What is the credit score needed to buy a home in California? (2024)

What is the credit score needed to buy a home in California? (1)

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California is a hot market known for high housing prices, and the minimum creditscore you need to be approved for a loan there will depend on several factors. These factors include how much of a down payment you have, the price of the home, and whether you qualify for government-backed loan programs.

Never forget the number one rule with loans: the higher your credit score, the better loan terms you’ll get. For a conventional mortgage in California, you typically need a minimum score of at least 600. If you qualify for certain government-backed loans, however, you may be able to buy a home with a score as low as 500.

Read on to learn about credit scores and how they affect your ability to make a home purchase.

What is a credit score?

A credit score is a number that tells lenders how likely you are to repay your debts. When you apply for credit, lenders will check your credit score to determine if you’re a good risk. Although there are several scoring models available, most lenders use FICO® scores to assess borrowers.

FICO scores are based on your financial habits—things like your payment history and the amounts you currently owe. Payment history is one of the most important, accounting for 35 percent of your FICO score

The amount of money you owe makes up another 30 percent of your FICO score. If you have high credit card or loan balances, a lender may hesitate to lend you additional funds.

FICO scores also depend on the following factors:

  • Length of credit history
  • Credit mix
  • Number of new accounts

How does my credit score affect mortgage interest rates?

What is the credit score needed to buy a home in California? (2)

Your credit score can make it more or less expensive to borrow money. If you have a high credit score, lenders see you as more creditworthy, prompting them to offer more competitive interest rates and better terms on mortgages and other types of credit. Lending to borrowers with low scores is riskier, so lenders account for that risk by charging more interest or presenting less favorable terms for repayment

What credit score do I need to buy a house in California?

As of February 2022, the median home price in California exceeded $771,000. Home prices are especially high in San Francisco, San Diego, Los Angeles, and Oakland due to the demand for housing in and around the state’s financial and technological centers. The median home price in Orange County has now topped $1 million for the first time ever.

With home prices in California so much higher than the national average, many buyers worry about how high their credit scores need to be to live there. Credit scores are indeed a big factor, but don’t forget it also depends on your financial situation and the purchase price of the home you want to buy.

There isn’t a standard credit score that is needed across all of California, but, generally, mortgage firms and banks prefer to see a score of 600 or higher for loans. Again, that is just a general number. Different home loans have different necessary credit scores, and your relationship with your finances can help you when your score isn’t as high as you would like.

What is the credit score needed to buy a home in California? (3)

What is the average credit score needed to buy a house?

The average credit score need to buy a house depends on what type of loan you need. Conventional loans, also known as conforming loans, aren’t backed by the government. As a result, they have more stringent borrowing requirements. You typically need a minimum credit score of 620 to qualify for a conventional mortgage.

Government-backed loans—including VA loans and FHA loans—typically have more flexible requirements. If you’re interested in the FHA loan program, you can qualify for maximum financing with a minimum score of 580 and a down payment of 3.5 percent of the home’s purchase price or a credit score between 500 and 579 and 90 percent financing with a 10 percent down payment.

Can I get a mortgage with bad credit?

Anyone can experience financial difficulties, so don’t worry if your credit report has a few blemishes. You may have to wait a little while to build up your credit, but it’s possible to qualify for a mortgage even if you have a low credit score, especially if you qualify for a government-backed loan program.

What other factors do mortgage lenders look at?

Your credit score is just one aspect of your mortgage application. Lenders also look at the following factors to determine if you qualify for a home loan:

  • Income: Lenders want to see that you have a steady source of income. This helps them determine if you can afford to make monthly mortgage payments.
  • Bank statements: Your lender will generally ask to see your bank statements to make sure there are no unusual deposits. Reviewing bank statements can also help a lender determine if you have enough money on hand to make a down payment and cover the closing costs on a home loan.
  • Assets: A mortgage lender may ask you to provide documentation related to investment accounts, insurance policies, and other assets. If you have high-value assets, a lender is likely to see you as less of a risk because you’d be able to sell those assets and use the proceeds to pay your mortgage if you run into any financial difficulties after closing on the loan.
  • Loan to value: Lenders will look at the amount of your mortgage request vs. the appraised value of the home. The higher your down payment, the lower your loan to value (LTV) ratio will be.
  • Comparable sales: Lenders will also evaluate comparable sales of similar homes to make sure prices are in line with market conditions.
  • Credit reports: Your lender will also look at your credit report to make sure you haven’t made any large purchases or opened new lines of credit during the underwriting process. Underwriting is the process of verifying the information you provided on your application.

How can I raise my credit score?

If your credit score isn’t where you want it to be, don’t panic. Because your scores are based mostly on your financial habits, there are a few things you can do to increase them in anticipation of applying for a mortgage.

Payment history is the most important component of your credit score. If you have a low score, make it a priority to make payments on time every month. Over time, late payments have less of an impact on your score, so avoiding additional missed payments can help improve your credit.

