A Complete Guide To Credit Requirements For First Time Home Buyers in SoCal

If you’re planning to buy a home in Southern California one of the smartest moves you can make is to optimize your credit. Your credit score will affect the types of loans you can go after and the interest rate you will get.

In this article, we give you an overview of credit and its importance when applying for a home loan.

What is Credit?

Credit is a history of how you have behaved when creditors have lent you money. It is given a numerical value known as your FICO score. Your FICO score is composed of your credit history, including factors such as how much you borrowed, whether you paid it back, whether you paid it back on time, and whether you paid it back in full.

Credit is one of the three factors that a loan officer will consider when looking at your application for a home loan. The other two factors are income and down payment. Your credit score plays a crucial role in determining your eligibility for a loan and the terms and interest rates you will receive.

Requirements for a Home Loan

The credit requirements for a home loan depend on the loan type and your particular situation. Whether you are a first-time home buyer or a repeat buyer, here is a breakdown of what is considered poor, average, and good credit scores:

  • Poor: Typically, a credit score below 580 is considered poor.
  • Average: A credit score between 580 and 669 is considered average.
  • Good: If you are going after a conventional loan, you want to be in the good category, which is typically above 700.

For first-time home buyers or those using an FHA loan, some lenders may accept credit scores in the mid to high 500s. However, it is recommended to have a credit score of at least 640 to get better rates and terms, especially in the current high-interest rate era. The higher your credit score, the better your interest rate, which can help lower your monthly payment.

Monitoring Your Credit Score

To know your FICO score, you can use apps like Karma to get a rough idea. However, it’s important to note that the loan officer will pull their own reports from the three reporting bureaus: Experian, Equifax, and TransUnion. To monitor your credit score, you can also pull a copy of your credit report annually. You are entitled to one free copy of your credit report each year. Here is the website to order your free annual report: https://www.annualcreditreport.com

Improving Your Credit Score

To improve your credit score, it’s important to have a healthy balance of debt. Avoid overextending yourself and try to keep the balance on your credit cards under 30 %. Make sure to make your payments on time and maintain a good payment history. The length of your credit history also matters, so it’s beneficial to have accounts that you have kept up with over time.

For more tips on increasing your credit score, you can download my free guide HERE

Working with a Loan Officer

If you have collections or other issues on your credit report that you want to address, it’s not necessary to go with an expensive credit repair company. A good loan officer, who is willing to be your partner through the home ownership journey, can take a look at your credit report and provide you with actionable items to improve your score. They will do this free of charge. If you need recommendations for reliable loan officers, book time with me HERE


Building Credit from Scratch

If you have no credit history at all, it’s important to build your credit before applying for a home loan. There are two easy ways to do this:

  1. Apply for a secured credit card: You can go to your bank or credit union and ask them how to apply for a secured credit card. This will help you establish a credit history.
  2. Become an authorized user: If you have someone you trust, such as a family member or close friend, who has a long and good credit history, ask them to add you as an authorized user to one of their accounts. This will help you build credit using their positive credit history.

Frequently Asked Questions about Credit

Here are some frequently asked questions about credit when it comes to buying a home:

  1. Can I buy a home with student loans?
  • Yes, having student loans does not prevent you from getting a home loan. What matters is your overall credit health and ability to manage your debt.
  1. Can I buy a home if I have a car payment?
  • Yes, having a car payment does not prevent you from buying a home. As long as you have a healthy balance of credit and can manage your debt, you can still qualify for a home loan.
  1. Can I buy a home if I have other debts?
  • Yes, having other debts does not automatically disqualify you from getting a home loan. What matters is your overall credit health and your ability to manage your debt responsibly.

Should I Pay Off All My Debt Before Buying a Home?

It is not necessary to pay off all your debt before buying a home. In fact, it may not be the best strategy. It’s recommended to speak to a loan officer first and have them assess your situation. They can advise you on whether it’s necessary to pay down or pay off some of your accounts. In some cases, it may be more beneficial to keep that money for your down payment instead of paying off debt that wasn’t an issue to begin with.

Should I Close My Credit Accounts?

No, you should not close your credit accounts, even if you have paid them off. Closing credit lines can actually hurt your credit score. It’s important to keep those credit lines open to maintain a healthy credit history.


Credit plays a crucial role when applying for a home loan. Your credit score, along with your income and down payment, will be considered by loan officers. It’s important to have a good credit score, especially if you’re going after a conventional loan. Monitoring your credit score, improving your credit health, and working with a loan officer can help you navigate the home buying process more effectively. Remember, having debt or credit does not prevent you from buying a home. What matters is maintaining a healthy balance and managing your debt responsibly.

More Resources

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