Buying a home can be one of the largest financial decisions for many people. The California Department of Real Estate (DRE) has released guidance to help prospective buyers prepare before entering the housing market this summer.
The DRE recommends that potential buyers consider their long-term plans, such as whether they intend to stay in the home for five or more years and if the property will meet future needs, including accommodating a growing family, remote work, or aging in place. Buyers are also encouraged to think about what type of home best fits their requirements—whether it is a single-family house, condominium, duplex, move-in ready property, or fixer-upper.
Neighborhood selection is another important factor. Prospective homeowners should assess aspects like proximity to work or school, safety considerations, available amenities, and any planned developments in the area. The DRE advises researching current housing inventory trends and how long homes typically remain on the market in desired locations.
Before starting their search, buyers should make lists of essential features and those that would be nice to have. Consulting with friends or family who have previously purchased homes can provide additional insight into the process.
Financial readiness is crucial when buying a home. Beyond monthly mortgage payments, buyers need to account for down payments—typically ranging from 5 percent to 20 percent of the purchase price—and closing costs that generally fall between 3 percent and 7 percent. Additional expenses include insurance, taxes, repairs, upgrades such as energy efficiency improvements or drought-tolerant landscaping, utilities, homeowner association dues (HOA), possible renovations and ongoing maintenance.
The DRE cautions that if less than 20 percent is put down on a property, buyers may be required to set up an impound account or pay private mortgage insurance (PMI). “Focus on the monthly payment you can afford in the context of other expenses, not the maximum loan amount you may qualify for,” according to DRE guidance. “Just because you qualify for a loan amount doesn’t mean you need to spend it. Buying more home than you can afford can put you at higher risk of foreclosure if your financial situation changes.”
Comparing lender rates and fees is recommended along with seeking pre-approval for smoother transactions. Lenders review credit scores and histories—including open accounts and payment records—to determine debt-to-income ratios.
Some lenders offer special rates for first-time buyers; government programs are also available to assist those who qualify. Understanding all aspects of a loan—including interest rate types—is essential before making commitments. Fixed-rate mortgages maintain consistent interest over time while adjustable-rate mortgages begin with lower rates but fluctuate based on market conditions.
The DRE emphasizes verifying real estate agent license status by checking online resources or calling their office at 877-373-4542: “Keep in mind that this is a business relationship, not a personal one.”
Buyers should ask agents about HOA dues as well as any special taxes or assessments related to properties—especially regarding solar systems already installed on homes—to understand what financial responsibilities will transfer upon purchase.
“Buying a home is both an emotional and financial decision,” states DRE guidance. “An emotional response can lead to poor decision making and often paying more than you can afford.” They advise taking time when considering each listing before making offers.
Additional tips are available on the California Department of Real Estate’s website.
