First-Time Home Buyer Guide: California

California at a Glance

Can You Afford a Home in California?

Here is what it takes to buy the median California home ($785K) under three common down payment scenarios, using a 6.5% mortgage rate and the 28% income rule. All figures include principal, interest, property taxes (0.73%), and homeowners insurance ($2K/yr).

California’s First-Time Buyer Program

How California’s Program Works

The CalHFA Dream For All provides down payment assistance to help eligible first-time buyers cover upfront costs. The program is administered through the state housing finance authority and works in conjunction with qualifying first mortgage products. Assistance is typically delivered at closing and applied directly toward the down payment and, in some cases, closing costs.

The specific terms — repayment schedule, interest rate, and forgiveness provisions — vary by program year and funding availability. Contact a participating lender to get the most current details on the assistance structure and how it integrates with your primary loan. Many buyers find that even modest DPA substantially changes the affordability math, turning a home that seemed out of reach into one that fits the budget.

Eligibility Requirements

While specific requirements vary by program year, the CalHFA Dream For All typically requires:

• First-time buyer status: Generally defined as not having owned a home in the past three years. Some programs make exceptions for veterans or buyers purchasing in targeted areas.
• Income limits: Household income must fall below a threshold set by the program, often tied to the area median income (AMI). Limits vary by county and household size.
• Purchase price caps: The home price must not exceed a maximum set by the program, which is typically aligned with FHA loan limits or a percentage of the area median home price.
• Homebuyer education: Completion of a HUD-approved homebuyer education course is required. Many programs accept online courses, which take 4-8 hours.
• Occupancy: The home must be your primary residence. Investment properties and second homes do not qualify.
• Minimum credit score: Most programs require a credit score of at least 620-640, though FHA-backed options may accept lower scores.

How to Apply

The application process for the CalHFA Dream For All generally follows these steps:

1. Find a participating lender. The program works through approved lenders — not all mortgage companies participate. Check the state housing authority website for a lender directory.
2. Complete homebuyer education. Enroll in and finish a HUD-approved course before or during the application process. Keep your certificate of completion; lenders will need it.
3. Get pre-approved. Your participating lender will evaluate your income, credit, and debts to confirm you qualify for both the first mortgage and the DPA program.
4. Find a home within program limits. Work with a real estate agent to find a property that meets the program price cap and any property condition requirements.
5. Apply through the program. Your lender submits the DPA application alongside your primary mortgage application. The two are processed together, and the assistance is delivered at closing.

Closing Costs in California

On the California median home of $785K, expect to pay approximately $9K in closing costs (1.2%% of the purchase price). This total typically includes title insurance, title search fees, recording fees, appraisal ($400-$600), credit report ($30-$50), lender origination charges, and prepaid escrow items (property taxes and homeowners insurance). Your actual costs will vary with the purchase price, lender, and loan type.

California imposes a real estate transfer tax of 0.11%, adding approximately $864 on a $785K purchase. While this is a moderate rate, it still adds to the cash needed at closing. Who pays the transfer tax — buyer, seller, or a split — depends on local custom and what you negotiate in the purchase agreement.

California does not require an attorney at closing — title companies handle most transactions. This can save you $500 to $1,500 compared to attorney-closing states. That said, first-time buyers may still benefit from hiring a real estate attorney to review documents, especially on a first purchase.

Buying Timeline & Advice for California

With a median home price of $785K, California is one of the more expensive states to buy in. First-time buyers here face a steeper savings hurdle: even with an FHA loan at 3.5% down, you need $27K for the down payment plus another $9K for closing costs — a total of roughly $37K in cash before moving costs. If that number feels daunting, the CalHFA Dream For All program (up to 20% shared appreciation loan) can substantially close the gap.

In high-cost markets, FHA loan limits become an important factor. If the California median home exceeds FHA loan limits in certain counties, you may need a conventional loan with a higher minimum down payment. Check the current FHA loan limit for your target county before committing to a loan type. Buyers stretching into jumbo loan territory (above the conforming limit) face stricter qualification standards, including higher credit score requirements and larger reserves.

Consider casting a wider geographic net. Surrounding areas or emerging neighborhoods within California may offer homes priced 15-30% below the statewide median while still providing reasonable commute times. Condos and townhomes also tend to come in below single-family home prices, giving first-time buyers a more accessible entry point into the California housing market.

Plan your timeline carefully: start improving your credit score and reducing debts at least 6-12 months before you want to buy. Enroll in homebuyer education early — it is a requirement for most DPA programs, including the CalHFA Dream For All, and it will help you understand the process. Save consistently, automate transfers to a dedicated house fund, and get pre-approved before you start touring homes. First-time buyers who are well-prepared before entering the market close faster and negotiate better.

Cities to Consider in California

Home prices vary significantly across California. Here are cities in the state, sorted by median home price, to help you target your search.

Next Steps

Ready to take the next step? Use these tools to crunch the numbers for your situation:

Common Questions

First-Time Buyer Guides: West Region