Even if two families have the same income and down payment prepared, different credit scores can lead to different approval results and monthly payments. If you are looking for your first home in Riverside, it's good to be aware of this difference in advance. If your score is in the low 600s to 700s, you can still get a loan, but the interest rate will be higher. If you exceed around 740 points, you are more likely to be approved for a lower interest rate even for the same loan amount.

There are four main items to check in order: credit score, type of loan, down payment, and DTI.

Starting with the credit score, for FHA loans, you can start with a 3.5% down payment if your score is 580 or higher, and a 10% down payment if your score is between 500 and 579 (according to FHA.com). A low score doesn't completely close the door, but it increases the burden of the down payment and the interest rate. For conventional loans, first-time homebuyers or those with an area median income of 80% or less can start with a 3% down payment, while others typically have a 5% standard (according to NerdWallet).

When deciding on a down payment, you should also consider the recent market prices in Riverside. According to Zillow, the average home value in Riverside is $652,797, which has decreased by 1.1% over the past year. If you put down 5% at this price point, the loan amount will be around $620,000, and since it's less than 20% down, PMI will apply. If you manage to put down 10%, the loan amount will decrease to around $587,000, but you will need an additional $33,000 in cash upfront. The decision depends on what you can afford monthly and the cash you currently have on hand.

You also need to check your DTI, or debt-to-income ratio. Lenders look at the sum of your principal and interest payments and existing debt repayments compared to your monthly income, typically setting a cap around 43%. If you have fixed monthly expenses like student loans or car payments, it's wise to calculate this ratio before making an offer. Getting pre-approved will confirm this calculation in writing, reducing surprises during the actual offer stage.

Closing costs are another item to prepare separately. They typically range from 2% to 5% of the loan amount and include escrow, title, appraisal fees, and prepaid property taxes and insurance. California property tax is based on a 1% assessment value according to Prop 13, with additional local assessments. The statewide average effective tax rate is around 0.71% (according to propertytaxrates.org), but new developments in Riverside County may have Mello-Roos, so it's safer to check the tax details for each property.

A fifth item that is easy to overlook is the rate lock. Once your offer is accepted, you can request to lock in the interest rate for about 30 to 45 days, and if you exceed this period, a re-lock fee may apply. The earnest money included in the offer is typically set at 1% to 3% of the purchase price and is deposited in escrow, then added to the down payment at closing. It's advisable to avoid opening new credit cards or transferring large amounts to other accounts during the period leading up to closing to help maintain your approval stability.

If you have any room to improve your credit score, managing your credit utilization and making payments on time for a few months before making an offer is just as important as preparing your down payment. If you want to lower your down payment burden, consider looking into CalHFA's MyHome Assistance Program. It requires first-time homebuyer qualifications and completion of homebuyer education, and repayment is deferred until the sale or refinancing. This article is not investment or legal advice, and tax and loan conditions may vary by county and individual circumstances, so it's advisable to consult with a loan officer and experts before finalizing any contracts.