January 11, 2022 | Sexton Real Estate Group
It’s not uncommon for people to know very little about the process of buying a home in California. There are many things you need to consider and prepare yourself for before committing to purchasing a property. In this article, we’ll go over the basics of what you need to know when it comes time to buy your first home in California!
A Steady Source Of Income Is Important When Buying A Home
One of the most important things that a lender looks at when considering a loan for a home is your income. They want to make sure that you can afford the mortgage payments and that you will be able to continue making those payments even if there is a change in your employment status. For this reason, having a steady source of income is very important when buying a home in California. If you are self-employed or have variable income, it may be more difficult to get approved for a loan.
Another thing that lenders look at is your debt-to-income ratio. This ratio compares your monthly debts (including the mortgage payment) to your monthly gross income. Generally, lenders like to see this ratio below 36%. So, if your monthly debts are $2000 and your monthly gross income is $6000, your debt-to-income ratio would be 33%.
A steady source of income is important because it ensures that your monthly payment will be met, as well as taxes. These taxes could include:
- property taxes
- mortgage insurance (PMI)
When you begin looking for a home in California, there are many factors to consider such as what type of loan program suits the buyer best and whether or not you want an FHA loan versus conventional financing.
A Loan Paydown Can Help You In Paying For A Home
A loan paydown is when you make additional payments on top of the regular monthly mortgage payment. You can do this by adding an extra amount or simply paying more than what your required monthly payment may be. This helps reduce the total interest paid over time, thus decreasing how much money you will owe overall if you’re still making only minimum payments every month.
You can make a payment whenever it fits into your financial plan, but with taxes and buying a home in California, there are certain things that need to be done in order to receive this benefit.
You can get a loan paydown on any kind of mortgage. The important thing to remember is that you need to make sure your lender knows about this extra payment and they must set up the account correctly in order for it to be applied every month until paid off, unlike a traditional bank savings account.
This benefit doesn’t apply if you have already made all the minimum payments required by law or during times when you are not required to make them either because of hardship or some other reason under federal regulations governing homeownership loans. You might also want to check with your tax advisor before making such an additional payment as taxes and buying a home in California may affect how much money you will owe at filing time annually.
Learn About Equity Building
There are many ways that buying a home can help you build equity, but one of the most important is through regular mortgage payments. As your mortgage balance decreases, your equity in the property increases. This is especially beneficial if you ever need to sell or refinance, as you will have more assets to work with.
Additionally, many homeowners choose to remodel their homes in order to increase their property values; this also builds equity. Finally, when it comes time to sell, you will likely see a greater return on your investment than if you had rented instead. All these factors together make buying a home one of the smartest financial decisions you can make.
Understand Portfolio Diversification
Portfolio diversification is the mix of different types of investments in order to reduce risk. When you’re buying a home, it’s important to think about how you can spread your investment across different types of properties and neighborhoods. This will help protect you from any one market downturn. Additionally, if you have rental income coming in from your property, that will also help to offset taxes and other costs associated with being a homeowner.
Why is portfolio diversification important when buying a home for the first time? The answer may surprise you. It’s not just about having enough money saved up to buy your dream house, nor is it something that should be left until after you’ve already purchased property. Diversifying your investment comes down to being smart with how much risk you are willing to take on, both now and later on as well. With taxes so intricately tied into homeownership these days, understanding them can help keep things running smoothly.
So remember, when shopping for your dream home, be sure to think about all the ways it can benefit your overall financial portfolio!
Consider Investing In An Inflation Hedge
When you are buying a home, it is important to remember that you are not just purchasing a property, but also an investment. In order for your home purchase to be as successful as possible, it is important to think about how the purchase will fit into your overall financial plan and goals. One of the factors you need to consider when making this decision is inflation.
Inflation can have a significant impact on the value of your home over time. For example, if you buy a home for $200,000 today and inflation averages at two percent per year, in ten years the cost of goods and services will have increased by 20 percent. This means that the same $200,000 would now cost $240,000 in ten years.
So, if you sell your home for $200,000 at the end of year ten after having made no improvements to it whatsoever during this time period, you will have lost out on a significant amount of money due to inflation. To avoid this situation from occurring in future real estate investments/purchases consider investing in an inflation hedge now that can help protect against the impact of rising prices over time.
This is just one reason why taxes are important when buying a home along with all the basics you need to know about taxes and buying a home in California. When considering taxes as part of your overall financial plan are several things worth knowing so be sure not to miss them!
So, as you can see, there is a lot to know before buying your first home. But don’t worry- we are here for you every step of the way! You may have questions about taxes or down payments or how to get pre-qualified with a lender. We hope this article has helped answer some of those questions and that it will help guide you on your journey towards homeownership. If not, give us a call today!
Are You Looking to Buy a Home in Northern California?
The top real estate agency in Northern California, Sexton Group Real Estate in Berkeley, California is a boutique real estate company specializing in residential sales for properties throughout the San Francisco Bay Area. To better serve our clients we have three local offices, one in the heart of picturesque Berkeley, one near downtown Oakland and the third in the heart of historic Lafayette, California. The Sexton Group encompasses the essence of Berkeley’s charm, Oakland’s history and Lafayette’s family-oriented vibe all with a relaxed, down-to-earth nature. We are an amazing group of real estate agents whose wealth of experience spans more than 25 years in the industry. Looking to buy a home in Contra Costa or Alameda County? Contact us today for your free consultation!