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Buying a house in California can be both an exciting and confusing process, especially for first-time home buyers. Our guide breaks down the process in eight steps, with insights and practical tips to help you navigate the Golden State's competitive market.
Key steps to buying a house in California
Step 1: Save for a down payment. » A 20% down payment on a typical home in California can be about california. You can choose a mortgage that requires less, but you'll have to pay mortgage insurance and more interest over the life of your loan.
Step 2: Find a great real estate agent. » Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Step 3: Get preapproved for a mortgage. » Preapproval helps you set your budget before house hunting and shows sellers that you're a serious buyer.
Step 4: Choose the right location. » Search for cities and neighborhoods where homes are within your price range, values are on the rise, and local amenities support your lifestyle.
Step 5: Start house hunting. » Competition for housing in California is fierce. For the best results, communicate all your must-haves and negotiables with your realtor so they can narrow down your choices and find your perfect house as quickly as possible.
Step 6: Make an offer. » Increasing demand for housing in California means homes don't sit on the market very long. Work out all your contingencies and concessions with your agent so you can act quickly and make a strong same-day offer.
Step 7: Conduct inspections and appraisals. » Learn more about the condition of the property and discover unknown issues before committing to a purchase.
Step 8: Close on the home. » Do a final walk-through of the home to make sure it's in its expected condition. Sign all the required documents, get the keys to your new home, and move in.
👋 If you're weighing your options to buy a house, Clever's fully licensed Concierge Team is standing by to answer questions and provide free, objective advice on how to get the best outcome. Get free advice from a licensed expert today — no obligations!
Step 1: Save for a down payment
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender pays the remaining balance.
A down payment can be up to 20% of the home's final purchase price. In California, that could mean paying up to $149,470 for a $747,352 home.
If you put less money down, your lender will typically require you to get private mortgage insurance (PMI) on the loan. That can save you money up front but increase your monthly payment and total interest costs over the life of the loan.
However, if you can't afford to put that much down at closing, or want to hold onto more of your cash to cover other home-buying expenses, some government-backed loans have lower down payment mortgage options.
|Mortgage type||Minimum down payment (%)||Down payment ($)|
|Conventional||20%, or <20% + PMI||$22,421|
|Federal Housing Administration loan||3.5%||$26,157|
|Veterans Affairs loan||0%||$0|
California down payment assistance programs
Thousands of down payment assistance programs are available across the U.S. to first-time and low-income home buyers. In California, eligible applicants may receive a government grant or a second mortgage with deferred or forgiven payments.
Here are some of the down payment assistance programs available to home buyers in California.
MyHome Assistance Program
California Housing Finance Agency’s MyHome Assistance program is available to first-time home buyers. The program offers a maximum of $15,000 or 3.5% of a home's purchase price as a second mortgage.
Borrowers must not earn more than the maximum household income limit set by the California Housing Finance Agency. You can check their income requirements here. Participants will also need to complete a homebuyer education and counseling course.
GSFA Platinum Program
The GSFA (Golden State Finance Authority) Platinum Program offers up to 5.5% of the home's purchase price for the down payment and closing costs. The assistance is given as a 0% second mortgage and is forgiven three years after the escrow closes.
The program isn't limited to first-time homebuyers, but borrowers must have a credit score of 640 or above. There are maximum income limits depending on what kind of mortgage you have. You can learn more about the requirements here.
U.S. Department of Housing and Urban Development
Additional programs in California can be found on the state's HUD page.
More about low down payment home loans
Government-backed loans, like FHA loans, allow a minimum down payment of 3.5% toward your home's purchase. Even conventional loans allow for down payments as low as 3–5%, though the minimum varies by lender.
But making a down payment of less than 20% comes with some risks:
- Because you're borrowing more money, you'll have higher monthly payments and pay more in interest over the life of your loan.
- Putting less than 20% down means you'll pay additional PMI, which protects the lender from potential losses.
|Down payment||Monthly payment||Total interest||Total cost|
Based on a 7.00%% interest rate for a 30-year loan on a median "" not found home.
Mortgage insurance costs around 1% of your annual mortgage balance and is added to your mortgage payment each month. However, rates vary based on your down payment, credit score, and loan type:
- Conventional loans require PMI until you've built up 20% equity in the home (for example, until you owe $800,000 on a $1 million home). Some lenders require proof that your home has increased in value enough to cancel the PMI.
- FHA loans require a mortgage insurance premium (MIP) for the life of your loans, regardless of your home equity.
