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Down payments are a big concern among home buyers in California, and for good reason. With a median home price of nearly $800,000 in 2024, California is the most expensive real estate market in the country.
To complicate matters, home buyers often have misconceptions and misunderstandings relating to the minimum down payment required for a home purchase.
Surveys have shown that many first-time buyers believe they have to put down 20% just to qualify for a mortgage loan. But that’s not accurate. Many borrowers in California can qualify for a down payment as low as 3% on a conventional loan, or 3.5% for FHA.
This guide explains the minimum California down payment requirements for different loan programs in the state, while clearing up some common misconceptions.
As a home buyer, you have a lot of different options when it comes to your mortgage financing. And they all have different requirements when it comes to the minimum down payment in California.
So let’s start by reviewing the most common loan options in California:
As you can see, there are several California mortgage options available that allow for a minimum upfront investment well below 20%.
The reason you hear so much about the 20% down payment has to do with mortgage insurance. Some borrowers choose to invest 20% upfront so they can avoid paying mortgage insurance on top of the principal and interest. But it’s not required for most home buyers.
According to surveys over the past few years, the average down payment among first-time buyers in the U.S. was 8%. Repeat buyers, on the other hand, tend to make down payments in the 12% to 13% range on average.
(The reason for this difference is somewhat obvious. By definition, a first-time buyer does not have profits from a previous home sale to put toward the investment on their next purchase.)
These averages debunk the notion that a 20% down payment is always needed to buy a house in California. In reality, that kind of investment is usually only required when a person purchases an expensive home using a “jumbo” loan.
But even for a median-priced home in California, a low down payment in the 3% range could add up to a substantial amount. On a median-priced house listed at around $800,000, a 3% investment would come out to around $24,000.
First-time home buyers in California often struggle to come up with such funds. So let’s talk about some of the ways you could reduce the challenges associated with a down payment.
Are you struggling to come up with the minimum down payment requirement for a mortgage loan in California?
You’re not alone. This is a common predicament, even among borrowers who could easily afford the monthly payments for a mortgage. That’s the challenge and reality of living in an expensive market.
But there are things you could do to overcome this obstacle:
As mentioned earlier, some mortgage programs allow home buyers in California to put down as little as 3% of the purchase price. FHA loans in California only require 3.5% with a credit score of 580 or higher. And VA loans for military members don’t even require a down payment.
But wait, it gets better. Even if you start off with a low down payment by using one of these financing programs, you could further reduce your out-of-pocket expense with gift money…
These days, most mortgage products available in California allow borrowers to apply gift money toward their down payment and closing costs.
Gift money is exactly what it sounds like. It’s when a family member, close friend, or other approved donor gives a home buyer money for their down payment and/or closing costs. A common example is a parent providing money to help their children purchase a first home.
The main requirement is that the money must truly be a gift. It cannot be a short-term loan with the expectation of repayment. The person providing the gift funds will have to sign a letter to this effect.
Down payment assistance programs (DPAs) can help California home buyers with limited savings overcome the hurdle associated with a down payment. They offer different forms of financial aid to reduce the amount of money you need to come up with.
One of the most popular DPA programs is offered by the California Housing Finance Agency (CalHFA), a state agency that supports homeownership. They offer a deferred-payment junior loan up to 3% of the purchase price to assist with the down payment and/or closing costs.
DPA programs often have specific eligibility requirements, such as income limits, credit score minimums, and participation in home buyer education courses. So not everyone can qualify for them. But it’s worth looking into all the same.
We’ve covered a lot of information relating to California down payment requirements, and it’s all worth remembering. So let’s wrap up with a summary of key points:
Since 1992, Sammamish Mortgage has been offering a variety of mortgage loan options with low down payments and flexible criteria. If you’re thinking of buying a home in California, reach out to us to get a rate quote and to get pre-approved for a mortgage to buy a home in the Golden State!
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.