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First Time Home Buyers in California

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From choosing the right loan type for you to applying for buyer assistance programs, there are tons of decisions you’ll need to make when you invest in your first home. Before you apply for a mortgage loan or get a refinance quote, make sure you read our complete guide for first-time buyers in California. 

Best Lenders for First Time Home Buyers in California:

The Housing Market in California: An Overview

Understanding the housing market in California can help you get a better idea of how much you should spend on a home. Let’s take a look at some statistics on California and the current market climate. 

Total Households: 11,502,870

Median List Price: $559,000

3 Most Expensive Cities in California to Buy a House:

  • Atherton
  • Hillsborough
  • Los Altos Hills

3 Most Affordable Cities in California to Buy a House:

  • Coalinga
  • Ridgecrest
  • Taft

Preparing for a Mortgage

Before you start shopping for homes, you’ll need to get a mortgage preapproval. A mortgage preapproval is an estimate of how much money you can get in a mortgage loan. Though it might be tempting to jump right into shopping for a home, getting a preapproval first has a few benefits.

  • You’ll have a better budget. A preapproval tells you how much you can afford to borrow. This gives you a great “jumping off” point when it comes to shopping for a home.
  • You’ll be able to give a stronger offer. A preapproval tells real estate agents and sellers that you won’t have trouble financing your home purchase. This allows you to submit a stronger offer when you find a home you want to buy.

Before you apply for a mortgage preapproval, you’ll need to compare lenders and loan types. There are a few different types of loans that you can use to buy a home as a first-time buyer. We’ll go over these loan options in greater detail in later sections.

Your lender will ask you for some financial documentation when you apply for a mortgage loan. This information gives them a closer look at your finances before you apply. Some of the things your lender will probably ask for include —

  • Your last 2 W-2s
  • Your last 2 bank statements
  • Your last 2 pay stubs

If you’re self-employed, you may need to provide more information.

Lenders also look closely at your credit score before they offer you a loan. Different lenders have different minimum credit standards you must meet before you can qualify for a loan. Let’s take a look at a few California lenders and their minimum credit scores.

LenderMinimum Credit Score Required
Amerivalue680
First California Mortgage640
Keller Mortgage600
loanDepot620
PNC Financial Services700

Once you’ve got your paperwork, chosen a lender and ensured that your score is up to snuff, you can apply for a mortgage preapproval. 

Mortgage Options

Lenders for first time buyers offer a multitude of home loan types. Let’s take a look at a few different types of loans available to first-time buyers.

  • Conventional. Conventional loans are the most common type of mortgage loan. You can use a conventional loan to buy any type of property, and almost every mortgage lender offers conventional loans. These loans have higher credit and income standards than government-backed loans, but offer lower interest rates.
  • FHA. FHA loans are government-backed loans for low-income individuals who have bad credit or no credit. It’s possible to get an FHA loan with a score as low as 500 points if you have a 10% down payment. You must meet income and home requirements before you can get an FHA loan.
  • USDA. USDA loans are government-backed loans for people who want to buy a home in a rural area. A USDA loan can allow you to buy a home with as little as $0 down. Your home must meet livability standards and be in a qualified rural area to get a USDA loan. You must also meet income standards before you qualify.
  • VA. VA loans are government-backed loans for veterans and members of the armed forces. A VA loan can allow you to buy a home with a 0% down payment, just like a USDA loan. You must meet service requirements before you can qualify for a VA loan.
  • Jumbo. Jumbo loans are high-value loans used to buy very expensive properties. If you want to buy a more expensive home, you may have no choice but to take out a jumbo loan. Jumbo loans have the highest credit, income and debt standards because they’re the riskiest for lenders to take on. 

First Time Home Buyer Programs in California

As a first time home buyer in California, you have access to a number of state programs through the California Housing Financing Agency (CalHFA). Let’s take a look at a few of the programs you may qualify for.

  • MyHome Assistance Program. The MyHome Assistance Program is a deferred-payment loan that can help you cover the cost of your down payment and closing costs. You can borrow up to 3.5% of your home’s value through this program, and you won’t need to pay the loan off until you refinance, sell your home or pay off your mortgage.
  • School Teacher and Employee Assistance Program. If you’re a public school teacher, administrator or other staff member working at a K-12 school in California, you may qualify for up to 4% of your home’s value in a deferred-payment loan.
  • Cal-EEM + Grant Program. This grant program can help you get a 30-year FHA-insured Energy Efficient Mortgage with additional funds to make energy-efficient improvements to your home.

You can read more about each of these programs on the CalHFA website

Current Mortgage Rates in California

No matter which type of loan you choose, you’ll pay your lender interest in exchange for giving you a loan. Most lenders calculate interest as a percentage of your remaining loan principal. There are a ton of different factors that can affect what you’ll pay in interest, ranging from the type of loan you take out to your credit score to the overall health of the housing market.

Interest rates change on a daily basis. We update our interest tables frequently to reflect the most recent data. Let’s take a look at what you might expect to pay in interest on your home loan in California. 

