How to Buy a House in San Diego: 14 Steps to Close the Sale

Whether you’re a first-time home buyer or just new to Southern California, deciding when and how to buy a house in San Diego may feel daunting.

But you’ve selected a great place to live.

Known for its mild climate, beautiful beaches, and laid-back lifestyle, San Diego has long been considered one of Southern California’s most sought-after places to live, work, and play. This Pacific Coast city combines the urban vibes of art and culture alongside fun physical activities like surfing or boating.

People who live here love the proximity to some of the west coast’s best beaches, as well as being close to destinations like Disneyland, Joshua Tree National Park, and the deserts of Palm Springs. Families often gravitate to San Diego County, as it ranks in the top 20% for California public schools, not to mention endless outdoor activities and miles of bike paths making it very kid-friendly.

If this all sounds perfect and you’re getting serious about purchasing a home in San Diego, read on.

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What will it cost to buy a home in San Diego?

According to data from the California Association of Realtors, the overall median single-family home price in San Diego was $824,950 in the first months of 2023. However, the median prices of homes in San Diego County vary widely when you look at them by home size.

• One-bedroom: $472,000
• Two-bedroom house: $675,000
• Three-bedroom: $800,000
• Four-bedroom: $1,270,000

Those seeking to buy in some of the more sought-after areas might find themselves paying well over the $1 million mark for their dream home. And with so many options, determining which neighborhood is best, what you can afford, and how to go about the process can seem overwhelming.

With the help of top San Diego agent Woody Henderson, who has 17 years of experience and specializes in relocations, we’ve put together a comprehensive guide that breaks down all the ins and outs of buying a house in San Diego. With tips on everything from how to save for your down payment, specific loan programs for buyers, and what you should look for in an agent, we’ve got you covered.

Steps to buying a home in San Diego

Let’s dive into the steps of buying a house in San Diego:

1. Assess your readiness

Before you start looking for homes in San Diego, you want to determine if you’re ready to purchase one. Consider factors such as how long you plan to be in the area, if you have steady employment, and if you have enough money saved for not just the down payment, but for closing costs, maintenance, property taxes, and more. Closing costs in California average about 1% of the home’s sale price, and there are other pre-paid costs you might have as well.

During this time, review your credit score and determine if it’s considered excellent, good, fair, or poor. Typically, the higher your credit score, the lower your interest rate will be, which saves you money over the life of the loan. You may want to pay off any collections accounts, dispute errors on your credit report, and pay down your credit card balances before you start shopping for a home.

Henderson says that while connecting with a reputable agent who knows the San Diego market is important, one thing potential buyers should be sure to do is to align themselves with a great lender.

“The average real estate transaction has more than 40 different people involved and hundreds of pages of documentation,” he says. “It’s important, especially for first-time buyers, to have someone in both the real estate side and in the mortgage side of things who will represent you and help you navigate.”

2. Saving for your down payment

The median sold price in San Diego is around $825,000. So, expect to spend somewhere around that number depending on what part of California you’re purchasing in, the home’s age and condition, and the size of the house and property, among other factors.

Different loan programs will require different down payment amounts, but you do not always need to put 20% down when buying a home. A survey completed by the National Association of Realtors found that first-time homebuyers put just 6% down on average in 2022, and the overall average for repeat buyers last year was 17%.

If this sounds daunting, don’t worry. There are loan programs that allow as little as 3.5% down, and Henderson says that for first-time buyers, San Diego has a number of down payment assistance programs. “There are affordable housing programs, silent second mortgages that help cover the down payment, as well as others,” he says. “They sometimes have stringent requirements, but they also provide tremendous value to new buyers.”

Some of the down payment assistance programs in San Diego include the following:

San Diego County Down Payment Assistance/SDHC: First-time buyers with a home purchase price of $589,000 or less may qualify for San Diego County’s down payment assistance program. Funded in partnership with the San Diego Housing Commission (SDHC), the program offers a deferred payment loan of up to 17% of the purchase price and up to $10,000 in closing costs assistance. Borrowers must meet specific income requirements and must contribute at least 3% of the purchase price. The program also has restrictions on the type of home and its location.

