Can You Qualify as a First-Time Buyer in California?

Getting into the world of real estate, while exciting, can be a scary and overwhelming step. If you’re on the mission of buying your first home, we understand the pressure, nerves and uncertainty you may be feeling. So, we’re here to help.

We want to teach you all about handling the real estate process as a first-time buyer in California. So, we’ll explain how you can qualify and get financing, which benefits you’ll reap as a first-time home buyer and how to make the process as smooth as possible. Let’s dive in and make your home-buying experience a stress-free adventure.

Who Is Considered a First-Time Buyer in California?

Before discussing qualifications for first-time buyers in California, let’s explain who a first-time buyer actually is. According to the California Housing Finance Agency (CalHFA), a first-time homebuyer is a person who hasn’t owned and occupied a principal residence in three years prior to the purchase of a home.

This means that even if you’ve owned property before, as long as you haven’t lived in that property as your primary residence in the past three years, you may still qualify as a first-time buyer. And in case you’re purchasing a home with a spouse or partner, both parties must meet the first-time buyer qualifications to be eligible for certain programs and benefits.

Qualifications for a First-Time Home Buyer in California

Now that you have a general idea of who is considered a first-time buyer let’s explore the necessary requirements for a first-time home buyer in California.

• Income requirements: Many first-time buyer programs have income limits that you must meet to be eligible. These limits are typically based on the median income in the area where the home is located. Income limits might vary depending on the program or benefit being offered.
• Credit score requirements: To qualify for many first-time buyer programs, you must have a minimum credit score. This score might vary depending on the program or lender, but generally, a credit score of 620 or higher is required.
• Down payment assistance programs: A lot of programs offer down payment assistance in the form of grants or loans that don’t need to be repaid. These programs typically require you to contribute a portion of the down payment, but they still make buying a home more accessible.
• Homebuyer education courses: Certain programs require completing a homebuyer education course that provides information on budgeting, credit management, and the home-buying process.
• Other qualifications: Some programs may have additional qualifications, such as citizenship status or being a resident of a certain county or city.

Benefits of Being a First-time Buyer

Although, at first glance, it may seem like you’re not in an enviable position when buying your first home, there are actually quite a few advantages to being a first-time buyer. If you don’t believe us, here are the main benefits you’ll get.

• Access to down payment assistance programs: Programs that offer down payment assistance can make homeownership more affordable by reducing the money needed for a down payment.
• First-time buyer tax credits: California offers a first-time buyer tax credit that can be claimed on state income taxes. The credit is equal to 20% of the mortgage interest paid during the year, up to a maximum of $2,000 per year.
• Lower interest rates and mortgage insurance premiums: With some programs, you can get lower interest rates and mortgage insurance premiums.
• Increased inventory of homes available to first-time buyers: Some programs offer special incentives for sellers to sell their homes to first-time buyers. This increases the inventory of homes available to first-time buyers and makes it easier to find a home that fits their budget and needs.

Does California Have a First-Time Buyers Program?

Great news! Not only does California have a first-time buyer program, but it also has several other programs and benefits aimed at helping first-time buyers achieve homeownership.

One of the more popular programs is the California Housing Finance Agency (CalHFA) program. It provides financing and down payment assistance to eligible first-time buyers. The program offers a variety of loan options, including fixed-rate and adjustable-rate mortgages, and can provide up to 5% of the loan amount in down payment assistance.

In addition to CalHFA, there are several other first-time buyer programs available in California. These include the MyHome Assistance Program, which offers up to 3.5% of the home purchase price in down payment assistance, and the Mortgage Credit Certificate (MCC) Program, which provides eligible first-time buyers with a tax credit of up to 20% of the mortgage interest paid each year.

So, it’s down to you to find a program that works for you and that you’re eligible for. Which one will it be?

How to Apply for First-Time Buyer Programs in California

So, there are various California first time home buyer programs you can go for depending on your situation, but how do you apply for them? These are some general guidelines for applying for first-time home buyer programs in California.

• Eligibility: Review the qualifications and requirements for the specific program you are interested in applying for to determine if you meet the eligibility criteria.
• Finding a lender: Work with a lender who is approved to offer the program you are interested in.
• Paperwork: Gather the necessary documentation, such as income statements, tax returns, and bank statements, to support your application.
• Application: Be sure to provide accurate and detailed information, and answer all questions truthfully.
• Homebuyer education course: If the program you’re applying for requires a homebuyer education course, attend the course and provide proof of completion.
• Approval: Wait for the lender to review your application and determine if you are approved for the program.
• Closing: If approved, work with your lender to complete the closing process and purchase your home.

Don’t Forget About Escrow

Even when you’re getting assistance from one of the first-time buyer programs, going through the escrow process is recommended. This means that you need to understand how beneficial this process is and meet the California escrow requirements.

During escrow, a neutral third party holds onto funds and documents until the end of the real estate transaction. This ensures that both the buyer and seller fulfill their obligations before the transaction is complete.

The escrow company collects and holds onto funds, such as the buyer's down payment and closing costs, until all conditions of the sale have been met. They also review and prepare documents, such as the purchase agreement and deed, to ensure they are complete and accurate.

Once all conditions have been met, the escrow company will release the funds and documents to the appropriate parties, and the transaction will be complete. This process might be a little more complex and there are more escrow terms to get familiar with, but knowing the basics is a good starting point.

Work With an Escrow Company and Close ASAP

Whether you’re buying your first or tenth home, escrow is just as important. Working with a good escrow company will help make the process simpler than ever and make your home-buying experience less stressful. Lightspeed Escrow is here to handle the escrow process from start to finish!

We’re escrow experts with years of experience and our goal is to help out clients navigate any real estate translation with ease. Count on us to help you successfully and quickly close your first ever home in California – get in touch today!