Whether you’re looking for the peace and quiet of northern California or the hustle and bustle of an urban environment like San Diego or Los Angeles, the Golden State offers something for everyone. However, becoming a homeowner here can feel daunting: The state consistently ranks as one of the most expensive places in the U.S. to live. Buying a home here is possible, though. If you’ve been California dreaming, here’s a look at how to approach the home buying process in the Golden State.

How to buy a house in California: A checklist

Decide where to live in California

California is huge: 163,695 square miles, to be exact, according to Census data. So, if you aren’t set on a specific location yet, take a long look at the map. Does the ocean air appeal to you, or are you looking to spend time in the desert sun? Do you need the space of a single-family home, or will a smaller condo meet your needs? Redwood trees and hiking trails, or a man-made skyline and loads of people? Ask yourself the critical questions about what you need for your lifestyle.

Calculate the cost of living

What you want isn’t the only consideration — you’ll also need to think about how much it will cost you. The cost of a house will certainly play a major role in that math, but there are other regular expenses you’ll need to consider: How much groceries cost, how much you’ll spend to fill up your gas tank and more. Use Bankrate’s Cost of Living Calculator to understand how much money you’ll need to earn to maintain a good quality of life in any of the major California metro areas.

Consider the best places to live

To determine the best places to live in California, take a look at where the data points. While Sacramento took the top spot on Bankrate’s most recent list, smaller cities might fit your needs, too. Once you’ve narrowed your searches to specific areas, you’ll want to consider suburbs and neighboring towns that might offer access to the attractions you want at a lower price point.

Determine your home buying budget

Speaking of price point, this is the foundation of your work to buy a house in California. Use Bankrate’s Home Affordability Calculator to figure out how much you can comfortably spend to purchase a home. Remember, the key word here is “comfortably.” If you stretch yourself too thin, you run the risk of too much financial stress to enjoy your new home.

Tips for buying a house in California

Every real estate market is different. As you begin looking at California homes, keep these things in mind.

Home values

The good news about home prices in California: They aren’t rising as quickly as they are in many other places around the country. Data from the California Association of Realtors shows that the median home price increased by less than 9 percent between April 2021 and April 2022. The bad news: Prices were already really high. The median home price in California was $884,890 as of April 2022.

Mortgage rates

Because home prices are so high here, many homebuyers need to borrow money that exceeds the limits put in place by the Federal Housing Finance Agency. With that in mind, you might need to compare California’s jumbo loan limits instead of conventional mortgage rates. It’s important to note that jumbo loans tend to come with stricter borrower requirements, including a larger minimum down payment and a higher credit score.

Things to know about buying a house in California

  • Property taxes and Mello-Roos laws: When you own a home in California, you’ll need to budget for annual property taxes, which are capped at 1 percent of a property’s assessed value. So, if your home’s assessed value is $500,000, your property tax bill would be no more than $5,000. That’s a fairly cheap property tax rate in an otherwise expensive state. However, you need to watch out for the Mello-Roos tax, a special charge that homeowners in certain communities must pay that helps cover everything from elementary schools to cable television lines. Make sure to consider Mello-Roos implications as you compare properties to determine if a home is subject to this charge, and how much it will be.
  • Dual agency: California allows real estate professionals to have dual agency, meaning a single agent can represent both the buyer and the seller in a transaction. That might sound strange, but it is legal here, and it’s not necessarily a bad thing. It can help lead to faster transactions. Either way, your agent is required to inform you if he or she is also representing the seller you want to buy from.
  • Seller’s disclosure: The seller of a California property is required to disclose a wide range of information about the property. For example, is it located in a natural hazard area that is prone to floods, fires or earthquakes? What are the flood disaster insurance requirements? Has anyone died on the property in the last three years? These are just a few of the questions that the seller must answer so you buyers can be well-informed about any potential risks.
  • Closing costs: As in any other state, you’ll need to budget for closing costs, too. In California, new homeowners pay an average of $8,219, including taxes, at closing.
  • Attorneys: Unlike some states that require a buyer to hire a real estate attorney to oversee the closing, you don’t have to have one in California. However, it’s still smart to have a legal professional to help make sure your contract includes favorable terms.
  • Climate and weather considerations: As you’re thinking about buying a home in California, it’s essential to think about how much it’s going to cost to protect that home from the elements. Some areas of the state have been ravaged by wildfires in recent years, and other areas are at risk for earthquakes and mudslides. Be sure to compare quotes from multiple California homeowners insurance companies to get a sense of how much you will need to spend to safeguard your investment.

