First-Time Homebuyer Guide for California: Down Payment, Credit, Programs and the Order of Operations

Step 1 — Know your three numbers before you look at listings

Three figures decide what you can buy: your credit score, your monthly debts (car payments, student loans, minimum card payments) and your liquid savings. Lenders combine the first two into a debt-to-income ratio — your total monthly debt including the new mortgage divided by gross monthly income — and most programs want that under roughly 43–50% depending on the loan and compensating factors.

Pull your credit reports (free at annualcreditreport.com) months before you plan to buy. Old collections, an authorized-user account gone wrong, or a high card balance are all fixable, but not in the week before you write an offer.

Step 2 — How much down payment do you really need?

• Conventional (Fannie Mae / Freddie Mac): as little as 3% down for first-time buyers on a primary residence under the conforming loan limit. Private mortgage insurance (PMI) applies under 20% and can be cancelled once you reach 20% equity.
• FHA: 3.5% down with more flexible credit; carries an upfront and a monthly mortgage insurance premium for most of the loan's life at low down payments. Often the better fit for scores in the 600s.
• VA: 0% down and no monthly mortgage insurance for eligible veterans and service members; a funding fee applies unless exempt.
• Down payment assistance: California's CalHFA programs and various county or city programs offer deferred second loans or grants for qualifying first-time buyers with income limits. Availability and terms change; we check what is open when you are ready.
• Jumbo: above the conforming limit, expect 10–20% down and stricter reserves.

Putting less down means a higher payment and mortgage insurance; putting more down than you can comfortably afford leaves you without reserves for repairs. Most first-time buyers land between 5% and 10%.

Step 3 — Get pre-approved, then set a budget from the payment

A pre-approval (see our pre-approval guide) tells you the maximum the guidelines allow. Your budget should come from the monthly payment you are comfortable with — including property taxes (roughly 1–1.25% of the price per year in most of California), homeowners insurance, HOA dues if any, and mortgage insurance. Our calculator lets you see the full payment, not just principal and interest.

A useful rule: decide the payment first, then let the loan officer translate it into a price. The reverse — falling in love with a price and hoping the payment works — is how people end up house-poor.

Step 4 — From offer to keys

1. Offer with your pre-approval letter, earnest money deposit (commonly 1–3% of the price in California), and contingency periods for inspection, appraisal and loan.
2. Inspection — hire your own inspector during the contingency period; negotiate repairs or credits.
3. Appraisal — ordered by the lender. If it comes in low, options are renegotiating price, increasing your down payment, or walking away under the contingency.
4. Underwriting — the lender verifies everything; respond to condition requests the same day if you can.
5. Closing Disclosure — arrives at least three business days before signing; compare it with your Loan Estimate.
6. Signing and funding — sign with a notary, wire the cash to close (verify wire instructions by phone — wire fraud targets buyers), the lender funds, the county records, and you get keys.

Costs first-time buyers forget

• Closing costs and prepaids — about 1.5–3% of the price. See our closing costs guide.
• The California supplemental property tax bill a few months after closing.
• Moving, immediate repairs, appliances, and a reserve for the first surprise.
• HOA dues on condos and planned communities, and the HOA's own financial health (ask for the reserve study and any pending special assessments).

Mistakes that cost the most

• Opening or closing credit accounts between application and closing.
• Moving money around without a paper trail; large cash deposits are effectively unusable for a down payment.
• Waiving the inspection to win a bidding war without understanding what you are giving up.
• Stretching to the maximum approval and leaving no reserves.
• Comparing lenders by rate alone instead of the Loan Estimate's total cost and cash to close.