If you’ve been told “your credit’s too low” or “you’ll never qualify” for a California home loan, take a deep breath. You’re not alone—and you’re not out of luck.
I’ve spent the last 13 years as a licensed California mortgage broker, and I’ve helped hundreds of borrowers with credit scores in the 500s and 600s become homeowners—from Sacramento suburbs to San Diego beach towns. Yes, it’s harder. Yes, you’ll pay a bit more. But homeownership is still absolutely within reach.
This guide isn’t about sugarcoating—it’s about strategy. We’ll cover real lenders, legit programs, and practical steps to get you into a home without falling for scams or predatory traps. Let’s get you closer to your keys. 🔑
Can You Really Get a Mortgage with Bad Credit in California?
Short answer: Yes.
Long answer: It depends on how bad your credit is, what caused it, and how you’ve managed your finances since.
Lenders care less about a single number and more about your overall financial story. Did you recover from medical debt? Have you paid your rent and utilities on time for the last 12 months? Are you employed steadily? These factors matter—sometimes more than your score.
California’s high home prices make qualifying tougher, but flexible loan programs and specialized lenders exist precisely for borrowers like you.
What Credit Score Do You Need to Buy a Home in California?
Not all loans are created equal. Here’s what’s realistically possible:
Conventional Loans
- Minimum score: 620 (Fannie Mae/Freddie Mac)
- Reality: Most lenders want 640+ in California due to high property values and risk.
- Down payment: 3%–20%
FHA Loans
- Minimum score: 580 for 3.5% down
- With 500–579: 10% down required
- Best for: First-time buyers, those with past foreclosures or bankruptcies (after waiting periods)
VA & USDA Loans
- VA: No minimum score (but most CA lenders require 580+)—$0 down for eligible veterans
- USDA: 640+ preferred, but some allow 600+—$0 down in eligible rural areas (parts of Central Valley, Inland Empire)
Non-QM (Non-Qualified Mortgage) Loans
- For: Self-employed, gig workers, or those with credit scores as low as 500
- Higher rates, larger down payments (10%–20%), but no strict DTI or credit rules
- Offered by specialty lenders (more below)
Top 5 Reputable Bad Credit Mortgage Lenders in California (2024)
- Guaranteed Rate – Strong FHA/VA options, in-house underwriting, fast approvals
- New American Funding – Offers Non-QM loans, transparent pricing, CA-based servicing
- CalHFA-Approved Lenders (e.g., CBC Mortgage Agency partners) – Specialize in down payment assistance + low-credit FHA
- Angel Oak Home Loans – One of the few offering true Non-QM with scores down to 500
- LoanDepot – Digital-friendly, good for borrowers rebuilding credit with solid income
⚠️ Always verify a lender is licensed with the California Department of Financial Protection and Innovation (DFPI).
Government-Backed Programs That Help California Borrowers with Low Credit
CalHFA (California Housing Finance Agency)
CalHFA doesn’t lend directly—but partners with approved lenders to offer:
- FHA loans with 3.5% down
- MyHome Assistance: Up to 3.5% grant for down payment/closing costs (forgivable after 3 years)
- Credit requirements: Minimum 640 for most programs—but some allow 620 with counseling
FHA’s 203(k) Rehab Loan
Buy a fixer-upper in Oakland or Fresno and finance repairs into your mortgage—even with credit in the high 500s. Great for building equity fast.
What “Bad Credit” Really Means to Lenders
Credit Score Ranges & Risk Tiers
- 670+: Prime (best rates)
- 580–669: Subprime (higher rates, but approvable)
- Below 580: Deep subprime (limited options, Non-QM territory)
Beyond the Number: Payment History, DTI, and Reserves
Lenders look at:
- Recent payment history (last 12–24 months)
- Debt-to-Income (DTI) ratio – Keep under 43% if possible
- Cash reserves – 2–6 months of mortgage payments shows stability
A 580 score with perfect recent payments beats a 620 with late rent.
Red Flags: Avoiding Predatory Lenders and Scams
Watch out for:
- “Guaranteed approval” with no credit check
- Upfront fees before loan approval (illegal in CA!)
