Buying your first house in California starts with confirming you qualify as a first-time buyer under the state’s three-year rule, then stacking the right loan, down payment assistance, and insurance before you ever write an offer. California’s prices make the sequence matter: a misstep on loan type or an insurance surprise can push a workable budget out of reach. The walkthrough below covers each stage in the order you’ll hit it.
Who Counts as a First-Time Buyer
California uses the three-year rule. You qualify as a first-time buyer if you have not owned and occupied a home at any point in the three years before your new purchase. The same standard applies if you lived in a home owned by a spouse during that window. Once three full years have passed since you last held ownership or lived in a spouse’s property, you regain eligibility even if you owned a home before that period.1California Housing Finance Agency. Borrower Eligibility Requirements
Displaced homemakers and single parents who previously co-owned a home with a former spouse can also qualify under certain state guidelines, even if the three-year gap hasn’t fully elapsed. That matters because it opens access to down payment assistance and favorable loan terms that repeat buyers can’t use.
Picking the Right Loan
Your loan choice sets your minimum down payment, credit threshold, and borrowing ceiling. In California, the ceiling matters more than almost anywhere else.
Conventional Loans
Conventional mortgages backed by Fannie Mae generally require a minimum credit score of 620, though the exact threshold shifts with your loan-to-value ratio and whether the loan runs through automated underwriting.2Fannie Mae. Eligibility Matrix You can put down as little as 3 percent on a single-family home, but anything below 20 percent triggers private mortgage insurance. Once you reach 20 percent equity, you can request that PMI be removed.
For 2026, the baseline conforming loan limit is $832,750 for a single-family home. In most California metro areas, however, the high-cost ceiling of $1,249,125 applies, so you can borrow significantly more before crossing into jumbo territory.3FHFA. FHFA Announces Conforming Loan Limit Values for 2026 Jumbo loans typically demand credit scores of 700 or above and down payments of 10 to 20 percent.
FHA Loans
FHA-insured loans are built for borrowers with thinner credit files or smaller savings. A credit score of 580 or higher qualifies you for the minimum 3.5 percent down payment; scores between 500 and 579 require 10 percent down. FHA also allows higher debt-to-income ratios than conventional financing, sometimes reaching 50 percent with strong compensating factors like cash reserves.
The tradeoff is mortgage insurance that lasts the life of the loan on most FHA products. You can’t cancel it at 20 percent equity; you’d have to refinance into a conventional loan to shed it. In high-cost California counties, the FHA single-family loan limit matches the conforming ceiling of $1,249,125.
VA and USDA Loans
If you’re a veteran, active-duty service member, or eligible surviving spouse, VA loans offer zero down payment and no ongoing mortgage insurance. CalHFA includes VA-compatible first mortgages in its program lineup, so you can layer state down payment assistance on top. USDA loans serve a similar zero-down function in designated rural areas, though fewer California zip codes qualify.
Getting Pre-Approved
Pre-approval before you start touring homes tells sellers you have financing lined up and gives you a realistic price ceiling. Lenders will ask for your most recent two years of federal tax returns and W-2s to verify income consistency. If you’re self-employed, expect to provide profit-and-loss statements and 1099 forms covering the same period. Pay stubs from the past 30 days and bank statements from the previous two to three months show your current cash position.
The core intake form is the Uniform Residential Loan Application, Form 1003, the standard document Fannie Mae and Freddie Mac designed for residential mortgages.4Fannie Mae. Uniform Residential Loan Application Form 1003 It asks for your full asset inventory, debts, employment history, and current housing expenses. Inconsistencies between the application and your supporting documents slow down underwriting and can trigger additional verification rounds that delay closing.
