What to know before buying a home in California, USA

What to know before buying a home in California guide, CA real estate purchase tips, Buy US property advice

What to know before buying a home in California?

September 9, 2022

What to know before buying a home in California, USA

Buying a house is a dream for many. And California has always been the favorite destination for many to buy their house.

But turning this dream into reality involves strategic decision-making.

You might be confused about where to begin. From figuring out what type of house you can afford to payment terms of loans, buying a home requires a lot of serious preparation and a little luck.

Hence, in this article, we will discuss the things you must know before buying a home in California.

  1. Evaluating Your Financial Health to Bear All Housing Expenses

Before you purchase a house, especially in a high-cost living state like California, you need to have a significant understanding of your current financial condition.

The following are some of the expenses you’d have to bear while and after buying a house.

  1. Down Payment

Down payment is the foundation of all your housing costs. It is the percentage of the closing price that you have to pay to the lender.

As of March 2020, the average down payment for property purchases in California amounted to 5.2% of the closing price and ranged from 3.5-20%.

Now, as the average value of homes for sale in Discovery Bay, CA is around $600,000, you can expect your down payment to be at least $30,000.

  1. Credit Score

Before buying a home in CA, you need to apply for a loan. And in this case, your credit score plays a vital role in determining the loan amount you can get.

Lenders tend to forward your loan applications easily if the lendee has a high credit score. Thus, you must have a consistent record of timely payment of your debts. Also, it indicates that you are a responsible and trustable borrower.

On average, for a loan or mortgage application, you should possess a credit score of at least 620. However, the criteria can vary among lenders.

  1. Closing Costs

These expenses typically include title fees, prepaid costs like home insurance, taxes, and lender fees.

In the state of California, where real estate prices are pretty high on average, it is seen that the closing cost is around 3% of the final property price (after negotiations), which can result in anything around $18000.

  1. Having Knowledge of the Current Real Estate Market in California

Although it remains a fact that home prices in California are too high, there is good news. The current value of real estate properties in California is not rising as quickly as in other states of the USA.

The data retrieved from the California Association of Realtors revealed that the average home price in California increased by less than 9% between April 2021 and 2022.

  1. Checking out the Available Loan Financing Options

Regardless of the state, loan financing always makes purchasing homes convenient.

The following are the 5 types of loans available in the state. You can choose to proceed with one by calculating your financial health and the type of home you want to buy.

  1. Conventional Loans

California is known for its higher loan limits. The majority of the cities in California have loan limits surpassing $7,00,000.

These loans follow set lending rules determined by the Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal Mortgage Association (Fannie Mae). They have the best loan terms and competitive interest rates, resulting in lower monthly payments.

However, these organizations have certain loan limits.

  1. Jumbo Loans

A jumbo loan refers to a loan amount that exceeds the limits set by the Federal House Finance Agency.

These are not eligible to be purchased by government-backed entities and are mainly underwritten. Individual investors and big financial institutions like Goldman Sachs and JP Morgan Chase & Co. can purchase and securitize these types of loans.

They generally exceed the limit of $ 970,800.

  1. USDA Home Loans

A USDA home loan is a specified zero down payment loan, especially for rural homebuyers.

They are issued by the United States Rural Development Guaranteed Housing Loan Program Department of Agriculture

  1. FHA loans

FHA loan, or the Federal Housing Administration loan, is a government-backed loan that caters to lower and moderate-income buyers.

These are specially for those who possess a lower average credit score.

  1. VA Home Loans

Veteran Affairs Home Loans are specifically meant for qualified veterans of the United States who have served years in the military and reserve forces.

What to know before buying a home in California

  1. Seeking Assistance from Professional Home Selling Services

House hunting can indeed be daunting. Thus, to make things easier, you can take the advice of professional services.

Here are some home selling service options you can avail of to make a worthy purchase.

  1. Listing Services

These are specific databases created and maintained by real estate professionals.

So, if you are looking for a specific city in California or a particular neighborhood for purchasing a residential property, you can set up alerts on these portals. And whenever there are any new listings, you will get an automatic message.

  1. Expert Real Estate Agents

Real estate agents are licensed and specially trained to help you find the desired home while keeping your preferences in mind.

They also have the skills to negotiate with lenders and arrange for all your documents and paperwork, including loan papers, taxation details, and personal credit history that you’d require to buy a home.

  1. Making a Thorough Inspection of the Chosen Property

Before you make an offer for the house, schedule a home inspection.

Certain lenders might undergo a thorough home inspection before they grant the loan. But, even if they don’t, it is nevertheless a good idea.

A thorough home inspection essentially involves checking the foundation of the property and the presence of potentially dangerous elements. It includes inspecting any foundational damage and checking the flooring, basement, porches, and decks.

You should check the roofs and chimneys minutely, as repairing them on your own can cost you a hefty amount. In addition, note whether the gutters slope to the downspouts.

Last but not least, ensure that the electro-mechanical systems are working properly. If there are any damages or issues with the house, the seller must get it repaired before you step in. Thus, inspecting the house before making the deal is important!

What to know before buying a home in California – End Thoughts

A dream home plays a significant role in everybody’s life. Hence, ensure to buy the best one by following the above tips.

If you have doubts, consult professional real estate service providers in California that can guide you through the entire process.

Comments on this guide to What to know before buying a home in California article are welcome.

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photograph : Joe Fletcher
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