To buy a house in California you need qualifying credit and verified income, enough cash for a down payment and two to five percent in closing costs, a homeowners insurance policy your lender will accept, and the patience to work through the state’s disclosure rules, escrow process, and post-closing property tax bills. The requirements stack higher here than in most states, but each one is manageable once you know what it is and when it applies.
Credit, Income, and Debt-to-Income Limits
Your credit score sets the floor for which loans you can get. Fannie Mae removed its longstanding 620 minimum credit score for conventional conforming loans in late 2025, moving to a broader risk-factor analysis for loans run through its automated underwriting system.1Fannie Mae. Selling Guide Announcement SEL-2025-09 In practice, individual lenders still set their own minimums, commonly in the 620 to 640 range, so ask early. FHA loans remain available with a minimum score of 580 for buyers putting down 3.5 percent, or 500 with 10 percent down.
Lenders also weigh your debt-to-income ratio, which compares your total monthly debt payments to your gross monthly income. FHA guidelines cap this ratio at 43 percent, though borrowers with strong credit or substantial savings may qualify as high as 50 percent. Conventional programs apply similar thresholds with some flexibility for borrowers who meet other compensating criteria.
How Much Cash You Need Upfront
The upfront cash requirement depends on the loan. FHA loans allow as little as 3.5 percent down, roughly $31,500 on a $900,000 home. Some conventional programs accept as little as 3 percent down, but putting less than 20 percent down triggers private mortgage insurance, an added monthly cost that stays until you build enough equity. On a $900,000 purchase, 20 percent is $180,000 at closing. That figure pushes many California buyers toward lower-down-payment loans or state assistance.
Beyond the down payment, plan on two to five percent of the purchase price in closing costs, plus money for inspections, the first year of insurance, and the supplemental property tax bills that arrive after you move in. Keep a cushion.
Down Payment Help Through CalHFA
The California Housing Finance Agency runs programs that help first-time buyers close the gap between what they’ve saved and what they need at the table. Two are worth knowing about.
The MyHome Assistance Program is a deferred-payment junior loan. You make no monthly payments on it, and the balance comes due when you sell, refinance, or pay off the first mortgage. For FHA-backed purchases it covers up to 3.5 percent of the purchase price or appraised value, whichever is less; for conventional loans the cap is 3 percent.2CalHFA. Homebuyers Loan Program
The Forgivable Equity Builder Loan provides up to 10 percent of the purchase price as a forgivable junior loan, with the balance potentially forgiven entirely if you stay in the home for the required period.
CalHFA requires applicants to finish a homebuyer education course before closing. The only accepted online option is eHome’s eight-hour course (roughly $100), or you can attend a live session through a HUD-approved counseling agency.2CalHFA. Homebuyers Loan Program Income limits apply and vary by county, so confirm your eligibility through CalHFA’s online tool before counting on these funds.
Documents the Lender Will Want
Lenders look for at least two years of financial history to confirm your income is stable. Gather these before you apply:
- Federal tax returns (IRS Form 1040) and W-2 or 1099 forms for the two most recent tax years. Self-employed buyers should add year-to-date profit-and-loss statements and any business tax returns.
- Two months of recent statements for every checking, savings, and investment account. Lenders trace where your down payment came from and verify the money has been in your accounts long enough to be “seasoned.” Large unexplained deposits slow the process down.
- A valid driver’s license, state-issued ID, or passport.
- Pay stubs covering at least the most recent 30 days. If you’ve changed jobs recently, bring offer letters or contracts confirming current compensation.
Near the end of the process the lender will call your employer for a verbal verification of employment. Fannie Mae requires this call within 10 business days before you sign loan documents.3Fannie Mae. Verbal Verification of Employment A job change or employment gap during this window can derail your closing, so keep your work status stable until the deed records.
Disclosures the Seller Must Give You
California requires sellers to reveal far more about a property than most other states. Three documents deserve close reading.