Account balances also have a significant impact on your score. If you have a maxed-out credit card or a personal loan with a high balance, focus on paying down the debt as quickly as possible.

If you need additional guidance on increasing your credit score, a credit repair company can help.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

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What is the credit score needed to buy a home in California? (2024)

FAQs

What is the credit score needed to buy a home in California? ›

Requirements to buy a house

What is the minimum credit score to buy a house in California? ›

The required credit scores for mortgages in California differ based on the type of loan. Conventional loans demand a score of 620, while government-backed loans are more lenient. However, a score below 500 makes mortgage approval difficult.

What credit score is needed to buy a $400,000 house? ›

Most mortgages, including conventional loans, require a credit score of 620 or higher. It's possible to get an FHA loan with a credit score as low as 500, but many lenders require higher scores. Borrowers with higher credit scores get better rates and terms than those with low scores.

What credit score is needed for a $250000 house? ›

Conventional loan | Credit score: 620

To qualify for a conventional loan, you'll need a credit score of at least 620, though some lenders may choose to approve conventional mortgage applications only for borrowers with credit scores of 680 and up.

What credit score is needed to buy a $300K house? ›

The required credit score to buy a $300K house typically ranges from 580 to 720 or higher, depending on the type of loan. For an FHA loan, the minimum credit score is usually around 580.

What is a realistic credit score to buy a house? ›

You'll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with scores as low as 500. Whether you qualify for a specific loan type also depends on personal factors like your debt-to-income ratio (DTI), loan-to-value ratio (LTV) and income.

How much can I borrow with a 580 credit score? ›

You can borrow anywhere from a few thousand dollars to $100,000+ with a 580 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

How much house can I afford if I make $70,000 a year? ›

If you make $70K a year, you can likely afford a home between $290,000 and $310,000*. Depending on your personal finances, that's a monthly house payment between $2,000 and $2,500. Keep in mind that figure will include your monthly mortgage payment, taxes, and insurance.

How much house can I afford with a 50K salary? ›

The rule of 2.5 times your income stipulates that you shouldn't purchase a house that costs more than two and a half times your annual income. So, if you have a $50,000 annual salary, you should be able to afford a $125,000 home.

What salary do you need for a $400000 house? ›

The annual salary needed to afford a $400,000 home is about $127,000. Over the past few years, prospective homeowners have chased a moving target: homeownership. The median sales price of houses sold in the U.S. stood at $417,700 in the fourth quarter of 2023—down from a peak of $479,500 in Q4 2022.

What salary do you need for $250000 mortgage? ›

If you follow the 2.5 times your income rule, you divide the cost of the home by 2.5 to determine how much money you need to earn annually to afford it. Based on this rule, you would need to earn $100,000 per year to comfortably purchase a $250,000 home.

What is the minimum down payment on a $250000 house? ›

Putting down the standard 20% can help you avoid paying mortgage insurance and interest and could save you thousands of dollars. So you can expect to pay between $7,500 an $50,000 as a down payment on a $250,000 purchase. Keep in mind, besides the down payment amount, you will also have to factor in closing costs.

What is the average house payment on a $250000 home? ›

Monthly payments for a $250,000 mortgage
Annual Percentage Rate (APR)Monthly payment (15 year)Monthly payment (30 year)
6.00%$2,109.64$1,498.88
6.25%$2,143.56$1,539.29
6.50%$2,177.77$1,580.17
6.75%$2,212.27$1,621.50
5 more rows

What is the 20% down payment on a $300 000 house? ›

A 20% down payment on a $300,000 mortgage is $60,000. The $60,000 down payment is what most lenders look for especially commercial lenders, because it helps mitigate the risk of default.

How much do you need to make a year to afford a $300 K house? ›

How much do I need to make to buy a $300K house? To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.

How much is a downpayment on a 200k house? ›

Conventional mortgages, like the traditional 30-year fixed rate mortgage, usually require at least a 5% down payment. If you're buying a home for $200,000, in this case, you'll need $10,000 to secure a home loan.

What credit score is needed to buy a $500000 house? ›

Expect most mortgage lenders to want minimum credit scores of 620 or even 640.

Can I buy a house with 580 credit score? ›

The Federal Housing Administration (FHA) insures FHA loans, which allows mortgage lenders to accept a credit score as low as 580 with a 3.5 percent down payment, or 500 with a 10 percent down payment.

What is the lowest credit score you can buy a house with? ›

What Credit Score Is Needed To Buy A House?
Type Of LoanMinimum FICO® Score
Conventional loan620 (Federal Housing Financing Agency requirement)
Federal Housing Administration (FHA) loan with a 3.5% down payment580 (FHA requirement)
FHA loan with a 10% down payment500 (FHA requirement)
3 more rows
Feb 23, 2024

How much of a loan can I get with a 620 credit score? ›

You can borrow anywhere from a few thousand dollars to $100,000+ with a 620 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

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