Looking to buy a house in California? Now’s the time to act! 21.8% of homes were sold below the asking price, giving buyers more room for negotiation. With 91,030 homes for sale, up 18.7% from last year, this means all the more options for you!
With more homes available, the average time spent on the market has increased to 39 days. With fewer bidding wars, sellers are more likely to offer concessions, like paying for closing costs. It’s a great time to buy a home in the Golden State!
9 Steps to Buying a House in California
Buying a home in California doesn’t have to be complicated. From finding a property to closing on the deal, these 9 steps will guide you through the process:
Step 1: Decide Your Homebuying Purpose
Before you start your home search, you need to be sure what kind of home to purchase in California. Are you looking for a permanent residence, an investment property, or a vacation home? This will help you decide on an ideal location and property type.
»💲Can you afford the Golden State?
Calculate the cost of living in California to estimate expenses like housing, utilities, and transportation. Get a detailed cost breakdown across cities for FREE today. 🏡
Step 2: Assess Your Financial Readiness
Before you buy a home in California, take these steps to get your finances in order:
- Review Your Credit Score: Your credit score determines how much you can borrow and the interest rates you qualify for. A minimum credit score to buy a house in California is 580 for an FHA loan and 620 for a conventional loan.
- Calculate Your DTI Ratio: Lenders use the debt-to-income ratio to determine your eligible mortgage amount. Ideally, your monthly debt payments should not exceed 36% of your gross monthly income.
- Determine Your Monthly Mortgage Budget: Decide how much you can afford for your monthly mortgage, including the loan, taxes, and insurance. A good rule of thumb is to keep housing costs under 28% of your gross monthly income.
» California Mortgage Calculator: Find how much house you can afford in the Golden State now. 🏡
Step 3: Explore Home-Financing Options
In California, the average down payment on a home ranges from 10% to 20%. However, there are several financing options to help you cover the costs:
1. Home Loans
| Loan Type | Down Payment | Key Benefit | Ideal For |
|---|---|---|---|
| FHA Loans | 3.5% | Low down payment, flexible credit score | First-time buyers |
| VA Loans | 0% | No down payment, lower interest rate | Veterans |
| USDA Loans | 0% | No down payment, lower interest rate | Rural homebuyers |
2. Assistance Programs
- First-Time Homebuyer Programs: If you’re buying a house for the first time in California, you should consider the GSFA Platinum Program. This program offers financial assistance up to 5.5% of the loan amount.
- Down Payment Assistance (DPA) Programs: Explore programs like the California Dream For All Program and the MyHome Assistance Program. They can cover 20% (up to $150K) for a down payment.
Step 4: Research the California Housing Market
In November 2024, homes sold for 99.9% of their list price. The time spent on the market has increased by 8 days Y-O-Y. This shows that the CA housing market is balanced.
- Track Mortgage Rates: As of January 9, 2025, the 30-year fixed mortgage rate is 6.66%. Experts predict rates to stay in the mid-6% range throughout 2025 and 2026. So, now is a great time to lock in a competitive rate.
- Home Inventory Levels: In 2025, single-family home inventory is expected to grow to 304,400 units, up 10.5% from last year. This gives you more options when house-hunting.
- Local housing trends: You can negotiate a better price if you understand local housing trends. For e.g., homes for sale in San Francisco have seen prices drop due to tech layoffs. Single-family homes have also seen a 15.4% price drop.
Step 5: Get Pre-Approved for a Mortgage
86% of sellers favor buyers with a pre-approval. So, get pre-approved before house hunting in California to show you’re serious about the purchase and financially capable.
Pre-approval also speeds up the buying process, helps you negotiate better, and reduces delays in the transaction.
Get pre approved for a mortgage in California 🏡
Select Your Loan Type
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New Home Purchase
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Mortgage Refinance
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Cash-out Refinance
Step 6: Start Your California Home Search
Traditionally, home buyers rely on California real estate agents to find a house, but this comes with hefty commissions. Instead, you can also:
- Search for Listings Online: Use online platforms to explore homes for sale in California. Look for neighborhoods that cater to your needs.
- Consider FSBO Homes: You can also search for California homes For Sale By Owner. It will allow you to bypass realtor commissions and directly negotiate with sellers.
Browse Homes For Sale in California by Price and Type
» 💡 What is the nicest and cheapest place to live in California?
Sacramento is one of the cheapest places to live in California. Its cost of living is 14% lower than the state average.
Step 7: Make a Competitive Offer
Once you’ve found a home you like, it’s time to make an offer! Here’s what your home offer should include:
- Seller’s Name and Address: Include the seller’s legal name and property address.
- Offer Price: Offer an amount based on the Fair Market Value (FMV) and comparable sales.
- Down Payment: The portion of the purchase price that you pay upfront.
- Earnest Money: A deposit to show you’re serious, often 1%-2% of the offer price, credited toward the purchase.
- Contingencies: Conditions such as home inspection, appraisal, or financing that must be met for the deal to close.
- Concessions: Requests for the seller to cover some costs, like closing fees or repairs.
- Closing and Move-in Dates: Specify when you aim to close the deal and move in, based on your and the seller’s needs.
- Offer Deadline: Specify the date by which the seller must respond to the offer.
Step 8: Conduct Inspections and Appraisals
A home inspection ensures the property is in good condition and there are no hidden issues. An inspection can help you save up to $14,000 on the sale price.
You should prioritize a home inspection in California that focuses on 5 key points:
- HVAC: Checks the heating and cooling systems for proper operation.
- Plumbing: Inspects pipes and fixtures for leaks or damage.
- Electrical: Evaluates the electrical system for safety and functionality.
- Roofing: Assesses the roof for damage or wear.
- Foundation: Examines for cracks or issues with the home’s foundation.
Once the inspection is complete, your lender will arrange for a home appraisal to ensure the property’s value matches the loan amount.
Step 9: Close on Your California Home
Before closing, do a final walkthrough. Check if the home’s condition and repairs are in the agreed-upon condition. It can take 30 to 45 days to close on your California home after signing the purchase agreement.
You’ll also need to pay closing costs for buyers in California, which are usually 2% to 5% of the home’s purchase price. Once everything is finalized, escrow will record the deed and hand you the keys to your new California home!
Should You Buy a House in California?
Absolutely! With more and more homes being sold below the list price, now is the best time to buy a house in California. But you need to plan properly.
Assess your financial situation to ensure your credit score is ready for quick pre-approval. Also, calculate your down payment and closing costs well in advance.
Frequently Asked Questions
Is California a good place to buy a home?
Yes, California is a great place to buy a home. It has a thriving job market, diverse housing options and excellent quality of life. San Diego, Long Beach, and Los Angeles are some of the best places to live in California.
How much down payment do I need to buy a house in California?
It depends on the type of mortgage you choose. For a conventional loan, you have to put down 20%. On the other hand, FHA loans only need 5% money down.
What are the requirements to buy a house in California?
To buy a house in California, you'll need a minimum credit score of 620, proof of income, funds for a down payment, and a 36% debt-to-income ratio. You should also seek a pre-approval if you plan to apply for a mortgage.
» Steps to Buy a House in California: Your 9-step action plan for buying a house in the Golden State.
What credit score do I need to buy a house in California?
For an FHA loan, you'll need a minimum credit score of 500, while conventional loans typically require 620 or higher. A good credit score can help you secure lower interest rates.
How to buy a home in California with no money?
You can buy a house with no money down in California by using USDA or VA loans.
