How to Buy a House in the Bay Area

Looking to buy a home in a region with good schools, job opportunities, outdoor activities, and endless choices in restaurants? You may just want to consider a move to California’s Bay Area. While it’s long been considered a hub for big tech, the Bay Area, which includes San Francisco, Oakland, San José, and Sonoma, is also family friendly, diverse, and rich in arts, culture, and history.

People who live here love all the urban amenities, such as great public transportation, museums, art galleries, greenbelts, and parks — not to mention highly-ranked public and private schools. The Bay Area is also close to beaches, national parks, and the wineries of Napa Valley.

If this all sounds perfect and you’re considering purchasing a home in the Bay Area, read on.

While the median price of a home in the Bay Area consistently averaged over $1 million in 2022, housing prices can vary greatly here. Those seeking to buy in some of the more sought-after neighborhoods might find themselves paying well over the two or three million mark for their dream home, while those interested in more up-and-coming regions can find homes for much less. And because the Bay Area includes several different cities and neighborhoods, determining which location is best for you, what you can afford, and how to go about the process can seem overwhelming.

With the help of top Bay Area agent Carl Medford, who has 22 years of experience and specializes in helping first-time homebuyers, we’ve put together a comprehensive guide that breaks down all the ins and outs of buying a house in the Bay Area. 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.

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Steps to buying a home in the Bay Area

Let’s dive into the steps of buying a house in the Bay Area:

1. Assess your readiness

Before you start looking for homes in the Bay Area, 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 to consider 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.

Medford says that right now, many new buyers are put off by the higher interest rates seen in the last year, but advises that they shouldn’t allow that to be a huge factor in their decision to purchase a home.

“You really should only be concerned with your monthly payment,” he says. “If you can find a home you like and you can qualify for the monthly payment, that is literally all that matters. The benefit of owning a house far outweighs what might be considered a higher interest rate in the current market.” He explains that owning a house is the most constructive and easiest way to build wealth, and even if you pay more now, you are still building equity, and will likely enjoy significant tax benefits.

2. Saving for your down payment

While the median home price in the Bay Area exceeds $1 million, and you should expect to spend somewhere around that number, the price of your home is going to depend on several other factors, such as the region (some neighborhoods are much less expensive), the home’s age and condition, proximity to schools, and the size of the house and property.

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 while the average down payment for all homebuyers was 13% in 2022, buyers in the 23 to 41-year-old age range, which are also more likely to fall in the first-time buyer category, put down only 8%-10%. California and the Bay Area also have several programs to assist buyers with their down payment and/or closing costs.

Consider the following down payment assistance programs in the Bay Area:

Golden State Finance Authority (GSFA): The GSFA offers several programs that can help low-to-moderate-income homebuyers in California purchase a home by providing up to 5.5% down payment and/or closing cost assistance. The programs are limited to owner-occupied primary residences, but there is no first-time homebuyer requirement. The amount of financial assistance available depends on the type of mortgage loan you use. For most programs, a portion, if not all, of the assistance has repayment requirements. One program called “Assist to Own” provides a 2% repayment exception if you are employed by one of the GSFA member counties.

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.

City Second Loan Program (CSLP): Offering deferred down payment loans of up to $375,000 to qualified buyers, CSLP is part of the Mayor’s Office of Housing and Community Development’s Homebuyer Assistance Programs (MOHCD). This is a second mortgage on the home, with no interest and no monthly payment, deferred until such time the property is sold, rented, or the title is transferred. Buyers must be first-time homebuyers, meet specific income limits, are required to complete a homebuyer education class, and only certain properties in certain neighborhoods are eligible.

Medford adds that some of the down payment assistance programs in the Bay Area can seem confusing, so it’s always good to talk to your lender about your options. Many lenders have additional insights and information on various programs and can help you through the process.

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 scores 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 Alameda County, the maximum loan amount is $1,089,300 for single-family homes, while in nearby San Joaquin County, which includes the cities of Stockton and Manteca, the loan limit is $656,650. Find the FHA loan limit for homes in the county you are looking to purchase here.

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 city, 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 the Bay Area include:

Fremont: Part of Alameda County and the East Bay, Fremont is a highly ranked neighborhood, known for its excellent public schools, diversity, and being family friendly. Median sold prices for homes are right at the $1.3 million standard for the Bay Area, and it is a well-laid-out neighborhood, with plenty of shopping and restaurants. It’s also about 45 minutes from downtown San Francisco, which can make it desirable for commuters.

Palo Alto: Home to some of the biggest names in tech, Palo Alto sits in the heart of Silicon Valley. With those big names come bigger home prices, averaging close to $3 million for a single-family home, but that higher price comes with the trade-off of excellent schools, more than 30 public parks, and some of the Bay Area’s best hiking and biking trails. The city center here features farmer’s markets, cafes and coffee shops, restaurants, and shopping, as well as Stanford University’s sprawling 8,000-acre campus, which sits just northwest of the main downtown area. Palo Alto is ranked in the top 10 for best suburbs to live in California, and in the top 20 for best suburbs to raise a family in California.

