Frequently Asked Questions About Buying a Home in California

Do you have questions about buying a home in the state of California? If so, you’re in the right place! We are about to address some of the most frequently asked questions among home buyers in the Golden State.

FAQs About Buying a Home in California

We’ve addressed a lot of home buying questions on our blog over the years. So we thought it might be helpful to compile them all into an FAQ series, all on one page. Without further ado, here are answers to some of the most frequently asked questions about buying a home in California.

What are the first steps when buying a home?

If you’re planning to use a mortgage loan, you can get pre-approved to find out how much you are able to borrow. This can help you narrow your housing search to a specific price range. It could also make sellers more inclined to accept your offer, since you’ve been screened by a lender already.

It’s also a good idea to get a basic home-buying budget on paper, before entering the market. You can do this simply by looking at your current income and debts, to determine how much of a monthly housing payment you can comfortably manage.

Lastly, spend some time researching the local real estate market where you plan to buy a home. Housing market conditions in California can vary depending on the location. Some markets are more competitive than others, while others have more inventory and fewer buyers. Review recent sale prices in your desired location, to see how much house you can get for the money.

How does the rest of the process unfold?

Once you have your financing lined up, you can start the house hunting process. When shopping for home, it’s important to be open-minded, flexible and realistic. It’s rare for a home buyer to get everything they want in a house, within their budget. You will likely have to make compromises in terms of the location, features, or other aspects of the home.

Once you find a house that meets your needs, you can submit a purchase offer that includes a specific price and closing date. The seller can either accept your offer, reject it, or make a counter offer by adjusting the price or other terms.

If the seller accepts your offer, you would go back to your lender with a copy of the purchase agreement. Then you will go through the mortgage underwriting process. The underwriter will ensure that the property and the borrower meet all applicable requirements, based on the type of loan being used.

After this, you will move into the closing stage. You will sign all of the finalized documents relating to the sale of the home, pay your closing costs and down payment, and receive the keys to your new home.

How much do I need for a down payment in California?

The amount of money you have to put down will vary depending on the type of home loan you use. For a regular or conventional mortgage, the minimum down payment is usually 3% of the home value. The FHA loan program allows borrowers to put down as little as 3.5%, while VA loans for military members allow for 100% financing.

In some cases, a larger down payment might be required. This is often the case for so-called jumbo mortgages that exceed the official loan limit within a particular county.

What are the closing costs associated with buying a home?

In California, home buyers typically pay somewhere between 2% and 5% of the purchase price in closing costs. Closing costs can include a variety of mortgage-related and third-party fees. They include such things as mortgage application fees, government recording fees, home appraisal fees, and other costs relating to the transfer of property.

Are home inspections and appraisals required in California?

If you’re planning to use a mortgage loan when buying a house in California, the lender will likely require a home appraisal to be performed. The appraiser will review the property being purchased, as well as recent sales in the area, to determine the current market value of the home.

The home inspection is a separate process, during which an inspector will evaluate the condition of the property. In California, home inspections are not required but can be a wise investment. These inspections give you a much deeper insight into the true condition of the property, including any potential issues that need repair.

Do I need homeowners insurance to buy a house in California?

All home buyers can benefit from having a homeowners insurance policy. A house is a major investment, so you want to ensure that it’s protected from damages and liabilities.

A standard homeowners insurance policy provides coverage to repair or replace your home and its contents in the event of damage. That usually includes damage resulting from fire, smoke, theft or vandalism, or damage caused by a weather event such as lightning, wind, or hail.

If you’re using a mortgage loan, the lender will require you to have a homeowners insurance policy in place prior to closing. You will probably be asked to bring a copy of the policy to the closing, for verification.

Do I need to use a real estate agent when buying a home?

Home buyers in California are not required to use a real estate agent. But there are some major benefits for doing so. Also keep in mind that the seller is usually the one who pays for the agents’ commissions. So, as a home buyer, you could enjoy the benefits of having professional help without having to pay for it.

A real estate agent can help you navigate every step of the buying process. They know how to evaluate the list price, put an effective offer on paper, negotiate with the seller, and keep the process on track. So you have to ask yourself if you’re comfortable handling these things on your own, or if you would be better off having a professional help you.

Do I need to make an earnest money deposit?

In the California real estate market, it’s common for home buyers to submit an earnest money deposit when making an offer on a house. This deposit shows the seller that you are serious about buying their property. Having an earnest money deposit could increase the chance that the seller will accept your offer.

If the sale goes through, the earnest money gets applied to the purchase price. If you back out of the sale for some reason, you might put your earnest money deposit at risk. This is why some home buyers choose to include contingencies within their purchase agreements, to protect their deposit money in certain scenarios.

What type of mortgage loan should I use?

Home buyers in California have many different mortgage loan options to choose from. To find the best one for you, you’ll need to consider your current financial situation and long-term goals.

Borrowers with limited funds for a down payment often use FHA loans, or a conventional loan with mortgage insurance. Both of these options allow you to make a down payment below 5%. Military members and veterans can benefit from the VA loan program, which allows them to buy a house with no down payment whatsoever.

If you are buying a more expensive property that exceeds the government-imposed loan limits for your county, you will likely need to use a jumbo mortgage loan. These loans are available in amounts well over $1 million. They tend to be more common in California compared to other states, due to the relatively high home prices we have.

What are the benefits of buying a home in California, versus renting?

Buying a home in California can have several advantages over renting, especially in the long run. Owning a home allows you to build equity and invest in an asset that can appreciate in value over time, potentially providing a valuable return on investment.

Renting, on the other hand, provides no opportunity for building equity and requires ongoing monthly payments that don’t contribute to any form of ownership.

Additionally, owning a home can offer stability and the ability to personalize your living space. You will have the freedom to make changes and renovations as desired. Homeownership also provides tax benefits, such as deductions for mortgage interest and property taxes.

What happens at closing?

The closing process represents the final step in a home purchase. This is when the buyer and seller sign all necessary documents to transfer ownership of the property. It typically takes place at a title company or an attorney’s office and involves several key steps.

First, the buyer will review and sign a variety of legal documents, such as the mortgage agreement, promissory note, and truth in lending statement. Next, the buyer will provide a certified check or wire transfer for the down payment and closing costs, which will be deposited into an escrow account.

Finally, the seller will sign the deed, transferring ownership of the property to the buyer, and the buyer will receive the keys to their new home.