- VA loans don't charge mortgage insurance. Instead, you'll pay a one-time VA loan funding fee at closing, which can range from 1.25% to 3.3% of the purchase price. VA loans are available only to veterans, active service members, and eligible surviving spouses.
Step 2: Find a great real estate agent in California
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great California realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
In addition to finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers (like title companies and inspectors) to help you buy your home in California — just remember you can always shop around!
Best of all, hiring a good real estate agent comes at no extra cost to you — sellers typically pay all realtor fees from the home sale — and can get you the best price on a home.
When finding and choosing a California realtor, consider their local knowledge and proximity to the specific neighborhoods you're interested in.
For example, an agent could have intimate knowledge of Alameda but not Oakland. If you don't know where you're moving to yet, you can reach out to agents who specialize in the broader Bay Area.
You can start your search by looking up a brokerage or realty, but don't stop there. Take the time to research and interview multiple real estate agents, paying attention to their:
- Years of experience (the median is 8 years)
- Number of home buyers helped in the last year — the more the better!
- Expertise in your target neighborhood and price range
- Online reviews and complaints
- Licensing and certifications, such as an Accredited Buyer's Representative
- Membership in local real estate boards, such as the San Francisco Association of Realtors or the Orange County Association of Realtors
Step 3: Get preapproved for a mortgage
Mortgage preapproval is a lender's conditional offer to lend you a maximum amount of money to buy a home.
Most sellers in California will ask for a mortgage preapproval letter before showing you their home. It demonstrates that you're financially qualified to make an offer and can give you an advantage over buyers who don't have one.
Pre-approval can be as simple as a 40-minute phone call with your lender, a credit check, and sending them your proof of funds. Once you make an offer on a house, you'll start the initial mortgage application.
Preapproval vs. prequalification
Preapproval is a more in-depth analysis of your finances than a prequalification and serves as a more formal commitment from a lender. It usually requires a hard credit check and supporting documentation, such as paycheck stubs and W-2s.
Prequalification gives you a basic idea of what you might be able to borrow based on a quick look at your finances.
Does pre-approval hurt my credit score?
✍️ Tip: If you get pre-approved with multiple lenders within a 45-day window, it will only count as one credit inquiry, minimizing the impact on your score.
The savings you'll gain from shopping around for a mortgage pre-approval will likely far outweigh any minor, short-term impacts to your credit.
What do lenders review?
Mortgage lenders will check your credit score, payment history, income, employment, and debts to determine approval and how much they are willing to lend to you. (Note: These are the same factors that determine the loan's interest rate.)
You're evaluating lenders, too
Consider each lender's quoted mortgage rate, estimated closing costs and fees, reputation and online reviews, customer service quality, and responsiveness to your questions.
Although you don't have to decide on a lender now, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best rate and terms when you buy your California home.
A local lender:
- Might provide you with more market-specific information, such as typical home values in your desired area
- Likely has a better understanding of lending regulations in the state
- Can connect with you other real estate professionals (realtors, contractors, inspectors, etc.)
You don't necessarily need to use a California-based lender when buying a home in the state. Many national and online lenders are licensed to provide mortgage loans in California and may provide better rates and terms.
Step 4: Choose the right location
Start zooming in on the best neighborhoods where home prices fall within your budget, and consider what you want out of your home.
If home equity is most important to you, search where home values are rising the most. But don't forget about local culture and amenities that fit your lifestyle.
California home prices
Currently, the typical home value in California is $747,352, but prices vary dramatically from city to city and even from neighborhood to neighborhood!
Home value appreciation in California
Talking to a local realtor can be huge when buying a home, especially in California's competitive market. They'll provide a unique perspective, with in-depth knowledge of neighborhoods and their potential for appreciation over time.
A good local agent can also provide tailored housing recommendations based on your lifestyle, such as information on the best schools, local amenities, and traffic patterns.
Where should you live in California? Start here
- 5 Most Affordable Places to Live In California
- 5 Most Affordable Places to Live In Los Angeles
- 5 Most Affordable Places to Live In San Diego
- 5 Best Neighborhoods in Los Angeles for Families
- 5 Best Neighborhoods in Oakland to Live
- 5 Best Neighborhoods in Redding to Live
- 5 Best Neighborhoods in Sacramento to Live
Step 5: Start house hunting in California
📊 Key local data
- Median mortgage interest rate: 7.00%
- Median home value: $747,352
- Best month for house hunting (highest inventory): #VALUE!
