Requirements to Buy a House in California

With a median home price of over $850,000, buying a house in California is like a far-off dream. Prices are high, lending rules are strict, and even figuring out where to start can be overwhelming.

First-time buyers and newcomers to the state often get frustrated by unfamiliar processes, tighter financial requirements, and paperwork that looks different from what they might expect. The requirements to buy a home in California can feel like one hurdle after another.

In 2025, the challenge isn’t just about meeting loan qualifications. Buyers are also up against tight inventory and intense competition, especially in popular metro areas like the Bay Area and Los Angeles. Well-priced homes move fast, and many receive multiple offers. Being financially prepared and understanding the process beforehand gives buyers a real advantage in a fast-moving market.

This guide outlines everything you need to know to qualify for and complete a home purchase in California. From loan requirements to inspections and closing details, you’ll find a clear path forward.

Financial Requirements to Buy a Home in California

Financial demand is one of the biggest hurdles to buying a house in California. As the state with the largest economy, residents earn higher incomes, which drive up competition and home prices.

Buyers need to qualify not only for a home loan in California but also for an amount that allows them to afford a home in their area. Lenders evaluate credit history, income stability, available funds for a down payment, and the amount of savings left after closing.

The home buying process in California should always start with getting pre-qualified so that buyers know their budget.

Credit Score Requirements

Your credit score is one of the first things lenders look at when reviewing your mortgage application. It helps them evaluate how likely you are to repay the loan on time. In California’s competitive housing market, having a strong credit profile can improve your chances of approval, reduce your interest rate, and give you access to better loan terms.

Each loan type has its own minimum score requirement. While these numbers represent the baseline, lenders will also consider your full credit history, including any late payments, collections, or past bankruptcies.

Before considering buying a house, it’s best to know your credit score. If it’s low, work on your credit by making regular payments and lowering your debt. Avoid taking out new credit cards or loans, as they can negatively impact your credit score or lower your borrowing capacity.

A higher credit score generally translates to a lower interest rate. For example, two buyers applying for the same loan amount may receive very different rates based on their credit scores. Over time, that difference can add up to tens of thousands of dollars in interest.

If your score is near the minimum threshold, lenders may still approve your application, but they will likely charge a higher rate or ask for additional documentation. It’s also common for lower-score borrowers to face stricter limits on loan size or require a larger down payment to offset risk.

Down Payment Requirements

The down payment is one of the biggest upfront costs in buying a home. California’s high prices mean even a small percentage can add up quickly. The down payment requirement depends on the loan type.

In a state where the median home price exceeds $850,000, even a 3% down payment can represent a significant amount. For example, a 3% down payment on a $750,000 home would still require $22,500 upfront, not including closing costs.

While some buyers qualify for the minimum required, many choose to put down more to avoid private mortgage insurance (PMI) and to secure better loan terms. For most loans, PMI is usually required if the buyer puts down less than 20 percent and can be removed once they have 20 percent equity. However, FHA loans include mortgage insurance, which cannot be removed over time unless the loan is refinanced.

Making a larger down payment can also help buyers compete in a tight market. It indicates to sellers that buyers are financially stable, which can strengthen an offer when multiple buyers are bidding on the same property.

Buyers who need down payment assistance programs should explore CalHFA programs.

Income and Debt-to-Income (DTI) Ratio

Lenders use your income and monthly expenses to assess how much buyers can borrow. They use a debt-to-income (DTI) ratio, which compares your total monthly debt payments to your gross monthly income. To determine DTI, lenders evaluate all monthly debt obligations, including:

• Principal and interest on the mortgage
• HOA fees
• Homeowners Insurance
• Property taxes
• Minimum payments on credit cards
• Student loans
• Car loans
• Personal loans
• Child support

Most lenders set a maximum back-end DTI limit between 43% and 50%, depending on the loan type and borrower profile. Staying below this limit is essential to qualify for a mortgage. Even high-income buyers can be denied if their DTI exceeds allowable limits.

Here are some example scenarios:

• Buyer A earns $10,000 per month before taxes, has $1,800 in monthly debt, and is considering a home with a $4,000 mortgage payment, making their total monthly obligations equal $5,800. Therefore, their DTI would be 58%, which is too high for most loan programs.
• Buyer B earns the same income but only has $250 in existing monthly debt. With a $4,000 mortgage payment, their total monthly obligations are $4,250. Therefore, their DTI would be 42.5%, which is generally acceptable for many conventional and FHA loans.

These examples show how the same home price can work for one buyer and not for another, depending on their existing debt. Managing your DTI is one of the most effective ways to improve mortgage eligibility.

This is especially important in California, where home prices and monthly payments are often larger than in other states. To improve your DTI, you can reduce debt, increase income, or consider a smaller loan amount.

Cash Reserves and Additional Costs

Lenders usually require buyers to have cash reserves in addition to the down payment. These are extra funds that remain in their accounts after closing, usually equal to two to six months of mortgage payments, depending on the loan type and risk profile.