Loan Type Rate APR
30-year fixed 3.941% 4.008%
15-year fixed 3.358% 3.481%
7/1 ARM (adjustable rate) 3.536% 3.894%
5/1 ARM (adjustable rate) 3.682% 4.008%
Rates based on an average home price of $554,886 and a down payment of 20%.
See more mortgage rates on Zillow

Closing a Mortgage

After you submit an offer to a seller and the seller accepts, it’s time to move onto closing. Closing is a series of processes that eventually culminate in you taking control of your new property and signing the documents on your mortgage loan. Most closing processes include the following steps.

  • Home appraisal. An appraisal is an estimate of how much the home you’re buying is worth. A property value expert called an appraiser will visit your property and give you a rough estimate of the value of the home. Lenders require appraisals because they cannot loan out more money than a home is worth. Your lender will usually schedule your appraisal on your behalf and pass the cost to you at your closing meeting.
  • Home inspection. A home inspection isn’t the same thing as an appraisal. During a home inspection, an inspector will test your home’s systems and tell you about any issues he or she finds. Home inspections aren’t required to get a mortgage, but you should get one to make sure your home doesn’t have any major issues before you buy.
  • Underwriting. During the underwriting process, your lender will look over your financial documentation and double-check that you qualify for a loan. Almost 100% of the underwriting process takes place behind-the-scenes at your lender’s office.
  • Closing meeting. The final stage of buying a home is the closing meeting. At closing, you’ll pay your down payment and closing costs and take control of your new home.

The entirety of the closing process may take anywhere from 2 weeks to half a year depending on where you live and your lender. Let’s take a look at a few different lenders’ average time to close. 

LenderAverage Days to Close Loan
Caliber Home Loans45
better.com21
Rocket Mortgage®30
JPMorgan Chase21
SunTrust60

5 Best Mortgage Lenders in California for First-Time Buyers

Now that you understand how getting a mortgage works and how to compare loan options, let’s take a look at some of the best mortgage companies in California. 

1. Best Overall: better.com

If you’re looking for a fully digital mortgage application experience, better.com is an excellent place to begin. Better.com is an online mortgage lender that offers a streamlined mortgage process ideal for first-time buyers.

They don’t charge any form of lender fees and their agents are strictly salary-based — which means you won’t need to worry about being pressured into a certain loan for an agent’s commission. Providing a fast, direct and convenient way to get approved for a loan at an affordable price, Better.com is our first choice for home buyers in California. 

2. Best for Low Credit Score: Rocket Mortgage®

Getting a loan with a lower credit score can be difficult. Many lenders require you to have a score of at least 620 points to apply for a conventional loan. If you’re still working on building credit, consider an FHA loan from Rocket Mortgage®.

With Rocket Mortgage®, you can qualify for an FHA loan with as little as 3.5% down and a credit score as low as 580 points. If you have a down payment of at least 10%, you can qualify with a score as low as 500 points. FHA loans from Rocket Mortgage® are an excellent option for both low-income buyers and buyers who have a lower score. 

3. Best for VA Loans: Veterans United

Veterans United is a lender focused on offering a simple and streamlined VA loan process for servicemembers and veterans. Despite the name, Veterans United doesn’t only offer VA loans — they also have FHA, USDA and conventional loans available as well.

Veterans United specializes in helping service members in understanding the VA loan process, and they offer paperwork assistance and credit counseling. Their customer service team is made up of former service members, and help is available around the clock. 

4. Best for Self-Employed: Luxury Mortgage

If you’re a small business owner or a freelancer, your income likely fluctuates from year to year. This can make getting a mortgage more difficult, as lenders usually want to see proof of consistent income before they’ll offer you a loan. Luxury Mortgage’s Asset Qualifier loan is an excellent choice for self-employed men and women.

When you apply for an Asset Qualifier loan, Luxury Mortgage will look at the sum of your business assets — not just your income — when they underwrite your loan. This can make it easier to qualify if you’ve recently invested a large amount of money into your business or if you’re in the middle of a slow sales year. 

5. Best for In-Person Service: CitiMortgage

While online mortgage applications are convenient, they may be confusing for less tech-savvy buyers. Citibank is a large-scale lender offering both online and offline mortgage application services though their CitiMortgage branch. You can get a purchase quote or apply for a loan online, or you can stop in at one of their branches for assistance.

CitiMortgage offers discounts on mortgage fees for Citibank customers, low down payment options and services multiple types of conforming and government-backed loans. 

Taking Your Mortgage Into Your Own Hands

The word “mortgage” literally translates from old French into “a pledge until death.” While you certainly won’t be trapped in your mortgage loan for life, a mortgage can easily be a 15- to 30-year commitment. Before you apply for a loan or choose a lender, make sure you do your research and compare the benefits and drawbacks of each of your options. Take your time before you apply for a preapproval to ensure that you’re getting the best rate possible when you finally do find that perfect property. 

Frequently Asked Questions

1) Q: How do I get pre-approved?

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1) Q: How do I get pre-approved?
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First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!

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2) Q: How much interest will I pay?

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2) Q: How much interest will I pay?
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Interest that you’ll pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.

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3) Q: How much should I save for a down payment?

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3) Q: How much should I save for a down payment?
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Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first-time buyers. Check out the lenders that specialize in making the home buying experience a breeze.

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