Becoming a homeowner is about more than purchasing a building and some land. A new house is also a new beginning for yourself, your financial goals, and your aspirations. To put it simply, you’re not just buying a house—you’re finding a place to build a home and a future.

If you’re ready to become a homeowner, you’ll need to know how to buy a house in California that you love and can afford. From understanding mortgage pre-approvals to finding a California REALTOR®, this guide will take you through every step of how to buy a home in California.

Step 1: Evaluate your financial health

Making the jump from renter to homeowner requires an in-depth evaluation of your finances. The first step to buying a home is considering the costs needed and understanding your current financial health.

Here is a breakdown of the costs associated with buying a house in California.

• Down payment – A down payment is the foundation of your housing costs. It is a percentage of the house’s closing price that you pay to your lender. In California, the average down payment is 5.3%, but it can be between 3.5% and 20%. In March 2020, the average home value in California was approximately $587,000. So at a minimum, expect your down payment to be at least $20,000.
• Closing costs – Closing costs include lenders fees, title fees, and prepaid costs for things like property taxes and home insurance. While the amount varies from area to area, your closing cost will be 3% of the home’s final closing price, which on average can result in about $17,000.
• Inspection costs – Before you close on a house, you should arrange for a home inspection. This inspection looks for issues like lead, asbestos, and termites before you close on the house. In California, these inspections cost about $350, but the price goes up with the size of the property.
• Property taxes – When you own a home in California, you are required to pay property taxes. The average effective property tax rate is 0.81% of the house’s value. You pay property taxes in two installments during the year.
• Emergency repair funds – If something goes wrong with your home, you can’t call the building owner or property manager to come fix the issue—you’re the homeowner now, so all responsibility falls to you. Before buying a house, make sure you can put aside emergency repair funds. Experts advise allocating between 1-4% of the house’s value to these funds.

Step 2: Research and find a great real estate agent

A  great California real estate agent will be your strongest advocate and ally throughout the home buying process. They work with you to understand the kind of home you’re looking for and scour the real estate  market for the best options within your budget.

The best California real estate agents show that they’re as invested as you are in buying a house you love.

If you’re worried about the cost of a real estate agent, there’s good news—usually, the home seller pays your agent’s commission fees. You’re essentially getting the time, care, and expertise of a real estate agent for free.

But it all starts with finding an agent you like working with.

Below are some tips for finding your partner in home buying:

• Research reviews – Just like you would use Yelp or Google reviews to find a good restaurant, real estate agent review sites can help you find friendly and reliable agents.
• Ask good questions – Once you have a list of agents, schedule quick introductory phone calls to get to know them. Beforehand, understand what you’re looking for in an agent and prepare some questions about the agent’s qualifications.

Don’t forget to ask questions like the following:

1. How well do you know the neighborhood that I’m interested in?
2. What times are you available to show me potential homes?
3. What’s your communication style?
4. On average, how long does the typical buying process take with you?

• Homebuying tip: Treat your agent search like you’re interviewing candidates for a job. Don’t feel obligated to sign the first agent you talk to. The agent-buyer partnership requires plenty of trust and communication in order to succeed. If you don’t feel heard or understood by an agent after that first phone call, thank them for their time and start looking for someone new. You’ll be saving their time and yours.

Step 3: Learn about the current housing market

Once you’ve found an agent, it’s time to get to know the California housing market. While your agent is a phenomenal resource, it’s always good to have a basic understanding of housing market trends so you can make informed decisions. Keep an eye on what’s happening to home values in your favorite areas and be strategic in your house search.

Step 4: Secure pre-approval for a mortgage

Let’s say your agent calls you out of the blue—they have found your perfect home, but there are other offers on the table. If you’re pre-approved for a mortgage, you’ll be able to move quickly to secure your dream home. If you aren’t, you risk losing out on a place you love. As soon as you sign a real estate agent, take the necessary steps to get pre-approved for a mortgage.

Have a look at this basic pre-approval checklist for buying a home in California to get you started:

• High credit score – Lenders want to see that you have a consistent history of paying off your debt. A high credit score will assure them that you’re a responsible borrower. For a mortgage application, you should have a score of at least 620, although some lenders set their minimum at 640.
• Steady employment – When you have a mortgage, you pay back the lender in monthly installments. Lenders want to see that you have a steady source of income so you can make your payments in full and on time. They look at your employment history to make sure you’ve been at your company for at least two years. If you’re self-employed, you can show proof of income for the last few years.
• Enough funds for a down payment – Saving enough for a house doesn’t just demonstrate that you have a steady income—it shows that you are a responsible applicant and capable of meeting long-term financial goals.

Homebuying tip: Don’t forget to find out if you qualify for a USDA rural home loan or a VA loan. This may take a huge financial strain off of your budget and open you up to other housing options.

Step 5: Find your new home

House hunting can be the most enjoyable part of the home buying process. It’s thrilling to tour different homes, explore new neighborhoods, and imagine the amazing possibilities each home has to offer for your future. But sometimes, it can feel a lot like work. However, you have plenty of tools at your disposal to make your house hunt easy and enjoyable.

Below are a few tips for finding your new California home:

Online home selling resources
In the digital age, more and more sellers are using online resources to advertise their homes. Browse through a few home buying sites, like Berkshire Hathaway Home Services California Properties, to get an idea of the real estate market. There are plenty of times in the day when you can quickly browse for houses—a doctor’s office waiting room, your train commute, or even your lunch breaks. Spend a little time every day looking, and you’ll have more opportunities to buy.

