Home Affordability Calculator. Keep in mind that “comfortably” is the crucial word here. You run the risk of being under too much financial stress to appreciate your new house if you spread yourself too thin.

Tips for buying a house in California

Real estate markets vary from one another. Keep these items in mind as you start looking at California homes.

Home values

The good news is that California’s housing prices aren’t increasing as swiftly as they are in many other parts of the nation. According to data from the California Association of Realtors, the median home price climbed from April 2021 to April 2022 by less than 9%. The bad news: Prices had already risen significantly. As of April 2022, the average cost of a home in California was $884,890.

Mortgage rates

Because of the high cost of real estate in this area, many homebuyers must take out loans larger than those permitted by the Federal Housing Finance Agency. In light of this, you might want to contrast California’s jumbo loan restrictions rather than standard mortgage rates. Jumbo loans frequently include tougher borrower restrictions, such as higher minimum credit scores and greater required down payments.

Things to know about buying a house in California

Property taxes and Mello-Roos regulations: If you own a home in California, you’ll need to set aside money each year for property taxes, which are limited to 1 percent of the assessed value of a property. Therefore, if the assessed value of your home is $500,000, your property tax bill will not exceed $5,000. In an otherwise pricey state, that property tax rate is quite reasonable. The Mello-Roos tax, a unique fee that residents in some localities are required to pay, should be avoided, as it helps pay for everything from primary schools to cable television lines. When comparing homes to discover if a home is subject to this fee and how much it will cost, be sure to take Mello-Roos implications into account.

Dual agency: Under California law, a real estate agent may act as both the buyer’s agent and the seller’s agent in the same transaction. Although that may sound unusual, it is legal in this country and isn’t necessarily a bad thing. It might result in quicker transactions. In either case, if your agent also represents the seller you intend to purchase from, he or she must disclose this to you.

Seller disclosure: The seller of a property in California is obligated to provide a number of different disclosures concerning the property. For instance, is it situated in a region that is vulnerable to natural hazards like earthquakes, fires, and floods? What are the requirements for flood disaster insurance? In the previous three years, has someone passed away on the property? These are only a few of the inquiries that the seller must respond to so that you purchasers are fully aware of any potential risks.

Closing costs: Like in any other state, you’ll need to plan for these. New homeowners in California pay an average of $8,219 at closing, taxes included.

Attorneys: California does not mandate the presence of a real estate attorney at the closing, in contrast to those jurisdictions that do. However, it’s still a good idea to work with a lawyer to ensure that your contract contains advantageous conditions.

Climate and weather considerations: If you’re considering purchasing a home in California, it’s important to consider the cost of securing it against the elements. A few regions of the state have recently been devastated by wildfires, while other regions are vulnerable to earthquakes and mudslides. To get an idea of how much you’ll have to pay to protect your investment, make sure to compare quotes from many California homeowners insurance providers.

How much house can I afford in California?

You may estimate your housing budget by considering all of your other expenses as you calculate how much you can afford to spend. While you’re at it, consider ways to save costs as well.

If you’re debating whether to buy a property right away or wait, you should know that prices rarely decrease. Expect them to climb more slowly in the foreseeable future, but don’t anticipate purchasing in California to become much simpler. So, consider a few important inquiries. Do you intend to spend some time in California? Is your rent increasing? Do you have a high credit score? If you can afford a down payment and you are confident that California feels like home, buying a house is a wise investment.

Saving for a down payment in California

In California, the down payment is frequently the expenditure that makes it the most difficult to purchase a home. However, you might be able to get financial aid to cover the cost.

1. First-time home buyers

The California Housing Finance Agency considers you to be a first-time purchaser if you have never bought a home before or if it has been more than three years since your last home purchase. The first-time homebuyer programs in California can be challenging for first-time buyers, but your situation may qualify you for a low rate mortgage program and/or a deferred loan for your down payment. Along with meeting a number of additional conditions, such as finishing a course in first-time homebuyer education, you’ll need to make less money than the state’s income limitations.

2. Assistance with down payments

There are numerous programs that can help you with your down payment, many of which are accessible even if this isn’t your first house. The majority of programs provide low- and moderate-income people with an opportunity to purchase a home and are targeted toward purchasers who make less than a particular amount of money annually. For instance, there are solutions to assist buyers in managing their up-front costs in Redding, Pittsburgh, Modesto, and La Mesa, among other locations.

3. Calculate your down payment

Making a larger down payment will reduce the amount you must borrow, which will lower your monthly payments and maybe help you avoid paying mortgage insurance costs. This will also result in cheaper long-term interest rates. Say, for illustration, that you’re considering making a 5% down payment ($37,500) on a $750,000 house. Your monthly payments will be $190 less and your total savings over the life of the loan will be close to $31,000 if you can double your down payment to 10% ($75,000), which will reduce your payments.

Get a mortgage pre-approval.

One of the most important steps in purchasing a home in California is getting preapproved for a mortgage. It signifies that a lender has conducted a preliminary analysis of your finances and is likely to grant you a loan for the purchase of a home in the amount and on the parameters specified in the preapproval. You may get a preapproval letter from several lenders online. It’s crucial to demonstrating to sellers that you are a serious buyer. A preapproval can strengthen your offer in competitive markets, which many cities in the state undoubtedly are.

Find the best lender

You are not required to obtain your mortgage from the same business that grants you a preapproval. In order to choose the lender who can provide you the greatest rate, you should really evaluate several of them. The best lenders in California are a good place to start, but keep in mind that certain lenders only provide certain programs. For instance, borrowers who require jumbo loans will have very different needs than those who are looking for FHA loans.

Find the best real estate agent

Your lender assists you in getting the money you require, but you’ll need aid deciding how to use it. You can negotiate the difficulties of being a buyer by working with a real estate agent; local experts know where to look based on your budget and how much to offer. Sometimes they are even aware of homes before they are put on the market.

Begin looking for a home

It’s time to begin looking through ads and attending open houses. Be aware of the features you must have in a home and the trade-offs you are prepared to make. You can prevent a lot of frustration if you can begin your quest with an awareness of where you can make sacrifices. When your offer on a house is approved, get to work finishing up all the requirements for your mortgage application.

Get a home inspection and appraisal

You should make sure the house is in good condition and that it is worth what you are paying because this is one of the greatest financial decisions you will ever make. To ensure that the property’s value is consistent with the amount of money you are borrowing, the lender will want an assessment if you are applying for a mortgage. Although a house inspection is optional, some buyers choose to forego it in order to improve the appeal of their offer. But it’s strongly advised: A qualified house inspector can spot problems that could be lurking below the surface, such plumbing or electrical problems, and spare you a lot of headaches in the future.

You’ll finally make one last trip to the house before you take ownership of it. You’ll probably conduct your final walk-through shortly before you leave for the closing. Make sure the house is in good shape, the owner has removed all of their possessions, and there are no defects that would make you want to cancel the contract.

Complete buying your new California property.

You are nearly there. Ask about the accepted forms of payment for all of your closing charges before proceeding because you’ll probably need to go either a certified check or a cashier’s check. Next, remember to bring the required identification on closing day, and be prepared to sign a ton of paperwork. The keys are yours once you’ve finished all the required work. You now possess a piece of California, so congratulation.

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