Purchasing a home in San Francisco for first-time buyers

Anna Katz
Anna Katz
Mar 8, 2019 · 4 min read
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After San Francisco home prices and rents ran away with the bank in recent years, many newcomers and residents alike grapple with the question: Is it cheaper to buy or rent in San Franciso? There’s no consensus but plenty of opinions and the cerebral types can enjoy crunching lots of numbers, charts, and pricing trends.

We’ll spare you the economic jargon and offer our own take that in the short term, renting is always more affordable, but after a certain period of time, the returns diminish. The better deal in the long run depends on how long your run is. Trulia has a handy rent vs. buy calculator to help you go to the drawing board and form your own conclusion. If homeownership makes sense, Bay Property Group can help.

In the way of a little trivia, we are not only a property management company that enjoys handing the keys over to a resident’s shiny new apartment. We are also a real estate brokerage, meaning we can also hand over the keys to your new home. Although this process is anything but trivial, doing your homework, shopping around, getting all your ducks in a row and a little patience will pay off.

The first thing you need to know is that there are many people clamoring to buy a home here, with good reason. The charm and perks of living in by San Francisco are offset by a skyrocketing real estate market driven by a tech boom that is the envy of the world, low interest rates, limited land and an influx of international buyers from China, Russia and other points around the globe.

Don’t let the price tag on your new San Franciso home intimidate you. Working with a mortgage professional, you can make a plan to pay off your home loan at a pace that works for you. In our many years of providing exceptional real estate services, Bay Property Group can recommend vetted mortgage providers who can make this daunting process easier.

First things first.

In the Bay Area’s tight real estate market where buyers are competing for a limited slice of housing inventory, aspiring owners are expected to have all of the mortgage and financing parts of the purchase figured out before going house shopping.

We can’t stress this enough. It’s more fun to look at homes than it is to compile reams of paperwork and chat with a lender, but we have seen many exuberant purchasers fall in love with a property, only to become disappointed when the home is in the wrong price range (too high or too low) or when they are unable to make a serious offer on the home they have their heart set on.

Sit down with a lender to discover how to get pre-qualified or pre-approved for a home loan, an exercise in reviewing your income and expenses, and can make the bid on your San Francisco home more competitive because the preapproval letter separates the serious from the curious.

Now is the time to get educated on what loan can be tailored to your unique financial picture. Does a fixed rate or adjustable rate mortgage make more sense?

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Given the high prices of San Francisco, many people on the road to home ownership have little choice but to take out a jumbo loan. As its name implies, a jumbo loan is a type of financing that exceeds the limits set by the Federal Housing Finance Agency (FHFA). These behemoth loans are not “conforming,” meaning jumbo loans are a home loan that exceeds the maximum size limits used by Fannie Mae and Freddie Mac and therefore, is not eligible to be purchased, guaranteed or securitized by Fannie or Freddie.

In plain English, larger debt equals more risk to the lender, and so the requirements are more stringent. More often than not, buyers will need a hefty down payment and a stellar credit score when the loan falls outside conforming amounts.

The threshold for conforming loans vary by county and for San Francisco, it hovers at $726,525.

We would be remiss not to mention that the Mayor’s Office of Housing and Community Development has programs that can provide “air support” to help first-time homebuyers with downpayments and mortgage tax credits, and it is certainly worthy of looking into.

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Finding the right ‘hood

San Francisco is only about 49 miles wedged onto the end of the peninsula, but neighborhoods change drastically within a few blocks. Walk five minutes and you’ll see a different character, history, aesthetic and a different price bracket. Many house hunters are myopic by only focusing on the house, but it’s important to know what awaits you when you walk out the front door.

In a Trulia survey, 36 percent of respondents would move to a different neighborhood than the one they are living in now if they had to do it again, but the number is even higher in San Francisco. Bay Property Group can help you avoid buyer’s remorse by exploring the rich tapestry of neighborhoods and find the right “vibe.”

In future posts, we’ll talk more about mortgages and programs for first-time homebuyers, finding neighborhoods with their own culture and charm, and dispense more tips on buying a home in a place like no other.

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