Your community
Spread the word among your local friends and family that you’re looking to buy a house. Word of mouth can be your best ally if a friend hears that a house in your ideal neighborhood is about to go on the market.

Hit the pavement
In your free time, take field trips to your favorite neighborhoods. Get to know the area, find new coffee shops you like, and you may even stumble upon an open house you didn’t know about. If you need a little help finding a great place to live in the Golden State, check out our list of the best places to live in Southern California.

Lean on your agent
Sometimes, everyday life gets in the way of house hunting. That’s why your agent is the best resource for finding your dream home. He or she is immersed in the home-buyer and home-seller network and can keep their ears to the ground for a place you might want to see. Plus, every Berkshire Hathaway HomeServices California Properties agent can set you up with your own unique listing alerts and dashboard where you can easily review, compare, and provide feedback on new listings.

Step 6: Make an offer

Sometimes, you walk through the doorway of a home that checks all of your boxes and, after a tour, you know it’s the one. If you fall in love with a home, save the honeymoon period for later, and jump into action to purchase it.

There are three things you need to do as soon as you know you want to buy a certain house and become a home buyer :

Ask if there are any current offers on the house. If there are, you’ll be entering a bidding war. Work with your agent to put in an offer you can afford, but will still put you in the running.

Deposit your down payment with a third party (typically an escrow agent).

Draft up your offer letter. It should include the address of the home you’re purchasing, how much you’re willing to pay for it, how you will finance buying the house, how long your offer is valid for, any required state provisions (your agent will tell you about this depending on the house), and any contingencies that would invalidate the offer.

If all goes well, you’ll be getting a very excited call from your real estate agent.

Homebuying tip: If you’re entering a bidding war for a home you adore, send a handwritten letter to the homeowners. Talk authentically about what you love about the place and the neighborhood and how you imagine your future in that house. Even if you don’t put in the highest bid, sometimes a thoughtful touch can tip the balance in your favor.

Step 7: Home inspection and negotiations

Before you get the keys to your house, schedule a home inspection. Some lenders require a home inspection before finalizing the mortgage, but it’s a good idea regardless.

A home inspection checks for potentially dangerous things in the house, like lead, asbestos, and foundational damage. Home inspections ensure that you’re purchasing a safe home. Don’t forget to attend the appointment—you’ll be able to ask questions and see what the inspector finds firsthand.

If something does come up in the home inspection, it might be a blessing in disguise. Why? It can reopen negotiations. You can ask the seller to make the necessary repairs before closing on the home or ask the seller to decrease their asking price. Again, in this scenario, your agent is your best tool to make the most out of the situation.

Homebuying tip: Once your offer is accepted, don’t forget to do your due diligence to seal your side of the deal. You’ll have a limited window to finalize your loan and have the home inspected. For a mortgage, it’s about three weeks. For the house inspection, it’s about two.

Step 8: Close on your new home

The inspection is done, the offer has been accepted, and now there are only a few things left to do to close on your new home:

Appraise the house
Hire a house appraiser to evaluate the worth of the home. While not required, it’s a smart move for your long-term finances. If you want to sell the house later down the line, you’ll have a baseline to compare it to.

Do a final walk-through
Stroll through the house one last time before it’s finally yours, just to make sure everything is in good shape. It’s also a chance for you to double-check that no new house issues have appeared since the home inspection.

Sign the papers
Meet with the seller, lender, title company representative, and the real estate agents to sign the final paperwork.

Pay closing price
Pay the closing price on the house to your lender.

Start your homebuying journey with Berkshire Hathaway HomeServices California Properties

Sometimes, the hardest part of the home buying process is starting. But once you understand the in’s and out’s of buying a home, every step will get easier and easier.

So long as you keep yourself informed, find an agent you trust, and stay open-minded, you’ll be moving into the final stage of house buying—packing up your things and scheduling the housewarming party in your new home.

At Berkshire Hathaway HomeServices California Properties, our agents understand how difficult finding a house can be. This is why we pride ourselves on working with your schedule to find a home that checks all of your boxes. Our goal is to help homebuyers find a house they love at a purchase price they can afford.

We can start today! Find a Southern California real estate agent near you.

Sources:

• SF Gate. Steps to Buy A House in California. https://homeguides.sfgate.com/steps-buy-house-california-7625.html
• LA Times. The 20% Mortgage Down Payment is All But Dead. https://www.latimes.com/business/la-fi-mortgage-down-payment-20170629-htmlstory.html
• LA Times. Home Prices Fall in Southern California for the First Time in 7 Years. https://www.latimes.com/business/la-fi-southern-california-home-prices-20190426-story.html
• LA Times. Make Sure Home Inspectors Play By the Rules. https://www.latimes.com/business/la-fi-home-inspectors-20170427-story.html
• USA Today. Property Taxes: Which state has the highest and lowest. https://www.usatoday.com/story/money/2019/05/20/property-taxes-state-which-has-highest-and-lowest/3697929002/
• Business Insider. Here’s exactly how much you should keep in a home repair fund, because owning a home is always more expensive than you think. https://www.businessinsider.com/personal-finance/how-much-money-save-for-home-repair-2019-7