My Home California Down Payment Assistance: California Housing Finance Agency (CalHFA), offers first-time homebuyers deferred payment loans through both FHA and conventional programs, to assist with down payment and/or closing costs. Loans are between 3%-3.5% of the purchase price or appraised value, and borrowers must meet certain income limits, owner-occupy the property, and are required to complete homebuyer education counseling. CalHFA works through approved lenders, and buyers apply for the program through their loan officer.

San Diego Black Homebuyers Program: Funded through The San Diego Foundation and the Local Initiatives Support Corporation (LISC), this grant program offers eligible African-American homebuyers up to $40,000 to use toward their down payment and/or closing costs. Applicants must be first-time homebuyers, be residents of San Diego County, and are required to meet specific income limits. Their home must also be their primary residence.

3. Get preapproved for a mortgage

Getting preapproved for a mortgage will help you determine how much you can afford, which will then inform your home search. It’s always smart to shop around for the best rates and terms, so be sure to research a few different lenders during this process.

You can also ask family, friends, your buyer’s agent, and attorneys for mortgage lender recommendations. When choosing a mortgage lender, ask for a detailed cost breakdown, review the terms you are being offered, and compare loan types.

According to the US Consumer Financial Protection Bureau (CFPB), there are three general categories of mortgage:

Conventional

Conventional loans, the most popular type of mortgage loan, are loans that are not backed by the federal government. Under the conventional loan umbrella are two subcategories called “conforming” and “non-conforming.” Conforming loans are given to buyers who fit into the qualification guidelines set by the entities Fannie Mae and Freddie Mac, who purchase loans after they are originated.

Non-conforming loans are for borrowers who do not fit into the guidelines set by Fannie and Freddie and are not eligible to be purchased by them — jumbo loans are an example of this because they offer loan amounts above the limits set by Fannie and Freddie.

FHA loans

FHA loans are geared toward borrowers with lower income and have more lenient credit score and down payment requirements than conventional loans. These government-backed loans can be a great option for borrowers who meet the requirements, however, they do require mortgage insurance.

Similar to conventional conforming loans in this way, FHA loans have loan limits that vary from county to county. For example, in San Diego county, the maximum loan amount is $879,750 for a single-family home, while in nearby Riverside county, the loan limit is $562,350. Visit this link on the U.S. Department of Housing and Urban Development (HUD) website to find the FHA loan limit in the county where you’re shopping for a home.

Special programs

VA loans: For veterans, service members, and surviving spouses. Loans backed by the VA offer 0% down payments for those who qualify. Different lenders will have different requirements, however, VA-backed loans do not have a universal maximum DTI requirement.

USDA loans: These loans are backed by the United States Department of Agriculture and are for lower-income borrowers in “rural areas.” To determine if the area you are purchasing in is eligible for a USDA home loan, use this eligibility map. These loans also offer 0% down for qualified borrowers.

4. Research the market and determine where you would like to buy

Now that you know more about preparing to purchase a house and down payments, it’s time to decide where you want to live. Do you want to live near family and friends, start over in a new neighborhood, live on the coast, or in a more rural area? Consider work commute times, average house prices, and things to do in each area that you’re thinking about living in.

Some great places to consider when buying a house in San Diego include:

Mission Beach: With its coastal location and many amenities, Mission Beach is a trendy neighborhood for young professionals. Being so close to the ocean means home prices run higher here, with a median of around $1.5 million. The trade-off of having the beach almost at your back door might be worth it, however. This is also a popular location for homeowners who might want to purchase a home for vacation rentals, as there is a plethora of shopping, bars, and restaurants nearby.

Poway: Ranked in the top 10 for best San Diego suburbs, the inland neighborhood of Poway is a great place for families. Schools here are highly rated, with Poway Unified School District coming in at #2 for best school districts in San Diego. The median home price here is around $1 million, slightly less than beachfront neighborhoods but with almost as many amenities as the pricier areas. Poway also has more of a rural feel. It’s known for its peach production, vineyards, and farming.

Clairemont: Located just a quick 15-minute drive from downtown San Diego, Clairemont is an up-and-coming neighborhood that is quickly becoming sought-after by both families and singles. It is divided into four sections – Clairemont Mesa East, Clairemont Mesa West, Bay Park, and Bay Ho. There are several large parks here, giving it a suburban feel, but you also aren’t far from the beach and amenities of the city. Median home prices are between $900,000 and $1 million, with some areas such as Mesa East, running slightly less.