Transfer Disclosure Statement
The Transfer Disclosure Statement is the seller’s accounting of every known problem with the property. Under California Civil Code Section 1102, the seller must complete this form in good faith, listing defects from roof leaks and plumbing problems to issues with appliances, drainage, or neighborhood nuisances.4California Legislative Information. California Code CIV Division 2 Part 4 Title 4 Chapter 2 Article 1.5 Section 1102 Both the seller and their agent fill out separate sections. If the TDS raises concerns, use it to negotiate repairs or a price reduction, or to cancel within your contingency period.
Natural Hazard Disclosure
The Natural Hazard Disclosure tells you whether the property sits in a mapped environmental risk zone. Under Civil Code Section 1103, the seller or seller’s agent must disclose if the property falls within a FEMA special flood hazard area, a state dam-failure flood zone, a very high fire hazard severity zone, a wildland fire area, an earthquake fault zone, or a seismic hazard zone.5California Legislative Information. California Code CIV 1103 Most buyers receive this through a third-party NHD report the seller orders from a disclosure company.
Mello-Roos and Megan’s Law
If the property sits within a Mello-Roos Community Facilities District, the seller must disclose the special tax assessment on the land. These assessments fund local infrastructure like schools, roads, and parks, and can add hundreds or thousands of dollars to your annual property tax bill on top of the base rate. Because the Mello-Roos amount doesn’t appear on a standard tax estimate, it’s easy to miss while budgeting.
Every California residential purchase contract must also include a notice about the state’s sex offender registry. Civil Code Section 2079.10a requires the contract to tell you that information about registered sex offenders is available through the Department of Justice website at meganslaw.ca.gov.6California Legislative Information. California Code CIV 2079.10a It’s a mandatory part of the contract, not something you have to request.
The Purchase Agreement, Earnest Money, and Contingencies
The California Residential Purchase Agreement is the binding offer that fixes the price, timeline, and protections on both sides.
When you submit the offer, you include an earnest money deposit. Three percent of the purchase price is common in competitive California markets, though the amount is negotiable. On a $1,000,000 home, 3 percent is $30,000 held in escrow as a sign of good faith. Under Civil Code Section 1675, if the purchase agreement includes a liquidated damages clause and the deposit doesn’t exceed 3 percent of the purchase price, the seller is presumed entitled to keep it if you back out without a valid contingency. Deposits above 3 percent flip the presumption, and the seller must prove the amount is reasonable to retain it. That 3 percent line matters when you’re deciding what to risk and when to waive contingencies.
Three contingencies in the agreement let you cancel without losing your deposit:
- An inspection contingency, commonly 17 days, to hire professionals for a general home inspection, pest inspection, or structural evaluation. California home inspections typically cost $300 to $700 depending on the property’s size and location.
- An appraisal contingency, giving the lender’s appraiser time to confirm the home is worth at least what you offered. If the appraisal comes in low, you can renegotiate, make up the difference in cash, or cancel.
- A loan contingency, a deadline for securing final mortgage approval. If financing falls through despite a good-faith effort, this protects your deposit.
The agreement also assigns who pays for title insurance, the county transfer tax, and any home warranty. These allocations vary by county custom in California, so read this section carefully rather than assuming the seller covers any particular item.
Homeowners Insurance in Wildfire Country
Your lender requires an active homeowners policy before funding the loan, and in California getting that policy can be the hardest part of the process. Properties in or near wildfire zones may struggle to find coverage from private insurers, many of whom have pulled back from high-risk areas.
If you can’t get coverage through the regular market, the California FAIR Plan serves as an insurer of last resort. The FAIR Plan accepts properties regardless of wildfire exposure and offers dwelling fire policies with coverage up to $3 million.7Assembly California. California FAIR Plan Update A FAIR Plan policy generally covers fire-related losses but is narrower than a standard homeowners policy, so you may need a separate “difference in conditions” policy to fill gaps like theft or liability coverage.