Berkeley: Student-friendly Berkeley, home to the university of the same name, offers its residents not only a youthful, college-town vibe, but also great public and private schools, lots of green space, and a progressive, inclusive atmosphere. With a median home price of around $1.2 million, it’s also slightly under the Bay Area market average, making it appealing to both families and young professionals. Berkeley is also close to beaches, regional parks, and forested areas, so getting out into nature is certainly not a problem here. That easy access to the outdoors might also explain Berkeley’s #1 ranking for healthiest places to live in America.

Hayward: Buyers looking to get in on a developing neighborhood with lower prices will find that Hayward fits the bill. The median listing price here is $849,000, and while schools aren’t quite as highly ranked as some other neighborhoods, this is still considered a great place for families. There are several public parks here, and young professionals will love that it’s less than 40 minutes from San Francisco. Like much of the Bay Area, Hayward also has excellent public transportation, with several BART (Bay Area Rapid Transit) stations nearby.

5. Find a local Bay Area 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 the Bay Area

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, Bay Area home styles range widely, to include Queen Anne or Victorian homes like the famous “Painted Ladies” of San Francisco, mid-century modern, the European flair of Italianate homes, craftsman, and of course, modern condominiums.

On a national level, the best time to buy a home is typically during the months of September – October. In the Bay Area, there tends to be a slightly higher inventory during the months of July – November, which means you may have a better chance of finding a house, but housing prices also can run higher in the summer months, so you may want to hold out until fall or even winter, when sellers might be more motivated to sell. This is where having a reputable agent who knows the Bay Area market can be especially helpful, as they will be able to track recent inventory and trends.

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.

While Medford says that buyers may still run into situations where they are competing against multiple offers, the current market doesn’t support that as much as it once did.

“By and large, they are going to be able to make an unchallenged offer in this market,” he says. He goes on to explain, however, that making an offer without that level of competition doesn’t mean it’s okay to make a lowball offer. “We still have a nationwide inventory crisis,” he says. “[Many] builders have stopped building, and that’s not just in the Bay Area. This means we aren’t going to see a massive decline in pricing.”

Medford also notes that in response to the uptick in interest rates, it’s not uncommon for buyers to ask sellers to buy down the interest rate, or the buyer can buy down the rate themselves if they’re able to do so. “Historically, the Bay Area primed the pump, so to speak, for as-is, non-contingent offers,” he says. “But it’s now possible to submit an offer with contingencies and still have that offer accepted.”

Components of an offer when buying a house in the Bay Area 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.

While there aren’t really any title issues that tend to be common in the Bay Area, Medford says that a smart listing agent is going to make sure they’re already aware of any potential problems. “Listing agents should be getting a pre-title report and pre-inspections before a house even goes on the market,” he explains. This ensures that the sellers don’t have any surprises during the inspection, and can take care of any potential title issues before they have an offer on the table.

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 California is $1,380 per year.

Some parts of the Bay Area may also require specialty insurance such as flood insurance, which averages about $779 per year in California, and in regions that are considered wildfire hazards, insurance can be more difficult to obtain, as well as being more expensive. “Homeowners have to abide by some very strict county requirements as to how the property must be maintained in wildfire areas,” says Medford, “It can be a challenge to get insured.”

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 the Bay Area include:

Termites: Termites are, unfortunately, a common problem in the Bay Area. Coastal California provides the perfect climate and environment for these pervasive little pests to thrive, and they can cause a lot of damage in a relatively short period of time. Medford says a separate inspection should always be done for termites, although they are not required in the state of California.

Roof: If you’re purchasing an older home, getting a separate roof inspection might be a good idea. A general inspector will look at the roof, but will not do the same level of in-depth inspection as a specialist. Dry rot is another common issue with houses in the Bay Area, so making sure that the roof of the house you’re purchasing is in good shape can save you on costly repairs later.

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.

“Something to consider here in the Bay Area is that buyers certainly can ask for repairs, but they do not get to ask for upgrades,” says Medford. “If it’s health and safety, absolutely ask, or if it’s something that might be a long-term issue. Otherwise, we caution our buyers not to go overboard with the asks. It may be common to ask for cosmetic repairs or upgrades in other parts of the country, but not here.”

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. Medford adds that California has very strict disclosure requirements, so if after the walkthrough, you discover something is wrong, you may still have recourse. “If the seller still has items in the house, furniture or throw rugs that are covering damage, it’s sometimes possible to miss things during the walkthrough,” he says.

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. Northern California uses the same title company for title insurance and closing, and buyers get the keys upon close of escrow. Access to the home is usually given the day after documents are signed. Once you have the keys in hand, you can call your new home yours.

Buying a house in the Bay Area

Buying a home in a busy market like the Bay Area can feel a little challenging, which is why partnering with an agent who knows the best areas to live, the best times to buy, and the best ways to navigate your purchase is so important. Medford says he feels there really is no bad time to buy, and reminds new buyers that homeownership is a long-term process. “If you’re going to be living on the property and building wealth, it’s always a good time to buy,” he says.

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

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