Carmel Valley: Carmel Valley is an upscale suburb located about 20 miles northwest of the city, and is ranked #5 for best neighborhoods to live in San Diego. Home prices here average $1.5 million, and the area is known for its highly-rated public schools, parks, and amenities. People who live here love the nearby beach access, restaurants, shopping, and being close to both San Diego and other neighborhoods like La Jolla and Del Mar.

5. Find a local San Diego agent

Real estate agents almost always appreciate it when their clients come to them to start home shopping after getting preapproved for a mortgage. This typically means that a buyer is ready to go and can start making offers. Choose a knowledgeable agent that specializes in representing buyers in the area you want to purchase in.

Your buyer’s agent will be able to help you create a wishlist, set up viewing appointments for you, tell you more about what’s going on in the neighborhood, negotiate on your behalf, and connect you with other vendors such as a title company, insurance agent, and home inspector. Real estate agents are also incredibly knowledgeable on the homebuying process as a whole and can hold your hand throughout the process to keep closing on track.

6. Start shopping for homes in San Diego

Once you’re preapproved for your loan and line up a knowledgeable agent to work with, the fun part of the house-hunting process really begins. Depending on your budget and location preferences, San Diego home styles range from Victorian style, craftsman, mission, beach bungalows, and Mediterranean.

The San Diego real estate market tends to follow seasonal trends, with prices rising after the holidays and into the summer. According to data collected from the National Association of Realtors, prices in San Diego are up from a year ago, but price growth is slowing.

When looking for a home, Henderson suggests really thinking about where you want to live and what’s important to your lifestyle. “Some people want to be close to work, their social circles, or their children’s schools,” he says. “Others may feel that sacrificing location for a less expensive house is worth the trade-off.”

7. Make a strong offer

Working with your buyer’s agent to craft a winning offer can sound overwhelming. In competitive markets, cash offers could be more likely to be accepted by sellers with multiple interested buyers. While it is not always recommended to completely waive contingencies to impress a seller, you might consider pairing down to just the inspection contingency and financing contingency to remain competitive. Get creative with your offer — you may want to offer a larger earnest money deposit, schedule a quick closing, or even consider letting the seller rent the house back from you for a certain period of time.

Henderson says that, like much of the country, the market in San Diego has cooled slightly, and while buyers may still sometimes have to compete against multiple offers, there is more room for negotiation. “I try to reach out to the listing agent during the pre-negotiation process and see what is important to the seller,” he says. “Do they need to do a rent-back on the house, or do they want a quick close? What is their timeline and what will make our offer stand out?”

Components of an offer when buying a house in San Diego include:

• Purchase price
• Closing date
• Earnest money deposit amount
• Contingencies (financing, home inspection, and appraisal)
• Closing cost stipulations (who pays for what, and if you’re asking the seller for a credit to use toward closing costs)
• Home warranty
• Personal property (such as appliances or furniture)

8. Send your earnest money deposit

Your earnest money deposit, also known as a “good faith deposit,” is an amount of money you agree to pay the seller to indicate that you are serious about purchasing the home. This is usually between 1% and 3% of the purchase price. However, a higher deposit can be more attractive to sellers and make your offer stand out in competitive markets.

Whether or not you get your earnest deposit money back if you decide to back out of the sale depends on the contract. If you decide to back out of the purchase for any reason not specified in the contract, you could forfeit your earnest money. Be sure to review the contract with your real estate agent and attorney before making any decisions.

9. Order a title search

Ordering a title search can be done any time after your offer is accepted, but it’s a good idea to do it as soon as possible because it may take a couple of weeks for the title search to come back, especially if the title company is backed up. Who customarily chooses the title company can vary by county — but if it is the buyer’s choice, your real estate agent or mortgage lender will likely have a recommendation.

The title company will issue a preliminary title report that will be reviewed by all parties, including your lender, and will include items such as property tax information, easements, CC&Rs, deed restrictions, liens, and any judgments against the title of the home. Any liens, encumbrances, or judgments against the property will need to be removed before the buyer can close on the property. Henderson says that title issues in San Diego are fairly rare, but there may occasionally be tax levies that have to be cleared prior to closing.

10. Shop for homeowners and specialty hazard insurance

Homeowners insurance is always recommended and it is almost always required if you’re financing your home with a mortgage. The average yearly cost of homeowners insurance in San Diego is $1,333.

