6 THINGS TO KNOW BEFORE BUYING A HOME IN THE BAY AREA
Apr 29, 2020
Considering Buying a Home in the Bay Area? Here are Some Things To Know
While the Bay Area has a lot to offer homebuyers - great jobs, vibrant metro area, and historic cultural landmarks - flexible housing prices are something that this area lacks. For first-time homebuyers and repeat homebuyers alike, it can be difficult to navigate. How can homebuyers feel confident about moving quickly through the Bay Area homebuying process? We sat down with Michele Cervantez, VP of Sales and Marketing at Shea Homes Northern California, to provide tips and information you need to know about the Bay Area housing market and homebuying journey.
1. KNOW THE CURRENT BAY AREA HOUSE-SEARCHING RULES
The real estate market and real estate transactions have been impacted by the Coronavirus (COVID-19) pandemic. California, and the Bay Area in particular, are still in the process of reopening, which has impacted the way new homebuyers view and explore homes. Many new home communities are only taking visitors by in-person and virtual appointments only, while group open houses are limited, at least for now.
As a homebuyer looking to buy a home in the Bay Area, it is recommended that you stay up to date and have a basic understanding of the latest California protocols, in order to make your homebuying process more seamless, safe, and enjoyable.
2. WHEN BUYING A HOME IN THE BAY AREA, YOU'RE PAYING FOR MORE THAN A GREAT HOUSE
The price tag of a home in the Bay Area isn't just for the cost of the house you're eyeing. Besides the house, there are also costs that go beyond those four walls that justify the higher price points in the Bay Area.
What's really included in your cost? Michele Cervantez notes that "the costs that buyers don’t see are the land price and fees that come with building in the Bay Area. With a limited housing supply and a strong demand for Bay Area homes, new homebuyers often pay for this lack of supply and increased demand. That translates into a higher priced home." But while home costs might be higher, there are several advantages to paying for prime land in the Bay Area:
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Quick and easy access to public transportation
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Walkability to some of the best restaurants in the Bay Area
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Large outdoor parks
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California weather
3. THINK ABOUT HOME INVESTMENT FOR LONG-TERM FINANCIAL BENEFITS
In talking with Michele Cervantez, she let us know that renters in the Bay Area are often paying the same, sometimes more, than a homeowner’s potential monthly mortgage payment. Even though buying a home may initially seem like a substantial financial output, it may be a smarter long-term investment.
Check out these potential benefits that could come with moving from renter to owner:
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Flexibility for home improvements
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Potential tax benefits
Don't fret if you're still on the fence between renting and owning. We break down the differences and benefits you should know in our Own vs Rent blog.
Even before you start touring homes, it's important to do your research to understand which type of home would best suit your lifestyle, wants, needs, and budget. Condos and townhomes are great options for starter homes or for people looking for shared community amenities. However, if you're looking for a home with additional space and potential for greater privacy, consider looking into single family detached homes.
Want more information on the types of housing options we offer at Shea Homes? Check out our Condo/Townhome vs Single family home blog for more details. You can also explore Bay Area Townhomes and Condos here.
4. UNDERSTAND YOUR DOWN PAYMENT
A down payment is an upfront, out-of-pocket payment you make when you purchase an asset like a home. How much you're able to save for your down payment can affect your Bay Area new home mortgage payments. Your down payment is a great way to examine how much home you can afford and what size home fits your budget.
Here are some basic tips when saving for a down payment:
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According to Zillow, many home loans require a down payment of at least 3% of your home's sale price in order to qualify for the loan.
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Down Payment Reality Report suggests that 10% - 20% is sometimes thought of as the ideal down payment because it can help you qualify for a lower interest rate, could allow you to avoid paying private mortgage insurance.
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Making additional mortgage payments, like paying more than your monthly amount, can reduce how much you pay in interest.
To help calculate your down payment, Shea Mortgage offers free online home affordability calculators that will give you a better idea of how much you can afford on a house.
5. KNOW THE MORTGAGE LOAN PROCESS
No one loan fits all. There are a variety of loan options available for Bay Area homebuyers that are catered to financial goals and life circumstances. If you're unsure which loan is best for you, we've created a Loan Guide for choosing the right home loan.
After understanding the type of loan you want to apply for, the next step is application. Here are 3 must-know steps before applying for a mortgage loan.
1.) Understand pre-qualification vs pre-approval
If you are planning to use a mortgage loan to purchase a home in the Bay Area, it is recommended to get prequalified. The Pre-qualification process is a general estimate of how much you'll be qualified to borrow based on an evaluation of your described finances, such as credit, debt, income, etc. Pre-approval carries a bit more weight. You must provide your lender with specific financial documentation (such as W-2s, current paystub, total monthly expenses, etc.) that they must verify. Once assessed, the lender will explain to you the amount and type of mortgage they're willing to offer.
2.) Know your credit score
Your credit score helps lenders determine their risk in lending you money and is designed to help predict how likely you are to pay them back on a loan.
3.) Know what goes into a mortgage loan application
Before you start a mortgage loan application, it's important to have all of your documentation ready before you talk with your advisor to ensure a smooth, seamless application process. Here is a general list of documentation and information that could be required for a mortgage loan application:
- Residential history for the past 2 years.
- Bank account and other asset statements for the past 2 months.
- W-2 or I-9 forms and federal tax returns for past 2 years.
- Paycheck stubs from the past 30 days.
- Current real estate holdings.
We understand the loan process can often be challenging for homebuyers. Shea Homes has a helpful team of mortgage lenders that can help buyers navigate the complex loan process. If you want more information, check out our 5 Step Mortgage Process.
6. BE PREPARED FOR CLOSING
Closing costs are fees associated with your Bay Area home purchase paid at the closing of the real-estate transaction. According to page 19 of our Expert’s Guide to The Homebuying Process, some of the most common fees that are associated with closing costs include:
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Application fee
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Appraisal fee
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Home inspection fee
Zillow states that homebuyers can pay between 2-5% of the purchase price in closing costs. Once the closing fees and paperwork are settled, the homebuyer officially becomes the homeowner!
The homebuying process in the Bay Area can be overwhelming, but you're not on this journey alone. Shea Homes has a knowledgeable sales team and mortgage team that can help guide you every step of the way, providing constant communication, home information, and mortgage advice.
