How to Qualify for an FHA Loan in California

Published:

January 3, 2025

Last updated:

January 3, 2025

Sammamish Mortgage

7 min read

In This Article

The FHA loan program is one of the most popular mortgage options among home buyers in California. First-time buyers, in particular, flock to this program for its low down payment.

But what does it take to qualify for an FHA loan in California? What are the minimum FHA loan requirements in California for home buyers, and how do you start the application process?

This guide answers all of these common questions and more.

Why California Home Buyers Like FHA Loans

California has some of the highest home prices in the country, especially in the major coastal markets like San Diego, Los Angeles, and San Francisco.

Because of this, a lot of home buyers struggle to come up with the funds needed for a big down payment. And this is where the FHA loan program comes into the picture.

The Federal Housing Administration (FHA) loan program is built around insurance. Borrowers pay an insurance premium as part of their monthly payments. The FHA uses those funds to reimburse lenders for losses if a borrower cannot repay the debt.

All of this benefits home buyers by making it easier to qualify for an FHA loan.

Here are the key benefits of FHA loans in California:

Borrowers can buy a home with a down payment as low as 3.5%.
The low down payment makes it easier to buy a house in California.
You don’t need perfect credit to qualify, due to the government backing.
FHA loans often allow borrowers to have higher debt ratios as well.
You could use gift money from someone else to cover the down payment.

These features can benefit home buyers nationwide, but especially in California. With a median home value currently approaching $800,000, California can be a challenging market for buyers.

The FHA loan program reduces these challenges by allowing for a smaller down payment than some other mortgage programs.

What It Takes to Qualify for the Program

Generally speaking, home buyers in California have an easier time qualifying for FHA loans than the more popular conventional mortgage loan.

We’ve covered the main reason for this already. Lenders who offer FHA loans receive an added layer of financial protection due to the government’s insurance backing. Even so, this program has some specific qualification criteria for borrowers.

Here’s what you’ll need to qualify for an FHA loan in California, at a minimum:

A down payment of at least 3.5%. This is a firm rule that applies to all borrowers. Anyone who uses an FHA loan to buy a house must put down at least 3.5% of the purchase price or appraised value.
A credit score of 500 (but ideally 580). Home buyers need a credit score of 500 or higher for basic eligibility, and a 580 or higher to qualify for the 3.5% down payment. If the score falls between 500 and 579, a down payment of at least 10% is required.
A manageable debt load. Ideally, a borrower’s total debt-to-income ratio should be no higher than 43%. But the FHA allows higher debt ratios if a person has compensating factors, such as significant cash reserves in the bank.
The ability to repay. Your lender will review your income history to make sure you can manage the monthly mortgage payments, along with all other recurring expenses.
A safe and habitable home. All homes financed with an FHA loan have to be appraised to determine their value and condition. The house must be in good overall condition without any health hazards or serious damage.

Note: This list summarizes the basic requirements for an FHA loan in California. Mortgage lenders can set their own criteria as well, and this varies from one company to the next.

Overview of FHA Loan Limits in California

Before applying for an FHA loan, you’ll also want to identify the official loan limit for the county where you plan to buy. FHA-insured mortgages have maximum size limits, and this can affect how much of a house you’re able to afford.

These limits can vary from one California county to the next, because they’re based on local home values. Pricier counties like Orange and Marin have higher FHA loan limits in 2025, while more affordable counties like Fresno and Merced have lower ones.

In 2025, the FHA loan limit for a single-family home in California ranges from $524,225 to $1,209,750, depending on the county. You can find the caps for all counties on our website and also through the HUD.gov website.

How the Rest of the Process Unfolds

Let’s assume you’ve applied and qualified for an FHA loan, and you’re now ready to move forward with the process. What’s the next step?

In California, the process of buying a home with an FHA loan can vary from one borrower to the next. But it usually works like this:

Mortgage pre-approval: You’ll provide your lender with financial information including income, debts, assets, and credit history. The lender will review this information and determine if you qualify for an FHA loan and how much you can borrow.
Finding a home: Once you’ve been pre-approved, you can work with a real estate agent to find a home that meets your needs and budget. You’re not required to work with an agent, but it could result in a smoother and more efficient search.
Making an offer: When you find a suitable home, you can make an offer to purchase it. You also have the option to include certain contingencies in your offer, such as a home inspection and appraisal contingency.
Home appraisal: In California, all homes purchased with an FHA loan require an appraisal to determine the fair market value of the property. The appraisal also ensures that the home meets the FHA’s minimum property standards for safety and habitability.
Home inspection: While not required for FHA loans, you might want to have a complete home inspection as well. This will help you identify any serious property issues that need to be addressed before closing.
Loan Underwriting: The lender will thoroughly review your loan application, appraisal, and other documentation to make a final decision on your approval. This process includes verifying your income, employment, and credit history.
Closing: The closing process represents the final step in the California FHA home buying process. You’ll sign all the necessary paperwork, including the mortgage documents, and pay your closing costs. Once the closing is complete, you’ll receive the keys to your new home.

From the initial qualification to the final closing, the FHA loan process in California typically takes around 30 to 45 days. But this too can vary from one borrower to the next.

Is an FHA Loan Right for You?

Now that you know what it takes to qualify for an FHA loan, you might be wondering if it’s the right mortgage program for you.

All home loan options have pros and cons, and the FHA program is no different. For instance, an FHA loan down payment in California may be low, but this loan type also requires borrowers to pay for mortgage insurance.

Need Financing in California?

When buying a home in California, you owe it to yourself to research all of your mortgage options to find the best fit. And that’s where we can help. Sammamish Mortgage offers a variety of loan options and serves the entire state of California. We can help you choose the right financing option based on your needs. Visit our website to get an instant rate quote, or call our office to have all your financing questions answered?