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Average Down Payment for a Bay Area Mortgage Loan: 2017 Update

The down payment is one of the biggest considerations for most Bay Area home buyers using mortgage loans. And with rising home values in the region, the average down payment on a house in the Bay Area has risen as well.

So what can you expect to pay in 2017 or 2018? Here’s an updated look at home values in the area and how they might affect your down payment for various mortgage programs.

Average Down Payment in the Bay Area

According to data published recently from CoreLogic, the median price for a single-family home in the San Francisco Bay Area was around $779,000, as of July 2017. Of course, home prices vary significantly based on where you live. But we’re measuring the average down payment for a mortgage across the entire Bay Area, so that’s a good number to start with.

Here’s how that would break down at various down payment levels:

  • 5% conventional: With a conventional (non-government-insured) home loan, you’ll probably have to make a down payment of at least 5% of the purchase price. Using the median home value mentioned above, that would come to an average down payment of around $38,950.
  • 10% conventional: Many home buyers in the Bay Area make down payments in the 10% range, so that’s another tier worth analyzing. With the median home value of $779,000, a 10% down payment would come out to $77,900.
  • 20% conventional: Home buyers who can afford to do so often make a down payment of 20% or more, because it allows them to avoid paying private mortgage insurance. Of course, it also increases the amount of the upfront investment. A 20% down payment on the median home price mentioned above would come out to $155,800.
  • 0% VA: If you are a military member or veteran in the Bay Area, you could qualify for a VA-guaranteed home loan that eliminates the need for a down payment. That’s just one of the reasons why this program is hard to beat.

FHA Loans Require 3.5% Down

The average Bay Area down payments listed above are for conventional home loans, which are those that are not insured or guaranteed by the government.

The Federal Housing Administration (FHA) home loan program offers a relatively low down payment of 3.5% for eligible borrowers. But there are loan limits for this program, and in some cases they fall short of median home prices. FHA loan limits vary by county because they are based on median home values. In the Bay Area, they range from $431,250 to $636,150.

The FHA program is primarily intended for borrowers with low to moderate income levels — as opposed to those buying high-end homes.

But it’s still a very popular option among borrowers in the Bay Area, particularly first-time buyers who are looking for a low-down-payment mortgage option.

Debunking Some Myths and Misconceptions

Surveys have shown that many home buyers wrongfully believe they have to put down 20% when using a mortgage loan. The truth is that’s not always the case. As we’ve just shown, there are some lower down payment options available for Bay Area home buyers with limited funds.

Depending on the mortgage program you use, and other factors, your down payment could be in the 3% range. If you’re currently in the military or have been in the past, you could be fortunate enough to qualify for a VA loan that offers 100% financing. So a 20% down payment is not always necessary.

If the average down payment in the Bay Area is a bit too steep, home buyers can also obtain gifts from third parties to help defray the cost. This is when another person or organization donates money to help cover a home buyer’s down payment expense. Most of the mortgage programs available these days allow for down payment gifts, and that includes both FHA and conventional.

Let’s talk: The bottom line is that there’s some flexibility when it comes to mortgage down payments in the Bay Area. We can review your financial situation to determine if you’re a good candidate for a home loan, and what your options might be. Please contact our staff today.

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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