Cash reserves are not paid to the lender; they are meant to show that you can keep making mortgage payments even if an unexpected expense arises.

Other upfront costs California homebuyers should budget for include:

• Closing Costs: Usually 2% to 5% of the purchase price, includes lender fees, title insurance, escrow fees, and recording charges
• Property Taxes: Typically 1.1% to 1.5% of the home’s value annually, often paid through your mortgage
• Homeowners Insurance: Lenders require it, and costs vary based on property type and location. Additional fire or earthquake insurance may be needed.
• HOA Fees: If buying in an HOA, expect monthly dues, which can range from $100 to $1,000+ depending on amenities
• Prepaid Interest and Escrow: Buyers pay interest upfront from the closing date to the end of the month, along with escrow deposits for taxes and insurance

Documentation and Legal Requirements

Getting a loan to buy a house in California requires extensive documentation. Lenders and state agencies need thorough documentation to verify eligibility, and California’s real estate process comes with several legal disclosures unique to the state.

Documentation Checklist

Your mortgage broker or lender must document your full financial history in your mortgage application. These items help confirm your identity, income stability, and ability to repay the loan. To save time, have everything organized before meeting with your mortgage lender. This will help speed up pre-approval and avoid future frustration.

Here’s a comprehensive list of documents typically needed to qualify for a home loan in California:

Each lender may request slightly different items, but this list covers what most buyers can expect to provide. Preparing these documents early in the process helps prevent last-minute surprises.

California-Specific Legal Requirements

California has some of the country’s most detailed real estate disclosure laws. These legal documents are designed to protect buyers by providing clear information about the property’s condition, location risks, and financial obligations tied to the home. While disclosures aren’t the buyer’s responsibility to produce, they need to review them carefully with their real estate agent and lender to identify any red flags.

Here are the most common California-specific disclosures:

• Transfer Disclosure Statement (TDS)
  Required for all residential sales. The seller must disclose known issues with the property, including structural problems, water damage, or past repairs.
• Natural Hazard Disclosure (NHD)
  Alerts buyers if the property is in a designated hazard zone, such as a floodplain, earthquake fault zone, fire risk area, or landslide zone.
• Mello-Roos District Disclosure
  Some newer communities in California have special tax districts (called Mello-Roos) that fund public improvements. If the home is in such a district, the seller must disclose the associated tax burden to the buyer.
• Energy Efficiency and Compliance Disclosures
  Sellers may be required to provide information about the home’s energy features, such as water heater straps, low-flow fixtures, and smoke and carbon monoxide detectors.
• Local Addenda and Forms
  Buyers may receive additional disclosures, such as seismic retrofit notices or environmental hazard assessments, depending on the city or county.

A qualified real estate agent and lender can help interpret them and ensure all legal obligations are met before closing. Don’t have an agent? FastExpert can help you find a local agent to guide you through buying a house in California.

Inspections and Contingency Process

Depending on where in California you are buying, you may or may not have a long inspection and contingency timeframe. Some of California’s most popular areas have extremely competitive markets, which means successful offers often require offers without inspection and finance contingencies.

If you make an offer with contingencies, once your offer is accepted, the inspection period becomes one of the most important phases of the home-buying process. Inspections help protect buyers from unexpected repairs and allow them to renegotiate based on the home’s condition.

In most California purchase contracts, the buyer has 17 to 21 days from the date of acceptance to complete all inspections and remove the inspection contingency. This period may be shortened in competitive markets.

Required vs. Recommended Inspections

Lenders require certain inspections to approve the loan, while others are optional but strongly recommended for the buyer’s protection. Unless you make an all-cash offer, you’ll need an appraisal that the lender will order.

California’s geography means certain areas have their own risks. Buyers in at-risk areas should consider more extensive inspections. For example, homes near fault lines (especially in the Bay Area or Los Angeles) should get a seismic inspection combined with a foundation inspection, which can reveal whether the foundation is properly bolted and braced. These inspections are particularly important for older homes.

In rural areas there may be homes not connected to city sewer lines will have a septic tank. These homes should get a septic tank inspection to avoid costly repairs later. It may uncover that the systems need to be pumped or replaced entirely, as septic tanks have a usable life of 20 to 30 years.

Coastal regions, such as Orange County, San Diego, and the Bay Area, may be prone to excess humidity, increasing the risk of mold. Buyers in these areas should consider getting mold testing.

Generally speaking, inspections beyond the lender’s appraisal are optional but recommended. While they come at a cost, uncovering major problems in a home could save homebuyers thousands.

Here’s a rough estimate of how much inspections cost:

• General Home Inspection: $450-$650
• Foundation Inspection: $1,000+
• Pest Inspection: $100–$250
• Roof Inspection: $200–$300
• Sewer/Septic Inspection: $300–$600
• Mold or Environmental Testing: $300–$800+
• Seismic Inspection: Varies, often $300–$500

Step-by-Step California Homebuying Process

Buying a house in California is similar to any other state but may require more care and diligence. Stay organized and avoid last minute surprises by understanding the full process of buying in a fast-moving, high-stakes market.

