Purchasing a house in California is truly a daunting task. In California, where the prices are reaching sky-high and are still increasing, it needs many devoted buyers who will sink their whole life savings into a single purchase – an asset where they can plan to live their entire life.
Unlike most new home buyers, you require a mortgage to finance your house purchase. A real estate agent and mortgage lender are the two most important professionals whom you might need in the process. Other than that, you will also deal with many other units throughout the home buying process.
In this article, we have outlined the step to step procedure of how to buy a house in California for those who seek a new dream home in the Golden State. Read on!
How much money do you need to buy a house in California?
If you are wondering how much it will cost to buy a house in California for low income, let us give you a clear information regarding it. The median home value in California is $758,360 but you have to contribute a purchasing price as a down payment of 20% to the money lenders in California which is about $151,672. However, you can decrease the down payment value but you have to buy mortgage insurance and recompense more interest over the loan period.
How much money should I save before buying a house in California?
If you want to know how to buy a house in California as a first-time buyer, you have to save nearly equal to 20% of the total amount as a down payment while applying for a home loan. Besides that, the type of house you want to buy, where you want to settle down, and the type of housing loan you will use, also let you know a target amount to save.
The other expenditures like moving costs, home furnishings, and furniture are difficult to quantify in advance. You can consider estimating this amount for extra expenses.
Steps to Buy a House in California
Remember! There was a time you were asking yourself, should you move to California? Time flies so quickly, here you are! Have already moved had settled down and now thinking about how to buy a house in California. Isn’t that a great achievement?
Well, While talking about Homes in Susanville, California, it usually stays on the real estate market for a longer time as the median house price is on the higher side than in any other US state. So, you can easily take your time to decide and lock a better deal.
The more you know about the current real estate market in California and the steps of buying a house, the more prepared you will be to route this difficult procedure as quickly, easily, and smoothly as possible.
Do you know? The best part is while buying a house from a real estate agent or company, you will get an actual cashback of 0.5% of the house price. E.g. on a $500,000, you will get $2500 real cashback directly into your wallet.
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1. Save For Down Payment
Are you receiving a constant salary from a company or employer for the past three years? Are you paying your current housing prices- mortgage or rent on time for the past 1 year? Are you able to pay off excess debt, if needed? Is your credit score at least 650? Have you saved an initial portion of your house purchasing price i.e. 20% of the total housing value which has to be paid as a down payment?
If your answer is yes, to all these questions, you are financially ready to buy a house. If not, then you will be facing a lot of trouble while getting a loan to purchase a house, and may need to work on finances and credits before searching.
After paying a closer value or down payment, the money lender will pay off the rest balance. You can also go for lower down payment options through government-backed loans or conventional loans which allow you to contribute 3-5% of your home purchase value.
|Mortgage type||Minimum down payment (%)||Down payment ($)|
|Conventional loans||3% – 5%||$22,751|
But after making a down payment of less than 20% you might face the following problems:
- As you are lending more money, you have to pay higher monthly payments and higher interest over the loan life span.
- You have to buy mortgage insurance
2. Get Pre-Approved For a Mortgage
Housing pre-approval is required to be done when the real estate market prices are on the higher side and multiple proposals are received for a single home or house in a highly demanded area. Many housing markets in California, especially the safest places to live in California, coastal areas, bay areas, and developed cities are competitive as a small house in these areas gets multiple bids competing for cash offers, early money deposits, and high down payments that can give a home buyer a tough competition. Therefore, having a pre-approval in hand can help you to get early access to a mortgage.
Pre-approval states that you are financially qualified to purchase a home because your income, assets, and credit are fulfilling the lender’s guidelines. It also shows the seller that you have already initiated the loan approval procedure and are on the way to getting finance with the ideal home.
3. Choose Your Preferred California
As you’re financially ready to take a step ahead to buy a house in California and have selected 5 locations of interest, it’s time to begin your search that best suits your price range. Check out the past and present home value trends, idealize an area that fits your budget, and then evaluate how well each locality fits your personal preferences and needs. While finalizing your list of target neighborhoods, consider the following factors:
- Crime rates
- Amenities and Open restaurants in Ontario, CA
- Transportation options
- Traffic system
- Daily communication from workplace to home
- School districts
Most California houses are enlisted by the members of the Association of Realtors, California. Remember, if the market is in demand and buyers are fewer you have to gear up fast to find a property in which you want to invest in. But if the houses in the area get more than 8 weeks to get sold and there is a long list for you to choose a property from, then you might take time in selecting the right one for you.
4. Partner With the Right Real Estate Agent in California
A real estate agent plays an important role in the home buying process. Other than searching and showing you real estate properties, your broker should be an expert in dealing with the entire home buying process in California.
You can start your home search by selecting a real estate broker, search around until you get the right agent with whom you want to work with ahead, who will then search for the right home for you.