How much house can I afford in California?

As you do the math to figure out how much you can afford to spend, think about all your other expenses to come up with a ballpark figure for your housing budget. And while you’re at it, look for ways to save money, too.

If you’re wondering whether you should buy a house now or wait, the reality is that home prices rarely go down. They will likely rise at a slower rate in the near future, but don’t expect buying in California to get much easier. So, think about a few key questions. Do you plan to stay in California for a while? Is your rent going up? Is your credit score good? If you can afford a down payment and you are confident that California feels like home, buying a house is a wise investment.

Saving for a down payment in California

The down payment is often the most prohibitive cost standing in the way of buying a house in California. However, you might be able to qualify for assistance with the expense.

First time home buyers

If you’ve never owned a home before or if you haven’t owned a home within the last three years, the California Housing Finance Agency considers you to be a first-time homebuyer. California can be tough for first-time buyers, but that status might put you in line for a low interest mortgage program and/or a deferred loan for your down payment — all part of California’s first-time homebuyer programs. You’ll need to earn less than the state’s income limits and satisfy a range of other requirements, including completing a homebuyer education course.

Down payment assistance

There are plenty of down payment assistance programs, too, many of which are available even if this isn’t your first home. Most programs are geared toward buyers who earn under a certain threshold of money each year, offering low- and moderate-income individuals a way to buy a home. For example, Redding, Pittsburg, Modesto and La Mesa are some of the cities with options to help buyers manage their upfront expenses.

Down payment calculator

If you can manage to make a bigger down payment, you can lower the amount of money you need to borrow — thus reducing interest charges over the long-term, lowering your monthly payments and potentially helping you avoid mortgage insurance premiums. For example, let’s say you’re thinking about putting down 5 percent on a $750,000 home ($37,500). If you are able to double your down payment to 10 percent ($75,000), your monthly payments will be $190 less, and you’ll save nearly $31,000 over the life of the loan.

Use Bankrate’s down payment calculator to determine what your budget will look like with the minimum down payment, versus how contributing more can make a difference.

Get preapproved for a mortgage

Getting preapproved for a mortgage is a crucial piece of buying a house in California. It shows that a lender has done a preliminary review of your finances and is likely to loan you a certain amount (the preapproval will include the amount and your terms) to buy a home. Many lenders can issue you a preapproval letter online. It’s an important piece of proving to sellers that you are a qualified buyer. In competitive markets — which certainly describes many cities in the state — a preapproval can give your offer more weight.

Find the best lender

You don’t necessarily have to get your mortgage through the same company that offers you a preapproval. In fact, you will want to compare multiple lenders to determine who can give you the best rate. Start by looking at the best lenders in California, and keep in mind that some lenders specialize in certain programs. For example, borrowers looking for FHA loans will have a completely different set of needs versus borrowers who need jumbo loans.

Find the best real estate agent

Your lender helps you get the money you need, but you’re going to need some assistance finding where to spend it. Working with a real estate agent can help you navigate the challenges of being a buyer — local pros know where to look based on your budget and how much to offer. They sometimes even know about homes before they’re listed for sale.

Start house hunting

It’s time to start browsing listings and checking out open houses. Know what you absolutely must have in a home versus what kind of compromises you’re willing to make. If you can start your search with an understanding of where you can sacrifice, you can avoid major frustrations. Once you’ve made an offer on a home and it’s accepted, work to complete all the necessary work for your mortgage application.

Get a home inspection and appraisal

This is one of the biggest financial decisions you’ll ever make, so it’s important to verify two key components: that the house is in good shape and that it’s worth what you’re paying. If you’re getting a mortgage, you’ll have to get an appraisal; the lender will require it to make sure that the property’s valuation is in line with the amount of money you’re borrowing. A home inspection is optional, and some buyers waive the inspection to make their offer more appealing. But it’s highly encouraged: A professional home inspector can identify issues that might be hiding beneath the surface — plumbing or electrical issues, for example — and save you a big headache later.

Finally, you’ll have one last visit to the home before you officially own it. Your final walk-through will likely happen just before you head to the closing. Make sure that the home is in good condition, that the owner has removed all their belongings and that the property is free of issues that could cause you back out of the agreement.

Close on your new California home

You’re almost there. Be sure to ask what type of payment is accepted for all your closing costs, as you’ll likely need to go get a certified check or a cashier’s check. Then, when closing day arrives, be sure to bring the proper identification, and be ready to sign a mountain of paperwork. Once you’ve completed all the necessary work, the keys are yours. Congratulations — you now own a piece of California.