Countless articles have been written about the different steps to buying a house. In fact, we’ve written one ourselves. But today, we will focus on the first few steps to buying your first home in California.
First Five Steps to Buying a First Home in California
Step 1. Learn about your mortgage options.
Research is one of the first steps to buying a home in California — or at least it should be. And mortgage financing is a good place to start.
To help you get started, we’ve created a guide to the different types of home loans that are available to first-time buyers in California.
One of your first choices is whether you want to use a government-insured mortgage program like an FHA loan, or a conventional loan that is not backed by the government. There are pros and cons on both sides of the fence.
- FHA loans tend to have more flexible qualification criteria, and they allow for a down payment as low as 3.5%.
- Down payments for conventional loans usually start at 5%. But borrowers who put down 20% or more can avoid paying mortgage insurance.
- The VA loan program is a great option for California first-time home buyers who happen to be in the military, as well as veterans.
Step 2. Get pre approved for a mortgage loan.
This is another one of the preliminary steps to buying your first home in California. Mortgage pre-approval is when the lender reviews your financial situation – specifically your income, debts and credit score – to determine how much of a home loan you’re able to take on. Here’s how it works.
It’s wise to do this early in the home buying process, before you start shopping for a house. Otherwise, you could unknowingly waste time looking at properties that are above your price range. Pre-approval will also make sellers more inclined to accept your offer, since you been “screened” by a lender.
Step 3. Find a real estate agent who knows the area.
Did you know that in California it’s usually the seller who pays the real estate agent commissions? It’s true. And that’s one of the many reasons to have an experienced real estate agent on your side. This is an important step, particularly when buying your first home in California.
A real estate agent can help you find a home that meets your needs, evaluate the asking price, create a compelling offer, negotiate with the sellers, and more. We encourage all first-time home buyers in California to seek the help of an experienced real estate agent — ideally one who is familiar with the neighborhood or area where you want to buy.
Step 4. Start house hunting, but be open-minded and flexible.
In many real estate markets across California, housing inventory is limited. There just aren’t enough homes listed for sale to satisfy the current level of demand. As a result, first-time buyers should be prepared for competition.
In such a market, it’s important to be flexible and open-minded regarding the type of home you want to purchase. In a constrained market with limited supply, you might not find a house the checks every box on your wish list. You might have to compromise with the location, the size, etc. These days, compromise is a very common step for first-time home buyers in California.
Step 5. Understand the dynamics of a sellers’ market.
It’s important to understand the dynamics of the real estate market you’re about to enter. While conditions vary from one city to the next, many markets across California currently favor the seller over the buyer. That’s because of the supply-and-demand imbalance mentioned earlier.
So you’ll want to adopt the proper mindset before entering the market. It’s a crucial step in buying your first home in a competitive market like California.
What does this mean in practical terms? Among other things, you should strive to make your first offer a strong one. Use recent and comparable sales to shape your offer. This will improve the chances of the seller accepting your offer. (Lean on your real estate agent during this process … it’s one of their specialties.)
It’s also important to realize that in a sellers’ market you don’t have as much negotiating ability. So you probably shouldn’t quibble over “nickels and dimes” during the negotiating stage. If you find a home that meets most of your needs and falls within your budget, move on it with a strong offer. Because chances are, there are other buyers lined up behind you.