First-Time Home Buyer Checklist California 2026: Everything You Need Before You Apply

Buying your first home in California is one of the biggest financial decisions you’ll make — and one of the most confusing, especially in a high-cost market where the numbers are larger and the competition is real. I’ve been helping first-time buyers navigate this process for nearly 20 years. I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. Call me at (800) 239-1103.

1. Check Your Credit Score First

Your credit score determines your loan options and your interest rate. Here’s the breakdown:

• 740+ — Where you get the best rates on every loan type
• 620+ — Minimum for most conventional loans
• 580+ — Minimum for FHA with 3.5% down
• 500–579 — FHA possible with 10% down

Pull your free credit report at AnnualCreditReport.com before applying. Dispute any errors — a $10 collection account that isn’t yours can cost you a better rate category. If your score is below 700, ask me about credit optimization strategies before you apply.

2. Know What You Can Actually Afford in California

The standard rule: your total monthly housing payment (principal, interest, property taxes, insurance, HOA) should not exceed 28–31% of your gross monthly income. As a broker, I work with lenders who push DTI to 43–50% with compensating factors. In California, where the median home price tops $900K statewide and over $1.5M in Marin and San Francisco, qualifying income is the primary challenge — not a lack of willing lenders.

3. How Much Down Payment Do You Actually Need?

You don’t need 20% down. Your real options:

• 3% down — Conventional first-time buyer programs (HomeReady, Home Possible)
• 3.5% down — FHA loan
• 0% down — VA loan (veterans) or USDA (rural areas)
• 3–3.5% + assistance — CalHFA down payment assistance

CalHFA offers silent second mortgages that cover down payment and closing costs — no monthly payments until you sell or refinance. Income and purchase price limits apply. Ask before assuming you can’t afford to buy.

4. Pre-Approval vs. Pre-Qualification — Know the Difference

• Pre-qualification — A quick estimate based on self-reported info. No document review. Sellers don’t take it seriously.
• Pre-approval — A lender has reviewed your actual documents and issued a conditional commitment. This is what you need before making offers in California’s competitive market.

As a mortgage broker, I pre-approve you across multiple wholesale lenders — giving you rate and term comparisons before you’re locked in with one bank’s product.

5. Documents You Need Before Applying

• 2 years of federal tax returns (all pages)
• 2 years of W-2s or 1099s
• 2 most recent pay stubs
• 2 most recent bank statements (all pages)
• Government-issued photo ID

Self-employed? Add a year-to-date P&L and business bank statements. I specialize in self-employed buyers whose tax returns understate their actual income.

6. Budget for Closing Costs — They’re Bigger Than You Think

Closing costs run 2–5% of the loan amount on top of your down payment. On an $800,000 California home loan, that’s $16,000–$40,000. These include loan origination, appraisal, title insurance, escrow, transfer taxes, and prepaid property taxes and insurance. Sellers can contribute, or lender credits can offset some costs in exchange for a marginally higher rate — both strategies I use routinely with first-time buyers.

7. Understand PMI and How to Manage It

Private Mortgage Insurance (PMI) is required on conventional loans when you put less than 20% down — typically 0.5–1.5% of the loan annually. On an $800,000 loan, that’s $4,000–$12,000 per year. Strategies to avoid or minimize it: 20% down, 80/10/10 piggyback structure, or lender-paid PMI programs. Once you reach 20% equity, you can request cancellation.

8. California Property Tax — Proposition 13 Explained

California property taxes are capped at 1% of assessed value under Proposition 13, plus local assessments — typically 1.1–1.4% total. When you purchase, your assessed value resets to your purchase price. On a $900,000 home, budget $9,900–$12,600 per year through your monthly escrow payment. Proposition 19 (2020) affects parent-child transfers — if you’re buying from a family member, ask about the tax implications before closing.

9. FHA vs. Conventional — Which Is Right for You?

FHA loans offer more flexible qualifying with lower credit scores and higher DTI allowances. The tradeoff: FHA requires upfront mortgage insurance premium (1.75% of loan amount) plus annual MIP that doesn’t automatically cancel. For most California buyers with 680+ credit and 5%+ down, conventional is usually cheaper long-term. For buyers with 620–680 credit or limited down payment, FHA may be the more accessible path. I run both scenarios for every first-time buyer — the right answer depends on your specific numbers.

Complete First-Time Home Buyer Checklist

• ☐ Pull credit report from all 3 bureaus and dispute any errors
• ☐ Know your credit score — optimize to 740+ if possible before applying
• ☐ Calculate your gross monthly income and total monthly debts
• ☐ Total your savings: down payment + closing costs + 2–3 months reserves
• ☐ Research CalHFA and local down payment assistance programs
• ☐ Gather 2 years tax returns, W-2s, 2 months pay stubs, 2 months bank statements
• ☐ Get pre-approved (not pre-qualified) with a mortgage broker who shops multiple lenders
• ☐ Compare FHA vs. conventional vs. VA based on your credit and down payment
• ☐ Budget for closing costs (2–5% of loan amount) and property taxes
• ☐ Understand PMI strategies to minimize or eliminate it
• ☐ Research conforming loan limits in your target county

Frequently Asked Questions

Related Resources

• First-Time Home Buyer Programs California — Full Guide
• Down Payment Assistance California
• Mortgage Pre-Approval California — Step by Step
• Closing Costs in California 2026
• FHA Loans California 2026