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Home purchase loans in California

Conventional, FHA, VA, jumbo, first-time buyer and bank statement loans. How each one works and the mistakes that cost buyers money.

Buying a home is the loan with the most moving parts: a contract with deadlines, a seller waiting on you, an appraisal, and an earnest money deposit at risk if the loan is late. Here is how purchase loans work and where buyers get hurt.

Loan programs for buying a home

  • Conventional. Standard documentation, competitive pricing for good credit, and mortgage insurance that can be removed once you have enough equity.
  • FHA. Government-insured, more forgiving on credit and debt-to-income ratios. Popular with first-time buyers.
  • VA. For eligible veterans, service members and surviving spouses. No monthly mortgage insurance.
  • Jumbo. For loan amounts above the conventional limit, common in coastal California.
  • First-time buyer and down payment assistance. Programs that lower the cash you need to close.
  • Bank statement (non-QM). For self-employed buyers who qualify on deposits instead of tax returns. See the self-employed guide.
  • Second homes. Financing for a vacation or second home.

How the purchase loan process works

  1. Pre-approval. Your credit, income and assets are reviewed up front so you know your price range.
  2. Early underwriting. When possible, your file goes to underwriting before you find the house. Your offer then reads closer to cash.
  3. Offer and contract. Your agent writes the offer. The contract sets deadlines for the appraisal and loan approval.
  4. Appraisal and approval. The lender confirms the home's value and signs off on the file.
  5. Closing. You sign, the loan funds, and you get the keys.

Pitfalls to watch for

Shopping only the rateTwo loans with the same rate can cost very different amounts. Compare the Loan Estimates side by side, including lender fees and points, not just the headline rate.
New credit during escrowFinancing furniture or a car before closing can push your debt-to-income ratio over the limit. Lenders often pull credit again right before funding.
Unexplained depositsLarge deposits into your accounts have to be sourced with paperwork. Talk to your broker before moving money around.
Job changesA new job, even at higher pay, can delay or change an approval. If a change is coming, say so at the start.
Missing contract deadlinesIf your loan contingency expires before the loan is approved, your earnest money can be at risk. Your broker and agent should track these dates together.
Appraisal gapsIf the home appraises below the price, the loan is based on the lower value. Know ahead of time whether you can cover a gap or renegotiate.
Condo approvalsSome condo projects do not meet lender requirements. Check the project early, before you are deep into escrow.
Letting the rate lock expireA lock protects your rate for a set time. Delays past that date can cost money to extend.

Questions people ask

How much do I need for a down payment?

It depends on the program, the property and your credit. Some programs require very little down and down payment assistance can cover part of it. The fastest way to know your number is a short conversation about your income, credit and the price range you are shopping.

Should I get pre-approved before I look at homes?

Yes. A pre-approval tells you your price range and makes your offer stronger. Having underwriting review your income, credit and assets before you make an offer is even stronger, because it catches problems before you are in contract.

Can I buy a home if I am self-employed?

Yes. If your tax returns show enough income you can use a conventional or FHA loan. If write-offs make your income look low, a bank statement loan can qualify you on deposits instead.

What is the difference between FHA and conventional?

FHA is more flexible on credit and is popular with first-time buyers, but its mortgage insurance usually lasts longer. Conventional mortgage insurance can be removed once you have enough equity. The FHA vs conventional guide compares them in detail.

What should I avoid doing while my loan is in process?

Do not open new credit, finance a car, change jobs, or move large amounts of money without talking to your broker first. Each of those can change your approval.

More guides

Refinance, cash-out and HELOCRemodel and construction loansReverse mortgagesSelf-employed home loansDenied for a mortgage? What to do nextFHA vs conventional loans