CalHFA Down Payment Assistance
The California Housing Finance Agency runs several programs that help first-time buyers cover down payments and closing costs. These are loans with favorable terms, not grants, and each one layers on top of a CalHFA first mortgage.5CA Housing Finance Agency. Homebuyers Loan Program
MyHome Assistance Program
MyHome is a deferred-payment subordinate loan that covers your down payment or closing costs. With a CalHFA FHA loan, you can borrow up to 3.5 percent of the purchase price or appraised value, whichever is lower. With a CalHFA conventional, VA, or USDA first mortgage, the cap is 3 percent.6California Housing Finance Agency. Downpayment Assistance Program – MyHome Assistance Program The loan carries simple interest and requires no monthly payments. Repayment kicks in when you sell, refinance, pay off the first mortgage, or if a notice of default is recorded against the property.7California Housing Finance Agency. MyHome Program Handbook
Dream For All Shared Appreciation Loan
Dream For All provides a loan of up to 20 percent of the home’s purchase price, capped at $150,000, for your down payment or closing costs. When you eventually sell or transfer the home, you repay the original loan amount plus a share of the property’s appreciation, either 15 or 20 percent of the gain depending on your income tier.8California Housing Finance Agency. California Dream For All Shared Appreciation Loan
Demand for this program consistently outstrips available funding. The 2026 cycle uses a randomized voucher lottery rather than first-come-first-served. Registration windows are short. The March 2026 portal, for example, was open for roughly three weeks, so check CalHFA’s site early and have your lender lined up before the window opens.
Income Limits and Required Education
Eligibility depends on household income limits that vary by county. For 2025, limits range from $185,000 in lower-cost counties like Del Norte and Fresno to $325,000 in high-cost areas including San Francisco, San Mateo, Santa Clara, and Marin.9California Housing Finance Agency. 2025 Government and Conventional Income Limits CalHFA also requires all first-time buyers to complete homebuyer education counseling. The only online course accepted is eHome America’s eight-hour program, which costs $100 and includes a mandatory one-on-one counseling follow-up.1California Housing Finance Agency. Borrower Eligibility Requirements
CalHFA restricts eligible property types to single-family one-unit residences, approved condominiums, and manufactured housing on permanent foundations. Investment properties and multi-unit buildings don’t qualify.
Property Taxes You’ll Actually Pay
Property taxes catch first-time buyers off guard more often than almost anything else in the process. Between the base tax, supplemental bills, and special district assessments, your real annual obligation can run noticeably higher than the 1 percent figure people quote from Proposition 13.
The Base Rate Under Proposition 13
Proposition 13 caps the general property tax at 1 percent of your home’s assessed value at the time of purchase, plus any voter-approved bond obligations. The assessed value can increase by no more than 2 percent per year, regardless of how fast market values climb. When you buy, the county reassesses the property at current market value, and your 1-percent-plus-bonds rate applies to that new figure.
The Supplemental Bill Nobody Warns You About
Within a few months of closing, you’ll receive one or two supplemental tax bills separate from your regular annual property tax. The county reassesses your home as of the date ownership changes, and the difference between the old assessed value and your purchase price generates an additional prorated tax covering the remainder of the fiscal year (July 1 through June 30).10California State Board of Equalization. Supplemental Assessment Close in October, and you’ll owe a supplemental bill covering November through June. Budget for this separately. It isn’t included in your lender’s escrow impound estimate at closing.
Mello-Roos Districts
Many newer California developments sit inside a Mello-Roos Community Facilities District, created under California Government Code Section 53311, which allows local agencies to levy a special tax to fund infrastructure like roads, sewer systems, schools, and fire protection.11California Legislative Information. California Government Code 53311 Mello-Roos assessments use formulas tied to property characteristics like square footage and lot size rather than market value, and they can add anywhere from a few hundred to several thousand dollars per year. Before making an offer, ask for the property’s current tax bill to see whether a Mello-Roos assessment applies and how much it costs.
Writing the Offer
When you’re ready to bid, your agent will prepare a California Residential Purchase Agreement, a standardized form published by the California Association of Realtors that serves as both the offer and, once accepted, the binding contract.12California Association of REALTORS®. California Residential Purchase Agreement and Joint Escrow Instructions The agreement spells out your proposed price, deposit amount, financing terms, and the timeline for each contingency period.
Contingencies That Protect You
Contingencies are the conditions that must be satisfied before the sale becomes final. Three show up on virtually every California purchase:
- The inspection contingency gives you time to hire a professional inspector and review any seller-provided reports. This window is typically the shortest, often just a few days in competitive markets.
- The appraisal contingency protects you if the home appraises below the purchase price, which would mean your lender won’t fund the full loan amount. The appraisal window generally runs seven to ten days.
