What Do I Need to Qualify for a Home Loan in California?

This is part of an ongoing series in which we answer common questions among home buyers in California. Today’s question is: What do I need to qualify for a home loan in California? What are the minimum qualification criteria for taking off mortgage loan?

The qualification requirements will vary depending on what kind of home loan you plan to use, the amount you’re borrowing, and other factors. At a minimum, you will need to have decent credit and the ability to repay your loan. You might also need sufficient funds to cover a down payment and closing costs, depending on the type of loan you are using.

Let’s take a closer look at some of the things you might need to qualify for a home loan in California.

1. You’ll need decent credit to qualify for a home loan in California.

Contrary to popular belief, borrowers do not need excellent credit to qualify for a home loan in California. “Decent” credit is a better choice of words.

In short, your credit history should show that you have a pattern of repaying your debts. This is what credit scores reflect. These three-digit numbers are based on the information within your credit reports, and they show how you have borrowed and repaid money over the years.

Learn more about credit scores and home loans.

There is no single cutoff point for credit scores, with regards to home loan qualification. With that being said, having a score of 600 or higher could improve your chances of qualifying for a home loan in California. Having an excellent credit score of 720 or higher will make it even easier to qualify for a mortgage loan, and it could help you qualify for a lower interest rate as well.

But again, these numbers are not set in stone.

2. You might need a down payment, depending on the type of loan.

Depending on the type of home loan you’re using, you might need to make a down payment for a certain percentage of the loan amount or purchase price. Down payment requirements vary based on the type of loan being used and other factors.

Here’s a quick overview of the minimum down payment required to qualify for different home loans in California:

• Conventional home loans (that aren’t government-insured) usually require a minimum down payment of 3% to 5%.
• FHA loans, which are insured by the Federal Housing Administration, require a minimum down payment of 3.5% of the purchase price or appraised value.
• VA home loans, which are available to California military members and veterans, offer 100% financing which eliminates the need for a down payment.

3. You might encounter closing costs when buying a home in California.

In order to qualify for a home loan in California, you need to have enough money in the bank to cover all of your purchase-related expenses. And this might includes closing costs.

Most people who purchase a home in California encounter closing costs. These are the various fees and charges that can accumulate during a typical real estate transaction, particularly when a home loan is being used to finance the purchase. They can range from 3% to 5% of the purchase price.

You’ll find an in-depth look at California closing costs here.

Please contact us if you would like to learn more about closing cost options when getting a home loan in California, or to receive a quote.

Note: Every mortgage lending scenario is different, because every borrower is unique. So your situation might be different from those presented above. These are just some of the common requirements that might be needed to qualify for a home loan in California.