Buying in San Francisco is different from buying almost anywhere else. Prices are high, much of the housing is condos and shared buildings, and how you own a place affects how you can finance it. Here's what first-time buyers ask us most.
Condo, single-family or TIC?
Most first homes here are condos or tenancy-in-common (TIC) units. A condo is a unit you own outright, with a share of the common areas, and it's financed with a normal mortgage. A TIC is a share of a whole building plus an agreement that gives you the right to use one unit. TICs often cost less, but fewer lenders offer loans for them, and the rates and terms differ.
- With a condo, read the HOA's budget, reserves and any planned special assessments.
- With a TIC, read the TIC agreement and ask whether the building has a fractional loan or one shared mortgage.
- With a single-family home, budget for inspections. Older homes here often need foundation or seismic work.
How much do you need for a down payment?
Twenty percent avoids private mortgage insurance, but it isn't required. Many first-time buyers put down 5 to 10 percent and pay PMI until they reach 20 percent equity. The city also runs down payment assistance programs for first-time buyers, so check whether you qualify before you assume you need to wait.
Copper tip: Get pre-approved before you start going to open houses. In a competitive market, an offer with a pre-approval letter is taken more seriously, and you'll know exactly what you can afford.
Fixed or adjustable?
A 30-year fixed rate (currently 6.125% APR) keeps the same payment for the life of the loan. A 15-year fixed (5.50% APR) costs more each month and much less overall. A 5/6 ARM starts at 5.875% APR and adjusts after five years, which can suit you if you expect to move or refinance within that time.
The right mortgage is the one whose worst month you can still afford.
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