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Don’t hesitate or rush while choosing a broker. Instead, look into a realtor’s:
- Overall review ratings
- Number of successful deals done in the past year
- Years of experience
- Experience in negotiating price range
- Complaints and reviews on the individual
Before committing to a broker or a real estate company, make yourself comfortable with them and acquire ideas about their knowledge, experience, communication strategies, and the process they adopt while searching and closing housing deals.
5. Go House Hunting
House hunting in California is a difficult yet interesting part of the house buying process as you will see over various home types and find out what kind of home you really want to live in.
Create a list of all the things you want in your home and highlight them separately into “mandatorily have” and “possibly have” ones. Let your agent know about your wants so that he can find a locality that fits both your wants and budget.
Besides that, the house hunting period in California also plays an important role in providing you with a number of options. For example, searching for a house in May will give you a lot of options as this month has witnessed a huge number of sold homes in California than December, as this month has seen fewer home choices in the state.
Housing inventory in California by month (based on data of Jan 2022 from realtor.com)
|June – August||43,793|
|September – November||38,107|
|December – February||32,995|
6. Make a Strong Offer
After finding an ideal house in California, it’s time to make an offer. Here your real estate broker will help you in making an enthralling offer that will convince your homeowner to sell the house to you in one take.
Besides that, your real estate agent will also ask you to opt for the common options that you must include in your offer to make it a strong one.
- Repair and maintenance concessions
- Dealer concessions
- Inspection credits
- Appeal to the seller to keep aside their personal attachment with the home.
Presently the houses in California remain on the market for 45 days before it goes under contract. However, the real estate market in California experiences seasonal changes. The homes are sold fast in the month of June for the properties remain in the market for only 39 days. If you are searching for a home around this time, then you must be prepared to make potential offers on several homes and quickly accept the ideal before it is accepted by others on the list.
And on the other hand, while buying a home in January you might get more time to search.
Annual average period houses stay on California’s real estate market (based on data of Jan 2022 from realtor.com)
|Annual average||45 days|
7. Pass Inspections and Appraisal
After selecting a house you will get an opportunity to inspect and evaluate the home’s condition before officially buying it. Afterward, you might get an opportunity to read the contract and offer with the seller prior to unexpected pop-ups.
Having your house inspected by an appraiser relaxes your mind about the housing condition before spending dollars on it. Your appraiser or inspector checks out the following property sections:
- Electrical system
- HVAC system
- Plumbing system
- Septic inspection
According to California’s strict disclosure housing laws, home buyers are recommended to perform additional inspections before closing. Here is a list of important inspections to be considered:
- Radon inspection
- Termite testing and treatment
Appraisals are done to find out the right value of the property. If you are doing a mortgage to buy a house, your home lender will arrange an appraisal to confirm whether the house is worthy of loaning you.
8. Do A Final Walkthrough and Close
Once you are done with the inspections, it’s time for your lender to approve your finance and close the deal. Closing is all about finalizing a house mortgage and transforming property ownership to the buyer.
Wondering what documents you might need to buy a house in California? Well! Here are the six documents you need for mortgage registration and to pay the closing costs.
- Loan application
- Deed transfer
- Recent pay stubs
- Signed tax returns
- Bank statements of all investments and accounts
- Purchase and sales agreement
- A recent copy of Year to date profit or loss statement
Understand every document before signing them. Ask any doubts regarding the documents from the agent before the closing date.
After completion of the documentation, you have to pay for the closing cost. In California buyers typically pay 3 to 5% of the closing cost from the buying home price.
It Is Hard to Close Escrow in 30 Days?
Usually, the real estate escrow process in California takes an average of 30-45 days in many states. Complicated transactions need more time and easy, straightforward transactions take less than 30 days to close up.
Do Not Buy Anything Until You Close? Things you should not buy or do while waiting or about to close a real-estate sale are as follows:
- Don’t purchase anything with your credit card.
- Don’t cancel any credit accounts
- Don’t look at your credit reports
- Don’t add credit limits to your card.
- Don’t start any new credits.
How to Buy a House in California FAQs
It is Hard to Beat Cash?
It is hard to beat cash offers over traditional mortgages while buying a house in California. This is because cash buyers face less risk and get quicker options to close their deals. They increase their chances of winning the deal over those who have applied for mortgage homes as they have real cash to bet more price than displayed offers.
Does California have a first time home buyer program?
California conducts a first-time home buyer counseling program that provides 30 years, fixed-rate mortgages to eligible first-time home buyers. For this program, buyers are required to complete the counseling course and then after have to buy a single-family home.
Buying a dream home in California will be a thrilling new venture for you. With this helpful information, you will be extra cautious and prepared to make remarkable financial decisions.
Navigating the house buying procedure for first-time buyers is easier when you get advice from expert professionals.
Also applying for a mortgage for buying a house is a huge commitment but it can make your home purchase more significant by relying on the cost over time.
Other than buying a home in California, you might wonder about what is the best time to travel to southern California, Read our article here!
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