Buying a house in San Francisco

A bustling metropolis that’s home to the iconic Golden Gate Bridge, one of the largest Chinatowns in America and hundreds of technology and software firms, San Francisco is a bustling and multifaceted city. It also has one of the most expensive housing markets in the country: The median sale price of a home here was a steep $1.35 million as of March 2023, according to data from Redfin. Do you have a big enough bank account for it? If so, here’s how to navigate the process of buying a home in San Francisco.

Deciding where to live in San Francisco

Though it has the feel of a big city, San Francisco is relatively small, geographically — about 47 square miles. But within its boundaries, there are a number of different neighborhoods and communities to choose from, each with its own culture, offerings and unique features. Popular neighborhoods in the city include the Mission District, Noe Valley and Nob Hill.

Whichever neighborhood suits you best, the cost of living is likely to be steep. San Francisco is 28 percent more expensive than the rest of California and 79 percent more expensive than the national average, according to RentCafe. And data from the California Association of Realtors shows that home prices in the overall Bay Area are by far the most expensive of any other region in the state, including Los Angeles.

How to buy a house in San Francisco

Save for a down payment

Nearly everything in San Francisco is likely to give you a bit of sticker shock, including the typical down payment on a home. Of course, down payment amounts are a percentage of home price, so it makes sense that this expensive city’s typical down payment amount would be much higher than national averages.

San Francisco had the highest down payment percentage in the country at 25 percent, according to a 2023 Redfin report. Using March’s median home price of $1.35 million, that comes to more than $337,000 for a typical down payment. Nationwide, the typical down payment was just $42,000, the report said.

You may not need to shell out that much money upfront, however. Most home loans don’t require anywhere near a 25 percent down payment. And California offers several homebuyer assistance programs that can help with down payments and other costs associated with buying.

Get preapproved for a mortgage

A critical first step in the homebuying process is getting preapproved for a mortgage. This allows a lender to take an initial look at your financial picture and estimate how much they are likely to lend you, which provides you with a home-shopping budget. Obtaining preapproval also signals to sellers that you are a serious and qualified buyer.

Find the right lender

Identifying the right lender for your financial needs and goals will take some research and shopping around. It’s a good idea to compare multiple California lenders and look at their different loan terms and rates side-by-side. Some lenders might even offer low-down-payment products or down payment assistance programs. Keep in mind that the higher your credit score, the better a rate you’re likely to qualify for.

Find the best local real estate agent in San Francisco

Working with a professional agent who knows your search area well can make the homebuying process in a competitive market like San Francisco less stressful. A knowledgeable local agent can identify the best San Francisco neighborhoods for your budget and lifestyle, advise you on much to offer on a house and guide you through potential bidding wars or price negotiations.

When looking for an agent, ask friends, family and even coworkers for recommendations if they’ve had a good experience with a Realtor. It’s also a good idea to interview several candidates, to ensure you find someone who you can communicate with easily. Before making a decision, examine online reviews for the agents you’re considering.

Start house hunting and make an offer

With your preapproval in hand and your agent by your side, it’s time to start looking at houses. In addition to identifying homes within your budget, research the neighborhoods that best suit your lifestyle. It’s also a good idea to develop a list of non-negotiable must-haves in a home versus things that would simply be nice to have.

When you find a place you love, work with your Realtor to develop the best offer possible. But keep in mind that even in this highly competitive market, conditions are becoming slightly more buyer-friendly. Per Redfin, San Francisco listings are now spending an average of 29 days on the market, which is nearly double the 15 days it took this time last year. And about 14 percent of listings dropped their price before selling.

Get a home inspection and appraisal

Even after your offer has been accepted by a seller and you’ve signed a purchase agreement, making it to the closing table is still not guaranteed. Next comes a review period that includes having the property inspected and appraised.

Home inspections ensure there are no significant or unexpected issues with the home that could be costly, or even impact your decision to proceed. This step is technically optional, but when making a purchase as significant as a home, it’s best to do your due diligence.

Appraisals ensure that the property’s valuation lines up with the amount you’re borrowing from a mortgage lender. This step is required by lenders and involves a professional coming to the home to assess its condition. An appraiser will also compare the home to other similar homes in the area that have sold recently in order to arrive at its market value.

Requirements to buy a house in San Francisco

Can I afford a house in San Francisco?

This is a crucial question in this city, and the answer really depends on your income, debt levels and lifestyle. Remember, the median home price is $1.35 million. Even with a 20 percent down payment, assuming a 30-year fixed mortgage at a 6.5 percent interest rate, Bankrate’s mortgage calculator shows that your monthly principal and interest payments will come to more than $6,800. And that’s not including property taxes, homeowners insurance or other associated costs.

Home prices have been declining and homes are spending longer on the market, which may give you more leverage to negotiate. But at the same time, mortgage interest rates are steep, so consider your financial readiness carefully. Is your job secure? Do you have savings squirreled away for emergencies? Can you comfortably afford both monthly payments and ongoing maintenance costs? Answering these questions can help determine whether you can reasonably afford a house in San Francisco.

First-time homebuyers

While a first-time homebuyer is generally someone who has never owned a home before, this status can also apply more broadly. The California Housing Finance Agency (CalHFA) also considers individuals to be first-time buyers if they haven’t owned a home in the past three years. This designation can be helpful in terms of allowing you to qualify for down payment assistance or closing cost assistance programs. CalHFA offers a range of programs designed to assist first-time buyers, particularly those who have a low or moderate income. Some mortgage lenders may even offer slightly discounted rates to first-time buyers.

Closing

The final step in the lengthy home buying process is closing. At the closing table, you’ll sign a stack of paperwork to finalize the purchase, pay closing costs and take legal possession of your new home. In California, you can expect closing costs to amount to about 1 percent of the purchase price, according to CoreLogic’s ClosingCorp. However, the exact amount of your closing costs may differ. When it’s all over, you’ll get the keys and be an official San Francisco homeowner.

FAQs

• Is it a good idea to buy a house in San Francisco?

  If you’re confident that you can afford the cost of the purchase (as well as the ongoing costs of property taxes, insurance premiums, maintenance and upkeep), then it may well be a good idea. San Francisco real estate has historically proven to be a wise investment. Data from Norada Real Estate Investments shows that real estate in the city appreciated 111.65 percent over the past decade. That puts San Francisco in the top 20 percent across the country when it comes to real estate appreciation.
  

• How much is a down payment on a house in San Francisco?

  The average down payment on a home in San Francisco is about 25 percent of the home’s purchase price, according to a recent Redfin report. Considering the median home price of $1.35 million, that comes to more than $337,000. But not all down payments need to be this high — for example, with many types of home loans, you may not need to put down more than 3 to 5 percent.