After more than 20 years helping families buy homes in the Bay Area and across California, I see the same five mistakes again and again. None of them are about intelligence — they happen because nobody explained how the process really works. Here is what to watch for.
1. Shopping for the lowest rate instead of the lowest total cost
The interest rate is the number everyone asks about, but two quotes with the same rate can cost very different amounts. One lender may be charging discount points, another higher lender fees, another a larger origination charge. That is why every rate quote must come with an APR — the annual percentage rate folds most of those costs into a single number so you can compare offers more fairly.
When you compare quotes, ask for an official Loan Estimate from each lender on the same day, for the same loan amount and lock period, and compare three things side by side: the rate, the APR, and the total in Section A (origination charges) and Section J (total closing costs).
2. Looking at homes before getting a real pre-approval
An online "pre-qualification" is a useful starting point, but it is not a pre-approval. A real pre-approval means a loan professional has reviewed your income documents, assets and credit. Without it, buyers fall in love with homes they can't comfortably afford — or lose a home because the seller chose an offer with stronger financing.
Getting your documents reviewed early also surfaces problems while there is still time to fix them: a collection account, a gap in employment, gift funds that need a paper trail, or self-employment income that needs a different loan program.
3. Budgeting for the down payment but not the rest of the cash
Your down payment is only part of the cash you need. You'll also pay closing costs — lender fees, title and escrow, appraisal, and prepaid items such as homeowners insurance and property-tax impounds. In California these often add up to roughly 2%–5% of the purchase price, depending on the loan and the county. Many programs also want to see reserves left in your account after closing.
There are ways to reduce what you bring to the table: seller credits, lender credits in exchange for a slightly higher rate, gift funds from family, and down payment assistance programs such as those offered through CalHFA (availability and rules change, so check what's open when you buy).
4. Forgetting what's inside the monthly payment
A mortgage calculator that shows principal and interest only will understate your real payment. Your actual monthly cost usually includes:
- Property taxes — in California generally about 1% of the purchase price plus local assessments, and some newer neighborhoods carry Mello-Roos special taxes.
- Homeowners insurance — premiums have risen sharply in parts of California; get a quote before you write an offer.
- Mortgage insurance — required on FHA loans and on conventional loans with less than 20% down.
- HOA dues — common for condos and townhomes, and they count against your qualifying ratio.
Use our mortgage calculators to estimate the full payment, not just the loan payment.
5. Making financial changes during escrow
Lenders re-verify your credit, employment and bank accounts right up to closing. Opening a new credit card, financing furniture, co-signing for someone, changing jobs, or moving large sums of money without a paper trail can delay — or even derail — your loan. The safest rule: between application and keys, don't change anything financial without calling your loan advisor first.
Which loan is right for a first-time buyer?
There is no single answer. FHA loans allow as little as 3.5% down for qualified borrowers and are more flexible on credit. Conventional loans can go as low as 3% down for eligible first-time buyers, and mortgage insurance can be removed later. Self-employed buyers may fit better with a bank statement loan. The right choice depends on your credit, down payment, income type and how long you plan to keep the home.
We hold free monthly First-Time Home Buyer Workshops. Come with questions — there's no sales pitch.
Frequently Asked Questions
How much do I need for closing costs in California?
Closing costs in California commonly run about 2% to 5% of the purchase price, depending on the loan type, county, title and escrow fees, and prepaid taxes and insurance. Your Loan Estimate will list them in detail.
What is the difference between pre-qualification and pre-approval?
A pre-qualification is an estimate based on information you provide. A pre-approval means a loan professional has reviewed your income, assets and credit documents, which makes your offer stronger.
What is the minimum down payment for a first-time buyer?
FHA loans allow 3.5% down for qualified borrowers, and some conventional programs allow 3% down for eligible first-time buyers. Down payment assistance programs may help cover part of it.
Want to know which option fits your situation?
Tell us a little about your scenario. No credit pull to start, and residential inquiries get a response the same business day.
Get Pre-Qualified or call 510-786-8739This article is for general educational purposes only and is not a commitment to lend or an offer of credit. Loan programs, guidelines, rates and eligibility change often and vary by lender; all loans are subject to credit approval, underwriting and property eligibility. SI MTG is a mortgage broker, not a lender. This is not tax or legal advice — consult a qualified tax professional or attorney about your situation. NMLS #300923 · CA DRE #01480904 · Equal Housing Opportunity.