Get Pre-Approved for a Mortgage

Before house hunting, buyers should contact a CalHFA-approved lender or mortgage professional to get pre-approved. A qualified lender can tell you if you qualify for any California first-time homebuyer assistance programs.

Down payment assistance programs can make buying a house in California more attainable. This step involves submitting documentation like tax returns, pay stubs, and bank statements. The lender will verify your credit score, income, DTI, and reserves to determine how much you can borrow.

Most buyer’s agents will direct you to a mortgage lender early in the process, as it’s best practice to fully understand your budget before you start shopping. Furthermore, sellers won’t consider an offer without a pre-approval letter, which makes getting a pre-approval letter even more crucial.

Start House Hunting with a Real Estate Agent

With a pre-approval in hand, buyers can begin searching for homes in their price range. Working with an experienced real estate agent who knows California’s local markets can be the difference between lost offers and buying your dream home.

Agents help identify homes that meet your needs and match program-specific requirements, such as price limits, location rules, or property type restrictions.

Make an Offer and Open Escrow

Once you find the right home, your agent will help you write an offer. In California, many disclosures are made available before an offer is submitted, and they should be reviewed and considered in the offer.

Disclosures may include:

• Transfer Disclosure Statement (TDS)
• Natural Hazard Disclosure (NHD)
• Pre-inspection reports (if available)
• Local addenda required by city or county

If your offer is accepted, the deal moves into escrow with a neutral third party that holds funds and oversees the transaction. At this stage, you’ll submit your earnest money deposit, and the lender or mortgage broker will begin the full loan application.

Complete Inspections and Appraisal

Once in escrow, the lender will order a home appraisal to verify that the property’s value supports the loan amount. This is a required step for almost all mortgages and helps protect both the lender and the buyer from overpaying.

At the same time, the buyer typically schedules inspections, which are not required by the lender but are strongly recommended. As covered earlier, inspection contingency periods usually last 17 to 21 days, depending on what’s needed. Buyers use this window to assess the home’s condition and decide whether to:

• Move forward
• Request repairs or credits
• Renegotiate the offer
• Cancel the deal if major issues are uncovered

Final Loan Approval and Underwriting

Once inspections are complete and the appraisal is approved, the lender finalizes the underwriting process. At this point, you may be asked to submit updated documents or letters of explanation.

Buyers should be prepared to immediately supply updated documentation to support:

• Final income and asset verification
• Sufficient cash reserves
• Down payment source documentation
• Confirmation that the home meets program guidelines

Any delay in supplying the requested documents could impact the closing date and force buyers to request an extension.

Closing

After loan approval, you’ll receive the Closing Disclosure, which outlines all final costs and loan terms. You’ll sign the final paperwork, transfer your down payment and closing funds, and become a homeowner.

In California, the full process, from pre-approval to closing, typically takes 30 to 45 days, though it may be faster or slower depending on market conditions, loan complexity, and seller responsiveness.

Regional Differences Across California

California is a big state with enormous variety in climate and culture, as well as housing costs, lending standards, and buyer expectations. While the process of qualifying for a mortgage or completing an inspection follows the same general framework statewide, the numbers and norms can change significantly depending on where you’re buying.

The most obvious difference between regions is price. In 2025, median home prices remain steepest in the Bay Area and coastal Southern California, while inland counties offer more room for first-time buyers and lower-income households.

Lenders technically apply the same underwriting guidelines statewide. Still, buyers in higher-cost areas often need to qualify for jumbo loans, which come with stricter credit requirements and larger down payments. In lower-cost regions, buyers may be more likely to qualify for FHA loans or CalHFA programs that offer more flexible terms.

Market Dynamics

Local competition can be just as important as home price. In places like San Francisco, Palo Alto, or Santa Monica, homes may sell within days, often above the asking price. Buyers in these markets typically need strong financing, large down payments, and little room for contingencies to be taken seriously.

Meanwhile, in regions like Sacramento, Fresno, or Riverside, the pace tends to be slower, and buyers may have more negotiating power. Offers that include repair requests or down payment assistance are more likely to be considered in these areas, where inventory is steadier, and seller expectations are different.

Buyers moving out of state should pay close attention to regional trends and get local information from their agents. What works in one part of California may not translate well to another. Working with a local agent who understands their market is one of the best ways to tailor your home-buying strategy.

Ready to Buy in California? Start by Finding a Local Agent

Buying a home in California isn’t simple, but it’s far from impossible. Yes, there are high prices, stricter lending guidelines, and competition. But knowing the requirements to buy a home in California is what separates prepared buyers from frustrated ones.

If you’re ready to move forward, FastExpert can connect you with top-rated real estate agents in California who understand both statewide programs and local market conditions. Whether you’re shopping in the Bay Area, SoCal, or a more affordable inland region, having the right expert on your side can make a real difference.