Budget
An excellent place to begin is drawing up a budget of what you can realistically afford, factoring in any additional expenses to homeownership (see below under Additional Expenses). Once you determine your budget, the next step is to talk to a mortgage broker about the best home loan on the market for you and the possibility of receiving home loan pre-approval. Pre-approval makes the lending process much easier when it comes time to apply for a home loan formally.
We can recommend the top loan brokers who will help you secure financing and share a wide range of home loan products and interest rates. They will also help you select the option best suited for your situation. Brokers work independently from lenders, so they’re able to show you a broad range of home lending options and help you find the lowest interest rate. Brokers also come at no extra cost to you, as their fees are paid for by the lender, so you’re able to get independent financial advice at no additional charge.
Due diligence
It’s vital to do your due diligence before buying a home. This process entails inspecting the property in person if possible and ensuring the proper building and pest inspections have occurred. Building and pest inspections incur a cost; however, they will confirm no structural damage or severe damage caused by pests, such as termites. California contracts enable you to guarantee an inspection is carried out while blocking the seller from accepting any other offers during this time.
Buying at Auction
Knowing your budget and doing your due diligence is essential no matter what the method of sale might be. However, if the home you are interested in is up for auction, you will still need to carry out all building and pest inspections before the auction occurs, even if you are not the successful bidder. This action must happen because sales by auction are not subject to the usual sale contingencies. You can find out more about the auction process in our Guide to Buying at Auction.
Additional Costs
Apart from a home deposit and the ongoing cost of mortgage repayments, there are other fees you should be aware of before buying your first home.
- Escrow and title fees: Escrow ensures your transaction is carried out objectively, confidentially, legally, and on-time. Fees vary, however they are typically tied to the purchase price of your property. Title insures your property is free and clear of any encumbrances (debts) and is legally safe for you to purchase. Title fees are regulated by the state.
- Building and pest inspections: As mentioned above, it’s worth investing in building and pest inspections before signing off contingencies, conditions, or subjects of sale to ensure your potential home is structurally sound and pest-free.
- Home and contents insurance: Remember that home insurance is an essential part of the home-buying process. It needs to take effect as soon as you close on your property, not necessarily the date you move in. Ensure you have looked at your options and have chosen the premium that best suits your needs and budget.
- Property taxes: California law is 1% of the purchase price, however, individual cities can add an additional 1/4%. Please plan for 1.25% in annual property taxes.
Though there is a lot to consider when buying your first home, it should be an exhilarating experience. Our aim is to make the buying process as smooth and straightforward for you as possible. This moment is a big step in life. Congratulations on reaching this milestone!