Buying a home in California’s overheated housing market isn’t exactly easy. Prices are high and inventory is low. In fact, a recent report from Bankrate looked at the ten worst metropolitan housing markets in the country for first time millennial homebuyers. A whopping six are in California.
However, despite all the bad news, it’s still possible to find a good home in a great neighborhood. The secret is being prepared and being practical. Here’s what you need to know:
First Thing’s First: Get to Know Your Neighborhoods
With horror stories on skyrocketing housing prices hitting the news nearly every day, it’s easy to get discouraged. But instead of stressing out and giving up before you start, spend a few weekends checking out open houses to see what your money can buy in your target neighborhoods.
If cities like San Francisco and San Diego seem out of reach, connect with an experienced broker who knows the city you want to buy a home in. They can help develop a list of places that will work with your needs and budget. A good broker knows their city inside and out, and can lead you to areas and properties you might not have considered before.
Second: Have Realistic Goals
Today’s homebuyers love their HGTV, and many think a house without a kitchen island the size of an Olympic swimming pool is not even worth considering. But sometimes a smaller home or a fixer-upper is all your budget will allow. Before you start diving into your home search, it’s a good idea to reign in your wish list, and be realistic about what you can get for your money. (Wondering how much house you can afford? We’ve got you — head over here!)
If the swankiest houses on the fanciest street are out of your budget, consider properties that may need work, but could be really special. If you keep an open mind and are willing to put some work in, a modest home can turn into something really special.
Third: Think Outside the Box
If, after lots of careful planning, a single-family home in your target neighborhood is still going to be a reach, consider some alternative options. The Los Angeles Times suggests thinking about properties that have guest houses or other spaces that can be rented out for additional income. Just make sure you know the zoning laws understand the in’s and out’s of being a landlord before you jump in.
Minimalists with few possessions or career-focused road warriors might want to consider joining the tiny house movement. Tiny houses are typically homes of less than 450 square feet with similarly small price tags. If cozy is your thing, maybe a tiny home could work for you.
Fourth: Get Pre-Approved
In competitive California markets, when you do make an offer on a home, yours may be just one of multiple offers on the property. If you don’t have a pre-approval letter to go with your offer, data from Redfin shows there’s almost no chance the seller will accept your offer. Skipping the pre-approval process can be a signal to sellers that you aren’t serious about buying. It also puts you at a disadvantage when looking for a home since you won’t know what you can actually afford.
California loan officers advise first-time homebuyers to shop around for fully underwritten pre-approvals before beginning their search. At Eave, we fully underwrite your financials within 24 hours of your application. Our Eave Conditional Approval shows sellers that you’re a serious buyer who’s ready to close the deal. And our results speak for themselves: 90 percent of our clients have won the first home they’ve bid on.
Fifth: Take Your Time
Technology has made it possible to have almost everything delivered to us the moment we decide to buy it (okay or just a day or two later!). However, when it comes to buying a new home – the most expensive single purchase most people will make in their lives — it’s essential to do things right. It’s easy to search for new homes on the market, find a broker, or obtain a mortgage, but real estate experts advise buyers not to rush into anything.
Use the internet but also consult friends, relatives, and colleagues and do as much research as possible. The Minneapolis Star-Tribune advises first-timers to start planning to purchase their first homes at least a year in advance. Getting money together for a down payment, working to improve your credit score, and getting pre-approved can take time, and it’s essential in an expensive market to be in the best financial shape possible before beginning the home buying process.