Regardless of where you are in your home buying journey, settling in California is a choice few end up regretting.

From the tech giants laced into the towns and cities of the San Francisco Bay Area to the sun-soaked beach towns of SoCal, the Golden State’s coveted housing market is often the endgame for most buyers.

But just because you’re shopping in one of the world's most prized real estate markets shouldn’t mean you won’t be able to make your first move on the homeownership ladder. Buying a starter home in California means being flexible and prepared; though you may not be splurging on a forever home, you’ll still see price tags that reflect the high demand for properties in that area.

Below, the team from Prevu Real Estate breaks down the essential tips to remember as you prepare to shop for your starter home in California, from having your budget down to getting cash back when you buy.

Buying a starter home in California

• Prepare your budget

• Identify your needs

• Expand your search

• Get pre-approved for a mortgage

• Interview buyer agents

• Use commission rebates to save money

Prepare your budget

They may be cringe when you’re bowling, but guardrails are a must when shopping for an entry-level home in California.

It’ll be much easier to say no and commit to your proverbial guard rails when your price range is clear. Your aim is to get your foot in the homeownership door so you can build equity, not break the bank to find the ideal open-floor layout with a pool. Committing to a budget you are comfortable with can help eliminate post-purchase headaches and potential buyer’s remorse.

You can start by estimating a down payment you feel confident in making. This is one of the largest one-off payments most buyers must weather, typically amounting to 20% of a home’s purchase price. From there, you can get an idea of the home prices within your range. 

However, remember to account for closing costs and potential bidding wars; closing costs are unavoidable, so saving for them early is vital. Bidding wars depend on the market and competition over a specific home. You can consider budgeting even more cash to have on hand in case you need to make a counteroffer to beat out rival buyers.

Identify your needs

No one wants to cross out “backyard pool and BBQ area” from their must-have list, but if it’s the amenity that stands in the way of affordability, it may have to go.

This is the time to think as much outside the box as possible: What if buying a condo in a new construction building is the better option? What about a duplex instead of a single-family home? Are you certain you want to sacrifice square footage for an outdoor patio?

It may be tough initially, but you’ll thank yourself later, having identified the non-negotiables. Knowing when to walk away from a house and when to go all-in with your best offer may save you a lot of time and energy. 

Of course, there are some essential comforts you always want to keep in mind. Your lifestyle is something you’ll take with you no matter where you move, so if you religiously explore the great outdoors on the weekends, it may be something you don’t cross off the list. 

An efficient commute is another aspect to prioritize; maybe that home fifteen minutes away from the office might be better than the one with a breathtaking kitchen island but miles away from effective transportation options.

Expand your search

Home prices in California often go hand-in-hand with their famous neighborhoods, almost like designer brands that leverage their well-known logos to display expensive price tags.

If you limit yourself to California’s most famous places to live, you’ll likely miss out on niche neighborhoods in Los Angeles or the wealth of options in San Jose or San Diego. California offers a vast landscape of unique towns and cities for buyers to explore, so give yourself permission to cast a wider net.

If you’re dead set on LA, consider neighborhoods in the San Fernando Valley, for example. They may not have direct beach access, but they may offer more accessible price points for starter homes. If sandy shores are essential to your first home purchase, consider venturing out to San Diego and exploring its coastal suburbs. You may not be in the heart of the city, but you’ll still be a stone’s throw away from famous towns like La Jolla or Carlsbad.

Get pre-approved for a mortgage

Regardless of the home you choose to buy, be prepared to face competition. California’s homes are almost always in high demand, starter or permanent. One of the best ways to prepare for that competition is by making sure your offer can stand out.

Getting a mortgage pre-approval before you begin to make offers will immediately help set you apart from the offers that have yet to secure financing. Sellers seek security and speed when choosing an offer, and a buyer with a mortgage pre-approval in tow can demonstrate the ability to go through with the transaction.

You must be on top of your finances to help secure a mortgage rate that works for you. Make sure your loans are paid off and your credit score is competitive before you start shopping around for interest rates that fit your budget.

Remember: unless you’re making cash offers, having a mortgage pre-approval is a necessity in today’s market. Making an offer without will likely affect your chances of getting in front of the seller.

Interview buyer agents

An experienced buyer’s agent’s knowledge is indispensable to ensuring a successful homebuying experience, especially for a starter home purchase.

Think of it this way; you can do all the legwork of identifying your needs, setting up a firm budget, and securing a pre-approval, but executing a successful search and knowing exactly where to look can be a daunting process. Having a professional buyer’s agent by your side that knows every nook and crevice of California can make that search a lot more manageable.

Real estate agents have access to essential tools like Multiple Listing Services (MLS) to optimize a buyer’s home search. They can leverage their knowledge of the median prices of homes sold in the area and pinpoint neighborhoods you should explore listings in first. 

From there, they can help you plan your negotiation strategy, provide backup options, guide you on the complicated paperwork that comes with buying a home, and, most importantly, secure a commission rebate - more on that later.

But it is vital to interview multiple agents before choosing who to work with. Each agent works differently and not every agent can offer a commission rebate. Some prefer to work traditionally via phone calls and email, while other brokerages, such as Prevu Real Estate, choose to leverage a digital hombuying platform to facilitate constant communication and keep buyers in the loop every step of the way.

Identify the approach you prefer; this is your journey and your agent should help enrich that experience.

Use commission rebates to save money

One of the most effective ways for home buyers to achieve affordability is via commission rebates.

Commission rebates, also known as homebuyer refunds, are real estate tools offered by select brokerages that allow agents to give a portion of their commission fee back to the buyer in the form of extra savings.

Tech-forward brokerages like Prevu choose to invest in a streamlined digital toolset for buyers while working with salaried agents; this allows them to unlock savings for homebuyers in California via commission rebates.

Prevu currently offers the largest rebate in California, allowing buyers to potentially receive up to 2% of their home’s purchase price back after closing. For instance, if you were to purchase a starter home in San Marcos near San Diego for $1,250,000 via Prevu, you could stand to receive up to $25,,000 cash back via the brokerage’s Smart Buyer Rebate.

These extra savings become an essential tool for first-time homebuyers in many ways. If you choose to work with Prevu, you’ll gain access to a wealth of listings that feature accurate estimates of the rebate you can expect if you close on a home. Knowing you stand to receive a certain amount of money back can give you the confidence to make a stronger offer.

You can also rely on a commission rebate to help you offset closing costs, replenish savings after a down payment, or help jumpstart your furnishing budget.

Interested in buying a home in California? Browse listings and see how much you can save with Prevu’s Smart Buyer Rebate.