- The loan contingency lets you back out without penalty if your financing falls through before final underwriting approval. In a hot market, some buyers waive this to strengthen their offer, which is risky unless you have the cash to close without a loan.
Once you remove a contingency, you lose the right to cancel the deal on that basis without putting your deposit at risk. Pay close attention to each deadline, and don’t let your agent remove a contingency until you’re genuinely satisfied with the condition it covers.
Disclosures You Should Receive
California law requires sellers of residential property to provide a Transfer Disclosure Statement detailing the property’s known physical condition, including defects, repairs, and material facts that could affect your decision.13California Legislative Information. California Civil Code 1102 Attempting to waive this requirement is void as a matter of public policy.
Separately, the seller must provide a Natural Hazard Disclosure Statement if the property sits within any of six designated hazard zones: special flood hazard areas, dam failure inundation areas, earthquake fault zones, seismic hazard zones, very high fire severity zones, and wildland fire areas.14California Legislative Information. California Civil Code 1103 Review it carefully. Properties in high fire severity zones can face insurance complications that directly affect your monthly costs.
Lining Up Homeowners Insurance
Your lender will require proof of homeowners insurance before funding the loan, and this step has become one of the most frustrating parts of buying in California. Enrollment in the state’s insurer of last resort, the FAIR Plan, has doubled in two years as major carriers have pulled back from wildfire-prone areas. Even homeowners who invest in fire-resistant construction and defensible space sometimes struggle to find private coverage.
Start shopping for insurance the moment you enter escrow, not after. If your property sits in a high fire severity zone, a standard policy from a private carrier may not be available. In that case, the California FAIR Plan provides basic dwelling coverage for properties that cannot get insurance through the regular market. You can apply through any licensed agent or broker, or contact the FAIR Plan directly.15CA Department of Insurance. California FAIR Plan The FAIR Plan covers the structure itself but typically lacks the broader protections of a comprehensive policy, including liability, theft, and water damage. To fill those gaps, ask your broker about a Difference in Conditions policy, which layers on top of the FAIR Plan to approximate standard coverage. Earthquake and flood insurance are separate products that you should also evaluate based on your property’s hazard disclosures.
Escrow, Closing Costs, and Recording
Once the seller accepts your offer, the transaction moves to escrow, where a neutral third party holds all funds and documents until every condition is satisfied. You’ll need to deposit your earnest money, typically 1 to 3 percent of the purchase price, into the escrow account within a few business days of acceptance. That money stays in a secure account and counts toward your down payment at closing.
What Closing Costs Run
Buyer closing costs in California generally run between 1.5 and 5 percent of the purchase price, depending on loan type, county, and what you negotiate with the seller. The main line items:
- Escrow and title fees. The escrow company charges for managing the transaction, and the title company charges for the title search and title insurance policy protecting the lender.
- Loan origination and processing. Your lender may charge an origination fee, often 0.5 to 1 percent of the loan amount, plus appraisal and credit report fees.
- Documentary transfer tax. California imposes a base county transfer tax of $0.55 per $500 of the property’s value, excluding any existing liens. Some cities add their own transfer taxes on top.16California Legislative Information. California Revenue and Taxation Code 11911
- Prepaid items. Expect to prepay homeowners insurance for the first year, fund your property tax impound account, and cover prorated interest from the closing date through the end of the month.
Who pays which costs is negotiable in every transaction. California customs vary by county. In Southern California the seller traditionally pays the county transfer tax; in Northern California the split is more varied. Your agent will know local norms, but everything is subject to what you write into the purchase agreement.
Final Walkthrough and Signing
Before the closing appointment, you’ll do a final walkthrough to confirm the property is in the condition you agreed to: no new damage, all negotiated repairs completed, and any items included in the sale still present. If something is wrong, this is your last chance to raise it before the deed transfers.
The closing itself is a signing session where you meet with a notary to execute your loan documents and the deed of trust. The escrow officer then distributes all funds, paying off the seller’s existing mortgage and covering transfer taxes, agent commissions, and lender fees, and sends the new deed to the County Recorder’s Office. The transaction officially closes when that deed is recorded, which makes your ownership a matter of public record and triggers the legal protections available to California homeowners.17California State Board of Equalization. Property Ownership and Deed Recording