While most areas in San Diego aren’t going to require specialty hazard insurance, Henderson notes that some areas, especially those near the San Diego river, may be prone to flooding and flood insurance is recommended. He adds that some neighborhoods also fall into fire hazard zones. “If you want to buy a house that happens to be in a fire hazard zone, insurance can sometimes be a challenge,” he says. “You can still get it, but it is going to be more expensive. This is where having an experienced agent will really help you, because we know which areas may require additional insurance.”

11. Order inspections and appraisal

If you’re applying for a mortgage, your lender will most likely order the appraisal, and you will pay for it. You will be responsible for ordering your own inspections with the help of your buyer’s agent, again, at your own cost. Your agent can recommend a licensed home inspection company if you don’t have one. The home inspector will schedule a date and time to inspect the house and, depending on its size, it may take a couple of hours to complete.

Some common issues in homes in San Diego that might merit a separate inspection include:

Air conditioning/HVAC: Most homes in San Diego have air conditioning, and because they can be quite pricey to replace, getting a separate inspection might be a good idea. The home inspector will look at the unit and will be able to note anything questionable, but if you’re concerned about it, or if the unit in the home you’re purchasing is older, it’s worth it to get a separate inspection.

Pool and spa: If you’re buying a house with a pool and/or spa, it’s important to have a pool inspection done by a professional pool inspector. Most general home inspectors will do a visual inspection of the pool, but only to determine if further inspection is needed by a specialist. Pools can sometimes have significant repair issues, especially if the previous owners didn’t keep up with maintenance, so it’s definitely of value for buyers to get a full pool inspection.

12. Negotiate repairs

Remember that everything is negotiable. If you have an inspection contingency in your contract, and the inspection report comes back with tens of thousands of dollars of necessary repairs, it’s time to negotiate.

Talk to your buyer’s agent and devise a plan for what to ask for during negotiations. Do you want a credit for the leaky roof or would you rather a licensed contractor repair it prior to settlement? If the house needs two new toilets, are you willing to walk away if the seller refuses to budge during negotiations? Keep the bottom line in mind, but don’t nitpick. Home inspectors are meant to be thorough. Focus on major repairs that need to be done ASAP and are going to be costly.

“While we don’t really recommend asking for repairs of cosmetic issues, we always suggest negotiating health and safety issues,” says Henderson. “Things come up, and sellers need to be prepared to take care of issues that arise.”

13. Final walkthrough

This is to verify that agreed-upon repairs have been completed and the condition of the home is satisfactory. The final walkthrough is usually done a day or two before the closing date. With the help of your agent, check that all plumbing, electrical, and HVAC units are on and working. If personal items such as the dining room chandelier and the washer and dryer were included in the contract, make sure they’re still in the house.

If you find that the necessary repairs were not made, or that there were damages left behind by the seller, notify your agent immediately so they can rectify the situation before closing.

“Typically, the final inspections are not a problem,” says Henderson. “Buyers will do the walkthrough with their agent, with the understanding that this is to verify that the house is in fundamentally the same condition as when the offer was accepted.” He adds that buyers will want to ensure that the house is clean and that any promised appliances, furniture, window coverings, or outbuildings like sheds are still on the premises.

14. Closing time!

In California, the closing process takes an average of 30 to 45 days. Since most buyers still finance their homes, this means appraisals, inspections, and repair negotiations, all of which take time. Southern California also often has separate escrow and title companies for the closing, which can add on extra days.

“Closing day is interesting in San Diego,” says Henderson. “You sign your loan documents and the loan funds the next day, and you’ll usually get a call later that day advising that escrow has closed.” Henderson explains that buyers also don’t get the keys to their new home until escrow has closed, so access is usually the day after documents are signed. Once you have the keys in hand, you can call your new home yours.

Buying a house in San Diego

Buying a home in a busy market like San Diego can feel a little challenging, which is why partnering with a top agent who knows the best areas to live, the best times to buy, and the best ways to navigate your purchase is so important. “There’s a perception out there that you can do it yourself, but it’s such a big decision, you really need to surround yourself with qualified professionals and get guidance from someone experienced in this market,” says Henderson.

A qualified agent can make a big difference in the kind of home-buying experience you have, and can assist you from the moment you decide to buy, to being handed those keys and knowing you’re officially a San Diego homeowner!

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