The First 5 Steps to Buying Your First Home in California

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 Steps to Buying a First Home in California

We know from experience that first-time home buyers in California often feel lost and confused during the initial stages of the buying process.

That’s understandable. If you’ve never been through the process before, you might not know what it involves or how to prepare for it. So let’s create a roadmap for success.

Step 1. Start saving money for your upfront expenses.

First-time buyers can encounter a variety of upfront expenses when purchasing a home. The closing costs alone can add up to thousands of dollars, and that doesn’t even include the down payment.

Your lender will probably request bank statements and other documents to ensure you have enough money to cover these costs. This is a standard requirement during the mortgage application and pre-approval process.

If you’re going to use a mortgage loan when buying your first home in California, saving money should be one of the first steps you take. The more money you save now, the better off you’ll be when the time comes to apply for a loan.

Step 2. 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 begin your research.

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. It will introduce you to some of the most popular financing options used by home buyers.

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: Home loans insured by the FHA tend to have more flexible qualification criteria, and they allow for a down payment as low as 3.5%. But they require mortgage insurance.
• Conventional loans: Down payments for conventional loans usually start at 5%, though some go lower. Borrowers who put down 20% or more can avoid mortgage insurance.
• VA loans: The VA mortgage program is a great option for California first-time home buyers who happen to be in the military, as well as veterans. It does not require a down payment.

Step 3. Get pre-approved for a mortgage loan.

This is another one of the preliminary steps when buying a first home, and it could set the stage for a smoother and more efficient house-hunting process.

Mortgage pre-approval is when a 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.

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.

How California first-time buyers benefit from pre-approval:

• Helps you understand how much home you can afford.
• Sellers take pre-approved buyers more seriously.
• Speeds up the mortgage approval process once you find a home.
• Reveals any credit problems early so you can fix them.
• Prevents you from falling in love with homes outside your budget.
• Gives you an edge in competitive real estate markets.
• Focuses your search on homes you can actually afford, saving time.
• Makes the home buying process smoother and more predictable.

Step 4. Find a real estate agent who knows the area.

In California, the seller often pays the real estate agent commissions (even for the buyer’s agent). And that’s just one of many reasons why it makes sense to work with an agent when buying your first home.

Researching and selecting an agent should be one of your first steps. It can pave the way for a more successful home buying experience.

A good agent will help you in many ways, including the following:

• Guide you through each step of the home buying process.
• Search for properties that match your needs and budget.
• Arrange visits to homes and provide insights on each property.
• Provide data on pricing, market trends, and neighborhood details.
• Draft, submit, and negotiate purchase offers on your behalf.
• Break down complex legal documents and contracts in simple terms.
• Recommend home inspectors and attend inspections if needed.
• Work with the seller to address issues found during inspections.
• Assist with final paperwork and ensure a smooth transaction.
• Provide ongoing support and advice throughout the process.

Step 5. Start house hunting, but be open-minded and flexible.

In many real estate markets across California, housing inventory remains 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 that checks every box on your wish list. You might have to compromise with the location, the size, and features.

These days, compromise is a common step for first-time home buyers in California.

Step 6. Understand the dynamics of a seller’s 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.

It’s also important to realize that in a seller’s market you don’t have as much negotiating ability. So it’s generally unwise to 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 there will probably be other buyers lined up behind you.