Buying a house is a complex and potentially lengthy process, especially if you’re a first-time buyer still learning the ropes. It’s also an important thing to get right. This is your home, after all! It’s best to do plenty of research before you even start looking for a property as this will help you understand your options, get to grips with what you can afford, and know what you can expect once you start the process.
Here are a few hints, tricks, and things to expect when buying a house in California. But then, remember – always get expert advice before you start!
Your first step onto the property ladder should be to find a fantastic realtor. The right realtor will support you every step of the way with expert, impartial advice and guidance. The right realtor will also have extensive local knowledge of the area where you’re looking to buy. California is a big place, and the process can be very different from one county to the other.
Not too long ago, 30-day escrow periods were common right across the state. However, as lending regulations have gotten tighter, and the process longer, it’s increasingly difficult to close escrow in that amount of time. Why make the process more stressful than it needs to be? Opt for at least 45 days and have an easier life.
If you’re in a position to offer cash for a home (as in, you don’t need a mortgage and can buy the house outright), then you should do so. Cash offers are much rarer, and buyers love the idea of them. If you don’t have a cash offer and are bidding against someone who does, you might find it much more challenging to get the house.
In some cases, cash buyers will be organizations and not people. A home buying company in Los Angeles is much more likely to be able to buy a house in cash than the average person. If you go up against a cash buyer, you should manage your expectations.
California is a big and diverse state, home to some of the most desirable zip codes in the country, and property prices can vary wildly even within the same town or city. You may have a specific idea of where you want to live, but the properties of the specification you need might be out of your price range. Be flexible, and you might find your dream home is just down the road from where you thought it was.
Before you buy a house, you should try and estimate how much money you’ll pay in property taxes. You don’t want to find yourself with tax bills you can’t afford!
This is especially important in California, as property taxes are infamously varied and complicated to calculate in the Golden State. Real estate is taxed at state, county, and city levels. It varies depending on where in California your property is, but as a general rule, you’ll pay 1% of your property’s value in taxes to the state, plus any county or city taxes. Make sure to ask your realtor for local property taxes in the area where you’re planning to live.
The time of year you choose to buy can have a significant impact on how the process goes. For example, if you buy a house in winter, you’re more likely to get a great deal. If you buy a house in spring or summer, it’s likely to be more competitive. Do your research and ask your realtor. If you can afford to wait for the right time, do so.
When buying a house, many people focus purely on saving for their down payment. But then, this isn’t the only major expense that comes with owning property. You also need to take closing costs into account. These additional costs can mount up quickly, so making sure you have funds set aside to cover them is really important.
Closing costs cover several fees, including wire fees, attorney fees, transfer taxes, notary fees, title policies, inspections, courier costs, insurance, interest, property taxes, escrow costs, and natural hazard disclosures. These will again vary by where you want to live. For example, in Northern California, transfer taxes are paid by the buyer. In SoCal, they are paid by the seller.
If you’re a first-time buyer, you may qualify for assistance with closing costs.
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Never ever cut corners on home inspections. As well as a general home inspection, you should consider more detailed inspections covering the roof, fireplace, plumbing, and electrics. This is important as, if a problem is found after you’ve purchased the house, the law will favor the seller, and you’ll be liable for any costs. Do your due diligence to avoid nasty surprises.
Sometimes, no matter how well the process is going, house sales simply don’t close. There can be any number of reasons for this: your mortgage loan doesn’t go through, the seller cancels escrow without warning, there are other legal issues or circumstances that simply can’t be foreseen. Because of these possibilities, you should avoid spending any additional money (on furniture, for example, or home decor) before the sale has properly closed. No one wants to be stuck with a coach they can’t use!
If you’re smart, before you even begin looking at a property, you’ll get a signed pre-approval letter from a mortgage broker. These letters detail how much money you’re pre-approved to borrow to buy the home. However, it’s important to note that these letters don’t constitute final approval and don’t guarantee you a loan in that amount, or a loan at all. You’re pre-approved before any review of your financial documents, and it isn’t until this has happened that you’ll receive final approval.