Buying a house in California is an exciting milestone, but the process can take some time. Several factors, like your financial situation, market conditions, and the local economy can affect both how long it takes you to find a home and how much it costs you.
For example, homes in Eureka are hitting the market at $524,000 and selling within 70 days — 15 days faster than the state average! — so you'll need to move quickly if you want to beat out the competition.
However, homes typically stay on the market longer in Susanville, so you'll be able to take your time and potentially find a better deal.
The more you know about the steps to buying a house and California's current real estate trends, the more prepared you'll be to navigate this complicated process as quickly and smoothly as possible.
No matter where you are in your home buying journey, Clever's concierge team can connect you with local real estate pros who will help you purchase your California dream home!
The best part? When you buy with a Clever real estate agent, you could earn a cash-back refund worth up to 0.5% of the home price. On a qualifying $300,000 purchase, you'd get $1,500. That's real money back in your pocket!
Step 1: Save for a down payment
Your down payment is the initial portion of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in California want you to contribute 20% of the purchase price as a down payment. That would be $151,672 for a $758,360 home — the typical home value in California.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum Down Payment (%)
Down Payment ($)
Based on typical home values from Zillow (February 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on a $758,360 home, the typical home value in California (Zillow, February 2022) with a 2.92% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
California down payment assistance programs
Are you looking for financial assistance for your down payment?
Thousands of down payment assistance programs are available across the U.S. to first-time and low-income homebuyers. 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 homebuyers in California:
MyHome Assistance Program
California Housing Finance Agency’s MyHome Assistance program is available to first-time homebuyers. 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% 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.
GSFA OpenDoors Program
The GSFA OpenDoors Program provides up to 7% of the first mortgage loan amount to low-to-moderate income homebuyers. The program comes as a second mortgage, and the funds may be used to cover a down payment or closing costs.
The second mortgage has a 30-year term, but doesn't accrue interest or require monthly payments. Payment is due after the borrower's first mortgage is paid off or refinanced.
The OpenDoors Program is not limited to first-time buyers, but income limits apply. You can check if you're eligible for assistance here.
U.S. Department of Housing and Urban Development
Additional programs in California can be found on the state's HUD page.
Step 2: Get pre-approved for a mortgage
A mortgage pre-approval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in California will require pre-approval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and pre-approval amounts from several lenders to make sure you're getting the absolute best terms when you buy your California home.
Get Pre-approved Today!
Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?
To get a pre-approved for a mortgage, you'll fill out a mortgage application and provide details about your financial situation. They'll look at the following information to determine your mortgage pre-approval amount:
Lenders need to know that you earn enough to make your mortgage payments each month. Most lenders want your monthly housing costs to be less than 28% of your monthly income.
Lenders also consider your other debts, including credit cards, student loans, auto loans, and personal loans. They use this information to calculate your debt to income ratio (DTI) — or your total debt (including future mortgage) divided by your total income.
While some lenders will approve mortgages for buyers with DTI as high as 43%, it's best to keep your DTI under 36%.
Because of this, you might consider paying off some of your other debts before applying for a mortgage in California.
Mortgage lenders in California want to see that you have enough cash in the bank to cover your down payment and closing costs without completely draining your cash reserves.
While this requirement varies by lender, most want you to keep at least enough to cover two mortgage payments including insurance and taxes.
Step 3: Choose the right location
A house's neighborhood can be just as important as its layout and features. In general, you should consider the following factors when deciding which neighborhood is best for you:
What's your home buying budget?
Once you know your budget (a pre-approval letter will tell you the most you can expect to borrow), you can narrow your search to neighborhoods where homes are selling within your price range.
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years. You want to choose a neighborhood that's in your budget, but could also lead to a big return when you decide to sell.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Los Angeles:
Home value appreciation in Los Angeles
Once you have a list of neighborhoods with homes in your budget, you should evaluate how well each one meets your personal needs and preferences. To finalize your list of target areas, consider factors like:
- School districts
- Your daily commute
- Crime rates
- Restaurants and amenities
- Transportation options
Step 4: Find a great real estate agent in California
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent should be an expert on buying a home in California.
They'll 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.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. you should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Ask each of them questions about your target neighborhoods, how they prefer to communicate, and their strategy for helping you find and close on your new home. You should feel comfortable with the agent's knowledge, experience, and process before committing to an agent.
Top Local Agents Hand-Picked for You!
Clever matches you with multiple agents in your area so you can interview, compare, and choose the best one to help you buy your next home.
Step 5: Start house hunting in California
Searching for homes in California is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Prioritize your needs vs. wants when buying a home in California
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in California can have a big impact on your number of options. For example, in California, May has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in California. Historically, there are 29.9%) fewer homes for sale than during California's peak season.
Housing inventory in California by season
New Listings per Month
Based on January 2022 data from Realtor.com
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.
Currently, in California, homes stay on the market for 45 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, California homes sell fastest in June, where the average property is only on the market for 39. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in January, you have a bit more time to search. Homes typically stay on the market 15 days longer than California's annual average.
Average time homes spend on market in California
Based on January 2022 data from Realtor.com
What should your offer include?
Your real estate agent can help you decide which of these common options you should include in your offer:
- Seller concessions: You'll have to pay for most of your closing costs out of pocket when you buy a home, but you may be able to ask the seller to cover some of those costs for you. This option may allow you to offer a higher purchase price and essentially include your closing costs in your mortgage.
- Repair credits: If the home is in need of repair, you could ask for credits instead of having the seller make and pay for the repairs. The seller avoids the hassle of waiting for contractors to complete the job, and you get to oversee the repairs in the future to make sure they meet your expectations.
- Inspection contingencies: Most purchase agreements have inspection contingencies that allow you to change your offer (or back out all together) if the inspection turns up major problems. If you have a high degree of certainty about the house's condition (like if the seller can show you a recent inspection report), you can forgo this contingency to give the seller a higher sense of confidence.
- Letter to the seller: Many sellers have a personal attachment to the home. They've lived there for years and want to know the next owner will take care of the property. Writing a letter to the seller can show them how you picture your life in the house and appeal to their sentimental side.
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
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.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
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 homebuyers 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 free radon testing kitto 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!
Once you finish your inspections and your lender approves your financing, you'll be ready for closing! Closing is the process of finalizing your mortgage and transferring ownership of the property.
The closing process in California simply consists of signing all the necessary documents and paying the closing costs. After completing these steps, you'll become an official homeowner!
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
Before signing anything, make sure you fully understand each document. It's best to ask your agent about any questions you have before the closing date.
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 3-5% of the purchase price in closing costs. For a $758,400 home — the typical home value in California — that's between $22,752 and $37,920!
Frequently asked questions
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred California neighborhoods
- Partner with the right real estate agent in California
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes, California has a first-time homebuyer program that offers 30-year, fixed-rate mortgages to eligible buyers. Interest rates, purchase price limits, and income limits for the program vary by lender and county.
To qualify for this program, buyers must purchase a single-family home or an approved condominium. Borrowers are also required to complete a homebuyer counseling course.
Buyers with an FHA loan or conventional loan may choose to take part in CalHFA’s closing cost assistance program instead.