Average and Minimum Down Payments on a House in California

According to the real estate data website RealtyTrac.com and other sources, the average down payment on a house in California in 2017 was around 13% of the purchase price.

But that is definitely not the minimum down payment required for California home buyers. These days, there are quite a few options for borrowers who can’t afford to put down 20% on a home, or even 10%.

Also, most mortgage programs today allow friends and family members to contribute funds toward the home buyer’s down payment and/or closing costs. There’s a lot of flexibility these days.

Average Down Payment in California, 2017

According to data reported by RealtyTrac, Ellie Mae (a mortgage software company), and other sources, the average down payment on a house in California is roughly 13% of the purchase price. Home prices, on the other hand, vary widely from one city to the next. So the average down payment in real dollars will vary quite a bit as well, depending on where you live.

In April 2017, when this article was published, the statewide median home price was around $490,000. Thirteen percent of that price would be a down payment of $63,700.

But home buyers shouldn’t be intimidated by those figures. They’re just average and median figures. The minimum down-payment requirements in California could be significantly lower than that, depending on the type of mortgage loan you use. And the money could be provided by a third-party donor, such as a family member or close friend.

So let’s move away from the averages and talk about the minimum required down payment in California.

Minimum Down Payments, and the 20% Myth

There’s a widespread misconception among home buyers (especially first-time buyers) that they need 20% down to buy a house in California.

A 2017 study conducted by the National Association of Realtors found that 39% of aspiring home buyers believed they needed more than 20% for a down payment on a purchase. Another 26% of buyers thought they had to put down 15% to 20% to buy a house. But that’s not the case.

In reality, the minimum down payment on a house in California is much lower than these double-digit numbers. In fact, he minimum can be as low as 3% in some cases — or even 0%, if you’re a member of the military.

Here’s an update on minimum down-payment requirements in California, for various types of home loans:

• Conventional — Conventional (non-government-backed) home loans typically require at least 5% down. Over the last couple of years, some 3% products have come onto the market as well.
• FHA — In California, as in all states, the minimum down payment required for an FHA loan is 3.5% of the purchase price or appraised value. These loans are generated in the private sector but insured by the federal government.
• VA — Eligible military members and veterans can qualify for 100% financing under the VA loan program, eliminating the need for a down payment.
• USDA — 100% financing is also available with USDA / rural development loans. But this program is generally limited to low- and moderate-income borrowers in rural areas of the state.

The thing to take away from this is that the minimum down payment needed to buy a house in California is actually quite a bit lower than the average stated earlier. Some people choose to put 20% down, in order to avoid paying for private mortgage insurance. But it’s not a necessity.

(Note: There are other ways to avoid PMI, even with a down payment below 20%.)

Borrowers Can Get Help from Family

So what do you do if you can’t afford the minimum down payment for a home loan in California? It’s not necessarily the end of the road. You might still be able to buy a house.

Most mortgage programs these days allow for down payment gifts from third parties. Depending on the type of loan you’re using, this financial help might come from a family member, employer, charitable organization, or even a close friend.

Learn more about down payment gifts in California.

It’s Important to Explore Your Options

The mortgage industry has gotten more flexible over the last couple of years. We have seen new loan products come onto the market, and some of them offer lower down payment options for home buyers. Qualification criteria have eased in other areas as well, such as credit scores and debt ratios.

The point is, you probably have more options than you realize, when it comes to home loans. That’s why it’s a good idea to speak to a knowledgeable loan officer or broker about your financial situation and your home buying goals. And that’s where we come in.