Buying your first home in Merced can feel exciting and a little overwhelming. You want a clear path, a fair payment, and a loan program that fits your life. The good news is you have solid options, including programs that may reduce your down payment or help with closing costs. This guide breaks down the most common first-time home loans available in Merced and how to get pre-approved with confidence. Let’s dive in.

Loan options at a glance

FHA basics in Merced

FHA loans are government-insured mortgages designed to help first-time buyers who need flexibility. You can often put as little as 3.5% down if your credit profile meets FHA guidelines. You will pay mortgage insurance, both upfront and monthly, and the lender will review your debt-to-income ratio and overall financial picture. Keep in mind that lenders may add their own requirements beyond FHA’s minimums.

VA loans for service members

If you are an eligible veteran, active duty service member, reservist, or certain surviving spouse, a VA loan can be a powerful benefit. Many VA loans require no down payment and do not have private mortgage insurance. You will need a Certificate of Eligibility and standard income and asset documentation. A one-time VA funding fee may apply, though some borrowers are exempt.

USDA in eligible Merced areas

USDA Guaranteed loans are designed for homes in designated rural areas and for households within income limits. Many properties in Merced County may qualify, while some more urban pockets may not. USDA often allows 0% down for eligible buyers, along with a review of credit and capacity. Property eligibility is address-specific and must meet USDA criteria.

CalHFA help for Californians

CalHFA supports first-time buyers across California through partnered first mortgages and down payment or closing cost assistance. These assistance options are typically structured as separate loans that may be deferred, forgivable, or repayable based on the program. Income and purchase price limits are county-specific and change annually. Many programs define a first-time buyer as someone who has not owned a home in the past three years.

Conventional low down payment

Some conventional programs, such as common first-time buyer products, may allow down payments as low as 3%. These loans often require private mortgage insurance if you put less than 20% down. Lender requirements vary, so compare options and ask about total costs over time.

What lenders look for

Credit, down payment, DTI

Your credit score influences the minimum down payment and pricing for most programs. FHA commonly allows 3.5% down for qualifying credit profiles, while many conventional options require higher scores. VA and USDA can offer 0% down for eligible borrowers. Lenders also review your debt-to-income ratio and may consider compensating factors like savings, reserves, and stable employment.

Property and occupancy rules

Most first-time buyer programs require that the home be your primary residence. FHA and VA appraisals include minimum property standards. USDA loans add a location requirement, so the home must be in an eligible area. If you have a specific neighborhood in mind, confirm property condition and location fit your target loan.

Documents you will need

Getting organized early helps you move faster. Lenders typically request:

• Government ID and Social Security number
• Recent pay stubs, W‑2s or 1099s, and federal tax returns for the past two years
• Bank statements for the past two months and statements for other assets
• Employment verification and any documentation related to gift funds
• For VA: Certificate of Eligibility and military service documents
• For USDA: household income forms and property eligibility documentation

Insurance, fees, and costs

• FHA: You pay an upfront and monthly mortgage insurance premium. The amount and duration depend on loan details and rules in place at the time you close.
• Conventional: Private mortgage insurance applies with less than 20% down and can often be removed when you reach enough equity, subject to servicer rules.
• VA: No monthly mortgage insurance. A one-time VA funding fee typically applies unless you are exempt.
• USDA: You pay a guarantee fee, both upfront and annually.
• CalHFA: You may combine a CalHFA first mortgage with assistance. Mortgage insurance rules depend on the first-loan type and program terms.

Get pre-approved in Merced

Pre-qualification vs pre-approval

Pre-qualification is a quick estimate based on information you provide and helps you set a rough budget. Pre-approval goes deeper. The lender verifies your credit, income, and assets and issues a letter with conditions and an amount range. A strong pre-approval gives sellers confidence and helps you compete.

Compare local lenders

You have options, including community banks, credit unions, mortgage brokers, and lenders who work with CalHFA. Compare interest rate and APR, lender fees, and experience with programs like FHA, VA, USDA, and CalHFA. Ask for a Loan Estimate from at least two or three lenders so you can compare offers and timelines side by side. If you prefer Spanish, request a bilingual loan officer or interpreter.

Spanish-friendly support

Tips for Spanish speakers

If you prefer Spanish, ask for materials and counseling in your language. You can request a bilingual loan officer and ask for translations of key documents. Knowing common terms can also help you follow along:

• Down payment = pago inicial / enganche
• Mortgage = hipoteca
• Pre-qualification = pre-calificación
• Pre-approval = preaprobación / carta de preaprobación
• Closing costs = gastos de cierre
• Escrow = cuenta de depósito en garantía
• Debt-to-income ratio = relación deuda/ingreso
• Mortgage insurance = seguro hipotecario
• Certificate of Eligibility (VA) = Certificado de Elegibilidad

What to do next

• Gather documents: ID, pay stubs, W‑2s or 1099s, tax returns, and bank statements.
• Check program fit:
  • If you served: request your VA Certificate of Eligibility.
  • If you are shopping outside town centers: confirm USDA property eligibility and your household income fit.
  • For CalHFA: review current Merced County income and purchase price limits and confirm whether the first-time buyer definition applies to you.
• Contact 2–3 lenders, including at least one with CalHFA experience and one familiar with USDA or VA if relevant.
• Get a written pre-approval before serious house-hunting.
• Consider a HUD-approved homebuyer education course, which some programs require and many buyers find helpful.

If you want a local guide who understands Merced and the loan programs that fit here, reach out to Naomi Townsend for bilingual, first-time buyer friendly support from search to closing.

FAQs

How much down payment do I need for a Merced home?

• It depends on the loan. FHA commonly allows 3.5% down for qualifying credit, some conventional options start at 3%, and VA and USDA can offer 0% down for eligible buyers; CalHFA may help with assistance.

What credit score do first-time buyers need in Merced?

• Requirements vary by program and lender; FHA accepts lower scores than many conventional options, VA and USDA rely on lender standards and program rules, and improving your score expands your options.

Can I use gift funds for my down payment or closing costs?

• Many programs allow gift funds with a proper gift letter and documentation; ask your lender about specific rules for FHA, VA, USDA, conventional, and CalHFA.

Are there down payment assistance programs in Merced County?

• CalHFA programs are widely available through participating lenders, and some local or nonprofit options may appear based on funding; check current availability with your lender or a housing counselor.

How do I check if a Merced property is USDA-eligible?

• USDA uses address-level maps to confirm eligibility; ask your lender or agent to verify the property location before assuming USDA financing will work.

I am self-employed; can I qualify for a first-time buyer loan?

• Yes, but expect more documentation, such as two years of personal and possibly business tax returns and a year-to-date profit and loss statement.

What if I am not a U.S. citizen but want to buy in Merced?

• Some loan programs require specific immigration status, and some lenders offer alternatives; discuss your status with a lender early to see which options apply to you.