How to Afford a House in San Diego

Living in San Diego is an aspiration of many, with over 3 million people calling San Diego home. Although this location is highly desired, it comes with a price: San Diego took the #1 spot in the U.S. News and World Report’s Most Expensive Places to Live in the U.S. list, and as of late 2023, the average home price in San Diego is nearly $1 million.

In an expensive real estate market like Southern California, finding a great home you can afford can appear challenging, but it is possible! Home buyers need a combination of flexibility, strategy, financial education and preparedness.

Review Your Finances
Before starting the home buying process, you’ll first need to review your finances. Analyze everything: your current income, debts, savings, financial habits and credit score. Taking inventory of your finances will help you determine how much house you can afford, including the initial down payment and the maximum you should spend on a monthly mortgage payment. Unsure of where to start? We have plenty of calculators and home shopping tools to help you get started, including a user-friendly Home Loan Payment Calculator that provides an estimated monthly house payment based on your location, down payment, terms and interest rate. Make sure to investigate what your total loan payment would be including taxes.

Learn About Current Rates
Equipping yourself with information about current home loan interest rates and trends, as well as understanding the difference between types of home loans and interest rates, is imperative when determining how much home you can afford and which loan is best for you. When searching for the best home loan rates, know that it can vary depending on a few factors, including:
  • Credit score
  • Debt-to-income ratio
  • Length of credit

Visit our Guide to Home Loan Rates blog for more information on home loan rates.

Explore All of Your Home Loan Options
Once you understand what you can afford and have knowledge of home loan rates, it’s time to see what kind of loans are available to you. There are lots of home loan options depending on what you’re able to afford. If you’re planning on living in your home for a short period of time (5, 7 or 10 years), an Adjustable Rate Mortgage (also known as a variable-rate mortgage) may be the perfect fit, as these mortgages typically start out with a lower interest rate.

If you are looking to stay in your new home for a longer period of time, a Fixed Rate Mortgage Loan might be an ideal solution. A Fixed Rate Mortgage Loan is great for those who like a consistent budget, as the monthly mortgage payment stays the same for the life of the loan. There are also mortgage lenders who offer lower down-payments of 3% or 5% instead of the usual 20% down. Work with a mortgage lender to see which loan works best for you.

Determine What You Can Afford
Now that you’ve taken inventory of your finances and understand both home loan rates and the loan options available, you should have a better idea of how much you can afford. Websites like Zillow, Redfin and Trulia are great resources to help with your search, as they’ll also show you comparative house pricing in the area and how long those houses have been on the market.

To maximize your buying options, consider expanding your search area to include neighborhoods just outside central San Diego. Be open-minded about a variety of property types, like condos or townhouses, as these options can significantly widen your search.

How to Negotiate for a Better Home Price
Even in a seller’s market, there is room to negotiate a better home price. A strong initial offer can set the tone for serious negotiations. Search for houses that have been on the market for a while, or that have a motivated seller which your realtor can investigate. Homes requiring repairs can also provide leverage for negotiating a lower price. Additionally, having a mortgage pre-approval lets sellers know you’re ready to proceed, which can give you an edge in negotiations.
Working with an experienced realtor who understands the San Diego market can be invaluable for finding homes with negotiation potential. By helping you access exclusive and off-market listings, learning about a great option in your budget before it hits the market and guiding you through effective negotiation tactics, a local real estate team can give you the upper hand when buying a home in California.

Rent a Room Out for an Additional Income Stream
There’s plenty of excitement that comes with buying a house, but you may be wondering how you are going to make the mortgage payment with home prices being so high in this current economic environment. There is a practice that is becoming more and more popular within the Gen Z and millennial generations, now known as “house hacking.”

What is House Hacking?
By purchasing a home with extra living space or a multi-family property, house hacking homeowners can receive additional income from renting out a room, Accessory Dwelling Unit (ADU) or adjoining housing unit and put it towards a monthly mortgage payment. According to CNBC, 39% of recent homebuyers have said that house hacking is an important opportunity to help potential home owners be able to purchase a home. A house hack doesn’t have to be permanent, either: you can forego room renting once you are in a financially stronger position. In the meantime, homeowners can enjoy the house they want, subsidize their income, increase their home’s equity and have more financial security.

Being able to afford a home in San Diego is a huge accomplishment. It’s also a great feeling knowing that your monthly payment is going towards your own home. For additional steps on how to buy a house in San Diego, check out this informational blog post.

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