Quantitative Checklist: What Your Income, Credit Score & Debt-to-Income Must Look Like Before Applying in California

Income Requirements for a California Mortgage

When preparing to buy a home in California, your income is a key factor in qualifying for a mortgage. There is no fixed income requirement across the board, but lenders want to see that you earn enough to comfortably cover your future mortgage payment, along with any other recurring debts.

Lenders typically look for two years of steady, verifiable income. If you are a salaried employee, this means two years of W-2s and recent pay stubs. If you are self-employed or a contract worker, you will need to provide two years of full tax returns and possibly profit-and-loss statements. The more consistent your income, the more confidence a lender will have in your ability to repay the loan.

In California, where home prices are higher than the national average, the income requirement is naturally higher as well. For example, a borrower aiming to purchase a home worth $700,000 with a 10% down payment might need to show a gross monthly income of $12,000 to $14,000, depending on their existing debt obligations and the loan program they’re applying for.

At LBC Mortgage, we take the time to evaluate your entire financial profile. Rather than setting arbitrary income thresholds, we focus on your overall ability to repay the loan. We help you understand exactly what documents you need and assist in calculating how much home you can afford based on your income.

Credit Score Expectations

Your credit score is another major piece of the puzzle. It reflects your history of repaying debt and is used by lenders to determine your risk as a borrower. The minimum score you need depends on the type of loan you’re applying for.

FHA Loans

For an FHA loan, the minimum credit score can be as low as 500, but that typically requires a larger down payment of at least 10%. If your score is 580 or higher, you may qualify for a down payment as low as 3.5%. FHA loans are often more forgiving of past credit issues, but you still need to demonstrate a recent pattern of responsible financial behavior.

Conventional Loans

For a conventional mortgage, most lenders look for a minimum score of 620. However, to get better interest rates and loan terms, a score of 700 or higher is preferred. Higher scores can also reduce the amount of private mortgage insurance (PMI) you need to pay, which can significantly lower your monthly payment.

Credit Improvement

If your credit score is below these thresholds, LBC Mortgage can help you build a strategy to improve it before you apply. We’ll review your credit report, identify errors or issues, and provide clear steps to increase your score. With our guidance, many borrowers improve their credit enough to qualify for better loan programs and lower rates.

Debt-to-Income Ratio (DTI) Standards

The debt-to-income ratio measures how much of your gross monthly income goes toward paying monthly debts. This includes your new mortgage payment, car loans, student loans, credit cards, and any other recurring debt obligations.

There are two types of DTI ratios lenders use:

Front-End Ratio

This is the percentage of your gross monthly income that will go toward your new mortgage payment, including principal, interest, taxes, insurance, and any homeowners association (HOA) fees. Most lenders prefer this number to be no higher than 28% to 31%.

Back-End Ratio

This includes all your monthly debts, not just the mortgage. Most lenders prefer your back-end ratio to be 43% or lower, though some programs may allow up to 50% if you have strong compensating factors like a high credit score or large cash reserves.

Example of DTI Calculation

If your gross monthly income is $10,000 and your total debt payments (including your proposed mortgage) add up to $4,000, your back-end DTI would be 40%. That’s within the acceptable range for most mortgage programs in California.

LBC Mortgage works closely with each client to calculate their DTI and find solutions if it’s too high. This might involve paying off certain debts, choosing a less expensive property, or exploring alternative loan programs. We ensure you know where you stand before you apply.

Your Pre-Application Checklist

Before you apply for a mortgage in California, make sure you meet the basic quantitative requirements. Here’s what to focus on:

Income Stability

You should have at least two years of consistent income in the same job or industry. Be ready to provide documentation such as W-2s, pay stubs, or tax returns. Self-employed borrowers need more extensive documentation, including full tax returns and potentially bank statements.

Sufficient Credit Score

Ideally, you want a credit score of at least 620 for a conventional loan or 580 for an FHA loan with a low down payment. Higher scores can help you qualify for better rates and fewer fees. If you’re unsure of your current score, we can help you obtain and interpret your credit report.

Manageable DTI Ratio

Make sure your total monthly debt, including your future mortgage, doesn’t exceed 43% to 45% of your gross income. Lower is better, and if your DTI is too high, we’ll work with you to find solutions.

Savings and Reserves

You’ll need funds for your down payment and closing costs, which usually range from 2% to 5% of the home’s purchase price. Some lenders also want to see that you have additional reserves — money left over after closing that could cover several months of mortgage payments in case of emergency.

Down Payment Readiness

FHA loans require a minimum down payment of 3.5% if your credit score is above 580. Conventional loans usually require at least 5%, and more if you want to avoid mortgage insurance. We can help you assess how much you’ll need and whether down payment assistance is available.

No Recent Credit Issues

Avoid large purchases or new credit lines before applying. Also, make sure there are no recent bankruptcies, foreclosures, or missed payments that could affect your eligibility.

Why LBC Mortgage Makes the Difference

At LBC Mortgage, we go beyond basic qualification. We take the time to understand your full financial picture, help you prepare your application, and guide you toward loan options that fit your unique needs. Because we specialize in California mortgages, we know what local lenders look for and how to position you for success.

We don’t just check your numbers — we help you improve them. Whether it’s building your credit, lowering your debt, or gathering the right income documentation, we provide hands-on support from start to finish.