One state protection worth knowing about: under Insurance Code Section 675.1, when the Governor declares a wildfire emergency, insurers cannot cancel or refuse to renew residential policies in affected ZIP codes for one year from the declaration date.8CA Department of Insurance. Mandatory 1 Yr Moratorium on Non-Renewals If you’re buying in a wildfire-prone area, start the insurance search early. Waiting until escrow opens causes delays.
Escrow, Closing Costs, and Recording
Once your offer is accepted, the signed purchase agreement goes to a neutral third-party escrow holder who manages all funds and documents. Neither your money nor the seller’s deed moves until the escrow holder confirms every contract term has been met.9Department of Real Estate. Escrow Information for Consumers
Beyond the down payment, closing costs typically run two to five percent of the purchase price. They include:
- Title insurance. California transactions usually involve two policies. An owner’s policy protects you against title defects for as long as you own the home. A lender’s policy protects the mortgage company until the loan is paid off.
- Documentary transfer tax. California imposes a tax of $1.10 per $1,000 of the sale price when the deed is recorded. On a $900,000 purchase that’s $990. Some cities add their own transfer tax on top of the county rate.
- Escrow and notary fees. California caps notary fees at $15 per signature, so the total notary cost is modest compared to other closing expenses. Escrow fees are set by the escrow company and vary.10California Legislative Information. California Code GOV 8211
- Recording fees. The county recorder charges a fee to officially record the deed and deed of trust. Fees vary by county but are generally a small flat amount per document.
- Prepaid items. Your lender collects prorated property taxes, prepaid homeowners insurance, and mortgage interest covering the days between closing and your first payment.
After the lender issues final loan documents, you attend a signing appointment with a notary to execute the promissory note and deed of trust.11Department of Real Estate. Buying a Home in California Once you’ve signed, the escrow holder sends funds to the appropriate parties and delivers the deed and deed of trust to the county recorder’s office. Recording creates the official public record of your ownership, and possession usually transfers the same day or the day after.
Property Tax Reassessment and Supplemental Bills
When you buy in California, the county assessor reassesses the property at your purchase price and issues a new tax bill. Under Proposition 13, the base property tax rate is 1 percent of assessed value, and that value can increase by no more than 2 percent per year going forward. The starting point, though, resets to whatever you paid. Voter-approved bonds and direct assessments (including Mello-Roos) sit on top of that 1 percent base.
New owners are often caught off guard by supplemental tax bills that arrive separately from the regular annual bill. These cover the difference between the prior owner’s assessed value and your new purchase-price assessment, prorated from the month after your purchase through the end of the fiscal year on June 30.12California State Board of Equalization. Supplemental Assessment
The timing of your purchase decides how many supplemental bills you receive. Close between June and December and you’ll get one. Close between January and May and you’ll get two, one for the current fiscal year and one for the full upcoming fiscal year.12California State Board of Equalization. Supplemental Assessment Your mortgage lender does not get these bills. They go to you, and you’re on the hook to pay them on time even if your regular property taxes are paid through an escrow impound account.
Filings After You Close
Two filings matter in the weeks after the deed records.
A Preliminary Change of Ownership Report must accompany the deed when it’s recorded. Your escrow officer typically handles this. If it isn’t filed at recording, the county recorder can charge a $20 fee, and you’ll need to file a separate Change in Ownership Statement within 90 days of the transfer date. Failing to file entirely can trigger a penalty of $100 or 10 percent of the taxes on the new assessed value, whichever is greater, up to $5,000 for properties eligible for the homeowners’ exemption or $20,000 for those that aren’t.13California State Board of Equalization. Change in Ownership – Frequently Asked Questions
California also offers a $7,000 reduction in assessed value for owner-occupied homes, which modestly lowers your annual property tax bill. You claim it by filing a one-time application with the county assessor. To receive the full exemption for the current tax year, file by February 15.14California State Board of Equalization. Homeowners’ Exemption If you later move out or stop using the property as your primary residence, the deadline to terminate the exemption without penalty is December 10.