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How Much Do You Need to Save for a $500,000 Home in California?

miniature house beside dollar bag and coins

You’ve been preparing for this moment for quite some time and, in the process, amassed a decent amount of funds for this. But since this is your first time engaging in this endeavor, you might be wondering: how much money should you save before buying a house?

The short answer is this: it depends on your chosen location. And if you choose to buy your starter home in California where home values are historically high, the question arises: how much do you need to save for a house here? 

The good news is that the winds of change have been blowing in the California real estate market, with more opportunities for buyers to find a house sans the aggressive bidding wars. More homes are finding their way into the market, some of which are priced at half a million. This is a great price for a nice starter home in the Golden State, and you’ll want to make sure you snag such a deal before the rest. 

Below are the things you need to prepare to successfully purchase your first home in California worth around $500,000.


The down payment generally depends on the loan type. FHA loans require a down payment of 3.5%. For a $500,000 home, this amounts to $17,500. Closing costs should also be taken into consideration. These include various fees and taxes and generally fall between 2% and 2.25% of the listing price. For a $500,000 home, closing costs could range from $10,000 to $11,250. If you add up the down payment and closing costs, this will cost around $30,000.


Mortgage lenders in general allow you to buy a house that is around two to three times your annual salary. In simpler terms, if you want to buy a $500,000 house, you need to make at least $167,000 annually. If you intend to spend less of your income on your mortgage, you should earn more than $200,000.


If you save 20% of your monthly income, you could qualify for a loan with a relatively lower interest rate and still have enough for your home’s down payment. For example, if you earn $100,000 a year, you will end up with $30,000 after a year and a half if you consistently set aside 20%.


If you’re not in a rush, you can play the long game and put aside only 10% of your income. While this might take you a considerably longer period before you can purchase a home, you will gain more flexibility in terms of spending. At the same time, you need to work on improving or maintaining a good credit score. A better credit score translates to a lower mortgage rate when you finally decide to buy a house. A credit score above 740 is considered ideal and qualifies you for the best mortgage rates, which can be at around 3.37% for a 30-year fixed-rate loan.


Aside from the above-mentioned payments, there is one more cost to consider – the homeowner’s association fees. These fees vary from one neighborhood to another and require monthly payments for as long as you’re a homeowner in the said neighborhood.

Take your home-buying concerns to the team with around four decades of elite service and deep knowledge of the Orange County, CA area – the Yoshikane-Toyama Real Estate Group. Check their listings here to get started on your home search. You can also call the team at 714.501.7132 or send them an email here.

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