How to Buy a House in California, the 2021 Edition

The home buying process in California has changed a lot over the past year or so. We’ve experienced a global pandemic, an economic slowdown, and a surprisingly strong year for the housing market in 2020.

In response to these changes, we thought it was a good time to publish an updated guide on how to buy a house in California. This article provides an updated look at the buying process, taking into account the COVID-19 situation, current real estate trends, mortgage rates and more.

How to Buy a House in California in 2021

An entire book could be written on how to buy a house in California. But you’re a busy person, and you deserve a more concise explanation of the process. With that in mind, we have boiled it all down to seven important steps.

1. Research and determine your financing strategy.

How will you be paying for your house? This is a big question, and it brings a lot of considerations front and center. Answering these questions in advance — or at least understanding them — will increase your chance for success.

If you’re paying cash for a home, you can probably skip this section of the tutorial. But if you’re like most buyers, you need to use a mortgage loan to help cover the cost of a home purchase. That means you’ve got some research to do.

We’ve written about the different types of home loans that are available these days. So that article is a good place to start.

You’ll also want to think about your upfront costs. When you buy a house in California, you will likely encounter some out-of-pocket costs that have to be paid up front. The down payment and closing costs are the two biggest expenses associated with a home purchase.

But it all starts with the type of mortgage loan you use.

For instance, VA loans allow people to buy a house in California with no money down. Other mortgage programs might require a down payment ranging from 3% to 5%. And jumbo loans for higher-cost homes tend to require more money down. It varies.

2. Know that you can buy a home safely, despite COVID-19.

The coronavirus pandemic has changed the way we do business. That’s partly why we felt it was necessary to create a new tutorial on how to buy a house in California. Things have changed so much over the past year.

As a buyer, you should know that most of the home buying process can be handled digitally. From virtual tours to digital document signing, the California real estate and mortgage process has evolved in a way that reduces the need for personal contact. And with COVID still going on, that serves everyone’s best interest.

A lot of home buyers — and even sellers — are reluctant to enter the real estate market right now due to coronavirus concerns. Those are legitimate concerns. But many of those same people don’t realize how much the industry has changed to ensure safety.

3. Determine where you want to buy a home, and have a backup.

Chances are, you already know where you want to buy a house. Even so, it’s good to have a backup plan. Having some second and third-choice locations in mind can increase your chance of finding the right house at the right price.

Home prices in California have risen steadily over the past year. So you might not be able to find a suitable home within your desired location and price range. You might have to expand your search into other areas. In fact, there’s a good chance of that happening.

This is why it’s so important to have a backup plan, and to be open-minded regarding your desired neighborhood and location.

4. Understand local housing market conditions (and challenges).

Market research is step number four in our “How to buy a house in California” tutorial. Before you dive into the real estate market to make a purchase, spend some time researching local housing trends.

The California real estate market has been surprisingly hot over the past year, despite the broader economic effects of COVID. Inventory remains low, while the demand from home buyers continues to soar.

Many local housing markets across the state are currently experiencing a sharp imbalance between supply and demand. The short version is that there are plenty of buyers in the market competing for homes, but not enough properties to go around.

But not all markets are the same. Over the past year or so, the number of homes for sale has increased in some cities but fallen and others. The San Francisco Bay Area, for example, has experienced a much-needed increase in real estate listings over the past year. In other parts of the state, the total number of listings has declined.

That’s why it is so important to conduct local housing market research before buying a house in California. Your research will pay off later, when the time comes to make an offer.

5. Negotiate with current market conditions in mind.

As of early 2021, most housing markets across the state still favor sellers over home buyers. Tight inventory conditions and strong demand tend to put sellers in the driver’s seat, when it comes to price negotiations.

As a savvy home buyer, you’ll want to keep these trends in mind when you make an offer. It’s probably not the best time to make a low offer, or to “sweat the small stuff.” In a competitive real estate market with limited supply, buyers should make strong offers supported by sales data.

6. Finish the closing process and get the keys to your new house.

Step number six in “How to buy a house in California” is the closing. This is the final step in the process, from a buyer’s perspective. It’s when you finalize all of the paperwork relating to the sale, pay whatever closing costs you’ve accrued, and get the keys to your new house.

This process can now be handled digitally, without face-to-face contact between home buyer and seller, lenders, agents, etc. The real estate and mortgage industries have been moving toward a more digitized process for years. And then the coronavirus pandemic came along.

Today, real estate, mortgage and escrow companies have embraced a digital workflow that allows the industry to move forward while keeping people safe at the same time.

As your closing day draws near, you’ll receive a finalized list of closing costs. This document will show the actual amount that must be paid on closing day. In California, most home buyers pay these costs with either a cashier’s check or wire transfer.

Related: Who pays which closing costs?

The best thing you can do, as the one buying a house, is to stay in touch with your loan officer and escrow agent. Ask questions whenever needed. Make sure you know what to expect on closing day, and how much you will have to pay. Communication is the glue that holds everything together.

Note: This article explains how to buy a house in California in 2021 and is intended for a general audience. The home buying process can vary significantly from one buyer to the next, for a number of reasons. As a result, portions of this article might not apply to your particular situation. You might also encounter additional steps that are not covered above.