- Pressure to sign quickly
- Interest rates 3%+ above market average
Stick to DFPI-licensed lenders and never pay a “processing fee” before closing.
Step-by-Step: How to Improve Your Mortgage Approval Odds
Reduce Debt-to-Income Ratio (DTI)
Pay down credit cards to below 30% utilization. Cancel unused store cards.
Build Cash Reserves
Even $5K in savings shows responsibility—especially if your credit is shaky.
Get a Co-Signer or Co-Borrower
A spouse or family member with strong credit can dramatically improve your terms.
Real-Life Success Story: Maria’s Path to Homeownership in Riverside
Maria, 34, had a 592 credit score after a medical bankruptcy. She’d been renting in Riverside for 5 years, paying $2,100/month.
We:
- Enrolled her in CalHFA’s homebuyer education
- Paired her with a CBC Mortgage Agency lender
- Used MyHome Assistance for $12K down payment help
Result: $420K FHA loan at 6.125%, 3.5% down ($14,700), plus $12K grant. Her payment? $2,350—just $250 more than rent, but now she’s building equity.
Should You Wait to Improve Your Credit First?
Ask yourself:
- Are home prices rising fast in your target area? (They are in most of CA!)
- Can you realistically raise your score by 40+ points in 6 months?
If prices are climbing faster than your credit improves, buying now may still be smarter—even with a slightly higher rate. You can always refinance later.
The Role of a Mortgage Broker vs. Direct Lender
- Direct Lender: Works for one company (e.g., Chase, Wells Fargo). Limited options.
- Mortgage Broker: Shops 20+ lenders, including niche Non-QM and CalHFA partners. Best for bad credit—they find the lender most likely to say yes.
In California’s complex market, a broker is often your secret weapon.
Down Payment Requirements for Bad Credit Borrowers
- FHA: 3.5% (with 580+ credit)
- Conventional: 5%–20% (higher with lower credit)
- Non-QM: 10%–20%
- VA/USDA: $0 down (if eligible)
Plus: CalHFA grants can cover part or all of your down payment—no repayment needed!
How Interest Rates Are Affected by Lower Credit Scores
In California (Q2 2024):
- 740+ credit: ~6.0% on FHA
- 620–679: ~6.5%–7.0%
- 580–619: ~7.0%–7.8%
- Below 580: 8%+ (Non-QM)
Yes, it’s more—but compare that to $2,500/month in rent that builds zero equity.
Pre-Approval Tips for Borrowers with Imperfect Credit
- Get pre-approved by a broker, not just “pre-qualified” online
- Disclose everything upfront—past bankruptcies, collections, etc.
- Bring proof of consistent rent payments (12+ months of bank statements)
Honesty builds trust—and better loan terms.
Final Thoughts: Your Home Is Possible—Even with Bad Credit
California’s housing market is tough, but not impossible. With the right lender, the right program, and a clear plan, you can turn your rental payments into mortgage payments—and your dream into a deed.
Don’t let a credit score define your future. Your discipline, your income, and your determination matter just as much. Take the first step today—your front door is closer than you think.
Frequently Asked Questions (FAQs)
Q1: What’s the lowest credit score to buy a house in California?
A: Technically 500 with an FHA loan (10% down) or Non-QM loan—but most lenders prefer 580+.
Q2: Can I get a mortgage after bankruptcy in California?
A: Yes. FHA allows 2 years after Chapter 7 discharge, 1 year into Chapter 13 payments. Conventional loans require 4 years (Chapter 7).
Q3: Does CalHFA require first-time homebuyer status?
A: Most CalHFA programs do—but not all. Some allow repeat buyers in targeted census tracts.
Q4: Are there income limits for bad credit mortgage programs?
A: CalHFA and USDA have income limits (e.g., $150K–$200K for a family of 4 in LA County). FHA and Non-QM do not.
Q5: Can I buy a multi-unit property with bad credit?
A: Yes—FHA allows 2–4 unit properties with 3.5% down, as long as you live in one unit. Great for house hacking in CA!