Making the jump into homeownership 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% or more.
• 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 approximately 3% of the home's final closing price.
• Inspection costs – In the first 17 days after opening escrow home inspections are arranged. There is a general inspection that will address the basic systems of the home. Additional inspections will likely be recommended to look for issues such as lead, asbestos, and termites. Depending on where you are purchasing you may need special inspections such as geology and septic. Be prepared to investigate thoroughly.
• Property taxes –Your tax bill will be 1% of the purchase price, plus any special or direct assessments levied by the municipality. You pay property taxes in two installments during the year.
• Emergency repair funds – Experts advise allocating between 1-4% of the house’s value to these funds.
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 will lose out on a place you love. As soon as possible, 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 – 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 USDA rural home loan or a VA loan. This may take the financial strain off of your budget and open you up to other housing options.
Important tip: During your escrow and after your pre-approval from your lender do not take on any new loans, apply for additional credit, make big purchases, miss any payments, change jobs, or make any large unexplained bank deposits, as this can change your ratios and can affect your mortgage commitment.
House hunting can be the most enjoyable part of the homebuying 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. It is important to have a meeting with your agent to discuss your needs and wants.
Online home selling resources
Browse through my website to get an idea of the market. Spend a little time every day looking, and you’ll start getting educated on values.
Rely on your agent
Your agent is the best resource for finding your dream home. A good agent is immersed in the home-buyer and seller network. Kristin will set you up with your own unique listing alerts and dashboard where you can easily review, compare, and provide feedback on new listings.
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.
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. When you find that home, jump into action to purchase it before someone else acts.
Kristin will draw up and guide you through the legal documents required to make a strong offer that has the best chance of acceptance. She has effective strategies and uses best practices that she has honed over the years to help you win your dream home. She will walk you through the disclosures, investigate the title report, and explain the escrow process.
A home inspection checks for potentially dangerous things in the house, like lead, asbestos, and foundational damage. In many cases, you may want geology or septic reports. Attend the appointment if possible—you’ll be able to ask questions, understand more clearly 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.
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
If you're getting a mortgage an appraiser will be hired to evaluate the worth of the home. Cash buyers may want to include an appraisal contingency depending on market conditions.
Do a final walk-through walk-through
Walk through the house one last time before it’s finally yours, to verify everything is in the same condition as when you made the offer. It’s also a chance for you to double-check that no new house issues have appeared since the home inspection.
Sign the papers and pay the closing price
Work with the escrow company, lender, title company representative, and your agents to sign the final paperwork. Then pick up your keys.
As an agent who's an expert in this local area, I bring a wealth of knowledge and expertise about buying and selling real estate here. Contact me today!