Qualifying for a Mortgage in California: 5 Ways to Improve Your Chances

As a home buyer, there are certain steps you can take to increase your chance of qualifying for a mortgage loan in California. We’ve covered five of them below.

The process of qualifying for a mortgage loan in California can vary from one borrower to the next. The truth is every borrower is different in terms of their qualifications and financing goals.

Some home buyers are able to qualify for a mortgage in California with relative ease. Generally speaking, these borrowers have excellent credit, manageable debt, and more than enough income to meet their monthly payment obligations.

Other home buyers find that they have to work harder to qualify for a mortgage loan in California. Maybe their credit scores are a bit lower than average. Or maybe they carry a little too much debt, relative to their income level. They might also lack the down-payment funds needed to qualify for a home loan.

Improving Your Chances for Mortgage Qualification

The good news is, there are steps you can take to increase your chances of qualifying for a mortgage in California. So let’s talk about those proactive steps.

1. Check your credit reports.

Did you know you have three different credit reports? Did you know they contain a detailed history of your loans and credit accounts? It’s true. More importantly, the information contained in your credit report reports is used to produce your credit scores (see #2 below).

If you plan to apply for a home loan in the near future, now might be a good time to review your credit reports. Check them for accuracy. Dispute any mistakes you find through the bureau that produced the report.

You can start by visiting annualcreditreport.com. That’s the official, government-regulated site for obtaining consumer credit reports. If you find any errors in your documents, refer to the “dispute” or “credit report assistance” section of the company’s website.

2. Maintain a good credit score.

FICO credit scores (the one used by most mortgage lenders) cover a range from 300 to 850. The higher your score, the better your chances of qualifying for a mortgage loan in California.

You can maintain a high score, or improve a low one, by paying your bills on time and using credit cards sparingly. According to MyFICO.com, those two factors count more than anything else when it comes to determining your score.

If you’ve had mortgage qualification problems in the past due to a low credit score, refer to the MyFICO website for guidance. They offer step-by-step tutorials on how to improve your FICO score. This could help you qualify for a home loan in the future (among other benefits).

Related: Credit score needed to buy a home

3. Save as much money as possible.

You’ll need a certain amount of money in the bank to qualify for a home loan in California. First, there’s the down payment to consider. You’ll also encounter some closing costs, and these can quickly add up to several thousand dollars.

Depending on the type of mortgage loan you’re using, you might need additional funds or “cash reserves” in the bank to qualify for financing. Not all mortgage products require this, but some do.

The point is this: The sooner you start saving money, and the more you have, the easier it will be to qualify for a mortgage loan in California.

4. Avoid major purchases.

You can also improve your chances of getting approved for a home loan by avoiding major purchases in the weeks before you apply. In this context, a “major” purchase is one that requires a credit card or loan to procure.

When it comes to qualifying for a mortgage in California, big-ticket purchases can affect you in two ways. First, it can chip away at your home-buying fund (see item #3 above). It could also raise your overall debt-to-income ratio. Both of these things can affect your ability to qualify for a home loan.

And speaking of debt ratios…

5. Evaluate your debt situation.

Earlier, we talked about the debt-to-income ratio, and how it can affect your ability to get approved for a home loan. You might want to measure your DTI before applying for a loan, just to see where you stand.

This is an optional step that might not be needed in all cases. But if you’re currently carrying a lot of debt relative to your income, a quick DTI assessment could be helpful. You can find plenty of debt-to-income calculators online, with a Google search.

There is no industrywide rule or requirement for maximum DTI ratios. But if your overall debt-to-income ratio is higher than 50%, you might have a harder time qualifying for a mortgage loan in California. The goal here is to (A) find out where you stand, and (B) create a plan to reduce your debts if they’re too high.

Disclaimer: This article is intended for a general audience and for educational purposes. As a result, portions of this article might not apply to your particular situation.