- Set Your Budget
- Obtain Financing
- Find the Perfect Neighborhood
- Build Your Team
- Look for Homes
- Submit an Offer
- Finalize the Loan Application
- Do Your Due Diligence
- Close on the Property
1. Set Your Budget
The first thing to do when buying a house in California is to set your budget. Remember that you’ll need to make a 20% down payment if you plan on using a conventional loan, or you may be required to pay private mortgage insurance. However, you could also choose a government-backed loan, which requires a lower down payment. Also, take a look at your monthly income and figure out how much you can afford to spend on housing. Most experts recommend not spending more than 28% of your monthly income on your mortgage payment. You can use a mortgage calculator to determine what 28% of your income would afford you in California. So, take stock of your income and savings and create a realistic budget.
2. Obtain Financing
Once you have a general budget, the next step is to seek a pre-approval letter from the bank (unless you plan on paying cash). This will involve having a quick conversation with the lender about your financial situation and current savings. They will then do a quick credit and employment check, and if everything is in order, they will let you know if you are pre-approved and for how much. They will also provide you with a pre-approval letter which you can show homeowners to prove you are serious.
3. Find the Perfect Neighborhood
Next, you’ll want to figure out where you want to live. Although you’ll want to start by identifying the city or town, eventually, you’ll want to narrow it down to particular neighborhoods to make your search more manageable. If you’re new to the area, you should do some research on local crime statistics, property values, areas of interest, school districts (if you have kids), and any other information you may find relevant. You should also take a quick drive through any areas of interest to get a sense of what it’s like to live in the neighborhood.
4. Build Your Team
When you’re ready to start looking at homes, the next step is to build your team to help you make the best decision possible. In most cases, you’ll want to start with a good real estate agent who can help you find available homes in your target neighborhoods and budget. You may also want to hire other professionals, like a real estate attorney or accountant, to help you make a more informed decision about your purchase. But it often helps to start with a real estate agent because they can make recommendations if you need help finding other professionals.
5. Look for Homes
Once you have the financing in order and a solid team of professionals behind you, it’s time to start your home search. Depending on your preferences, this process can take a few days or several months. You can look at as many properties as you like, but most experts recommend looking at least 6 to 12 homes before deciding, especially if it’s your first time. So, look at as many options as possible within your price point and narrow them down until you’ve found your dream home.
6. Submit an Offer
When you’ve found the perfect property, strategize with your real estate agent and determine a fair offer. Sometimes, it may be wise to offer the listing price, but if you think you have some leverage, you may offer less and see if they accept. Or if the market is hot and you really want the property, you may offer even more to beat the competition. Once you submit the offer, the seller will review it and either accept it, reject it or send a counteroffer. Then you can negotiate until you both agree on the price, or you decide to look for another property.
7. Finalize Loan Application
After you sign a purchase contract committing to the sale, you’ll want to go ahead and finalize your loan application. Even if you’re pre-approved, that doesn’t mean the money is yours, and you’ll still have to go through the formal underwriting process before you can obtain the funds. But as long as you were honest in your pre-approval meeting and nothing has changed with your finances since then, you shouldn’t have any issues seeking approval.
8. Do Your Due Diligence
While waiting for the loan to be approved, you’ll want to conduct your due diligence to ensure you’re making a sound investment. First, you’ll be required to schedule an appraisal to confirm the property’s value as part of the loan approval process. You’ll also want to schedule a home inspection to verify the home’s condition and spot any red flags. If the inspection or appraisal uncovers any new information, you may want to return to the negotiating table. But if everything checks out, all that’s left to do is close on the sale.
9. Close on the Property
About 24-48 hours before the closing, you’ll want to do a final walkthrough of the property to look for any last-minute items that need addressing. Once you’re satisfied, you will head to the closing table with your real estate agent and attorney and sign all the necessary documents. You will also bring a check for any outstanding closing costs and the remainder of the down payment. Once you sign on the dotted line and transfer the funds, you’re officially a homeowner.
- Cash for the Down Payment and Closing Costs
- Stable Income to Qualify for a Loan
- Good Credit
Although buying a home in California may seem overwhelming at first, as long as you take it step-by-step, you should be fine. Just make sure to determine an accurate budget and set realistic expectations, and before you know it, you’ll be the proud owner of a new home.