Searching for homes in California is the fun part of the home buying process! You'll get to look at a variety of available listings and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them by must-haves (such as proximity to work or your children's school) versus your nice-to-haves (like a spacious garage or backyard).
Consider the full costs of owning a home, not just the mortgage payment. Other potential costs of owning the home include maintenance and repairs, property taxes, homeowner's insurance, and HOA fees.
Your realtor can help you understand which of your needs and wants fit your budget and favorite neighborhoods and adjust where possible.
You should also decide whether you'll only visit homes in person or if you trust your agent to visit the properties on your behalf. This can be useful if you work demanding hours and can't always be available to see a house.
Next, your agent will search for homes on your local MLS and bring you top picks, and you'll schedule viewings and tours.
Step 6: Make an offer
Once you find a California house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Talk to your real estate agent to work out all your contingencies and concessions so you can act quickly and make a strong offer that gives you a good chance of winning the home.
Part of your offer could include an earnest money deposit, which may be 1–2% of the purchase price. It's an incentive for the sellers to take the home off the market until closing. If the sale goes through, the earnest money goes toward your down payment, so you won't be anything additional out of pocket.
Note: When housing inventory is high, so is demand. So if you're house-hunting in #VALUE!, you may have less time to make an offer than in #VALUE!.
Average time homes spend on market in California
Source: Realtor.com (realtor_date)
Step 7: Inspections, appraisals, and financing
Once the seller accepts your initial offer, you have to do due diligence before officially purchasing the home. Inspections let you better evaluate the home's condition, and lenders use appraisals to determine value and decide how much your final loan amount will be.
If something unexpected pops up or if the home's appraised comes in below the purchase price, you could have an opportunity to renegotiate the terms of your contract.
This is also the period that your lender will verify that you can afford your mortgage. They may ask for proof of income, pay stubs, and letters of explanation for income that doesn't come from wages, and other loan statements (like for student debt).
Delays could lead to postponed closing, so start collecting this information early so that you can be ready to submit documents when your lender asks.
Home inspections in California
Having your California home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it. A licensed professional checks the house for any unseen, unexpected, or potential issues.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
A home inspection costs around $300 to $600, depending on factors like the home's location, condition, and age.
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
California has strict disclosure laws, but it’s still recommended for home buyers to have additional tests done before closing. Here are a couple good inspections to consider:
- Radon testing: Certain parts of California, including Santa Barbara and Ventura County, can have elevated radon levels. California residents can order a radon testing kit to make sure the chemical isn't present in a potential home.
- Termite inspection: Certain loans require pest inspections, but it's a good idea for all buyers to complete this process. Termites and other pests can affect the safety of a home, pose possible health hazards, and lead to bigger extermination fees later. Getting a pest inspection before closing will ensure that your future home will be safe and termite-free.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
Step 8: Close on your new home!
Before you close on your new home, you and your agent will do a final walk-through of the property to ensure that it's still in the expected condition. You'll want to check to make sure:
- The appliances are in working order.
- Any agreed-upon repairs were handled by the seller.
- There was no damage to the home when the seller moved out.
On the closing date, you’ll meet at the title company to review lots of important paperwork. You'll need to read and sign several documents, including:
- The final loan application
- The deed transfer
- Various disclosures
Before signing anything, ask your agent or closing attorney about any questions you have to make sure you fully understand each document.
After completing the paperwork, you'll have to pay for closing costs. The title company will collect the total amount you owe for various services and pay each party on your behalf.
Typically, a buyer's closing costs can be separated into four categories:
- Prepaid costs: Ongoing costs of homeownership, such as property taxes and homeowners insurance. Mortgage lenders often require buyers to pay these monthly fees up front.
- Title and escrow charges: Charges for the title company's services, such as title searches and title insurance.
- Lender fees: Fees for the mortgage company to originate and underwrite your loan. Lender fees might include other expenses associated with your loan, such as appraisal fees or mortgage points.
- Other closing costs: Miscellaneous costs unique to each buyer. Other closing costs can include pest inspection fees, natural disaster certification fees, and other variable expenses.
Buyers in California typically pay 3% to 5% of the purchase price in closing costs. For a $747,352 home — the typical home value in California — that's between $22,422 and $37,370.
After signing all of the paperwork, you'll get the keys and can move into your new home. Congrats!
Start of mortgage payments
If you took out a mortgage to purchase the home, your first loan payment is likely due within a month after closing.
Ask your lender for more specific details about the payment schedule, how to make the first payment, and how to set-up automatic payments (if desired).
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