First-Time Homebuyer Guide

The IRS and most loan programs consider you a first-time buyer if you haven't owned a primary residence in the last three years. That means you can qualify for first-time buyer programs on your second home purchase, as long as there was a gap. Investors and second-home buyers do not qualify.

This matters because first-time buyer status unlocks lower down payments, softer credit requirements, and grant or second-mortgage assistance programs from CalHFA, GSFA, and select cities.

For a first purchase in Northern California, you're realistically choosing between four programs. Each has a different fit depending on credit score, down payment, and property type.

• Conventional 97: 3% down, minimum 620 credit score, PMI required until you hit 20% equity. Best if your credit is 680+ and you plan to stay long enough to remove PMI.
• FHA: 3.5% down, minimum 580 credit score, more forgiving on debt-to-income and credit history. Mortgage insurance is permanent on most FHA loans, so plan to refinance out later.
• VA: 0% down, no monthly mortgage insurance, no maximum loan amount with full entitlement. Only for active-duty, veterans, and qualifying surviving spouses.
• USDA: 0% down in eligible rural areas (parts of Sonoma, Lake, Napa, and the Sierra foothills). Income caps apply.

California has more DPA programs than any state in the country, and most first-time buyers never hear about them. The most common:

• CalHFA MyHome: A deferred second loan of up to 3.5% of the purchase price. Paid back when you sell or refinance, no monthly payment.
• CalHFA Dream For All: Shared-appreciation loan covering up to 20% of the price. You repay principal plus a share of the home's appreciation.
• GSFA Platinum: Grant of 3–5% that never has to be repaid, layered on top of FHA or conventional.
• City programs: Sonoma, Santa Rosa, San Francisco, and Sacramento all run their own DPA layers with income caps.

Stacking a first mortgage with CalHFA MyHome and a city grant can get a qualified buyer into a $700,000 home for well under $10,000 out of pocket.

A pre-approval letter that a listing agent will take seriously is not a form you filled out online in three minutes. It's a full underwritten credit decision: pay stubs, W-2s or tax returns, two months of bank statements, credit run, and an underwriter's review of the file.

Ask specifically for a TBD-property pre-approval or a Loan Estimate that reflects your actual scenario. If your broker gives you a one-page letter without ever pulling credit, you are not pre-approved.

Closing costs in California run roughly 2–3% of the purchase price. On a $750,000 home, budget $15,000–$22,000, made up of:

• Lender fees (origination, underwriting, appraisal): $1,500–$3,500
• Title insurance and escrow: $2,500–$4,500
• Prepaid interest, taxes, and insurance: $4,000–$8,000
• Recording, transfer, and HOA fees: variable by county and property

Many of these are negotiable through lender credits or seller concessions. On FHA loans, sellers can pay up to 6% of the price toward your closing costs.

• Opening a new credit card or auto loan during the process. Any new tradeline re-triggers underwriting.
• Moving money between accounts without documenting the paper trail. Underwriters flag every unsourced deposit.
• Waiving inspection contingencies without a full pre-approval already in hand.
• Assuming the property will appraise. In this market, low appraisals happen constantly and you need an appraisal-gap plan up front.
• Shopping rate without shopping structure. The lowest rate with the wrong loan structure costs more than a slightly higher rate on the right one.