Minimum & Average Down Payment for a House in California, in 2021

Home prices in California rose steadily throughout 2020, despite the coronavirus pandemic and resulting economic restrictions. As a result, the minimum down payment for a house in California also rose over the past year. Below, we will take an updated look at the average and minimum down payment in California, as of January 2021.

Home Prices Keep Climbing

It’s hard to believe that home prices would rise steadily through a global pandemic. But that’s exactly what we saw during 2020, in California and most other states around the country. In many ways, it was a banner year for the real estate industry. Surprising, but true.

According to a January 2021 report from the California Association of Realtors (C.A.R.), the median sale price for existing single-family homes rose to $717,930. That’s the highest median ever recorded in the state. And since home values and down payments go hand-in-hand, we are also seeing higher down payments among borrowers statewide.

To quote the C.A.R. report:

“After dipping below $700,000 the previous month, California’s median home price bounced back above that benchmark and set another record high in December. The statewide median home price rose 2.7 percent on a month-to-month basis to $717,930 in December, up from November’s $698,890.”

Average Down Payment in California in 2021

Last year, Realtor.com published a report that revealed home-buying trends nationwide. Among other things, it showed that the median (midrange) down payment among buyers was 12%. The median for first-time home buyers, in particular, was 7%.

If we apply these percentages to the median house price for California, we have some sense of what the “typical” or average down payment is for a house in California, as of early 2021.

• A 12% down payment on a median-priced home in the state ($717,930) would come to $86,151.
• A 6% down payment for that same price point would come to $43,075.

But don’t get discouraged if these numbers are beyond your reach. These are just median and average figures. It’s possible to put down less than 6% on a home purchase. So let’s shift gears and look at the minimum down payments required for different mortgage programs in California.

Minimum Down Payments in California, Updated for 2021

So, what is the minimum down payment for a house in California, as of 2021? That depends on the type of mortgage loan you’re using, among other factors. Different loan programs have different requirements, in terms of their minimum upfront investment.

Below, we have calculated the minimum down payment at three different thresholds. First, we’ve use the 20% down payment which is used by a lot of home buyers in California. Secondly, we’ve use the 3% minimum for conventional loans and the 3.5% that’s required for FHA insured mortgage loans.

• 20% ($143,586) — A borrower who makes a down payment of 20% on a median-priced home in California would be looking at an upfront investment of around $143,586. (That doesn’t include costing costs.) Some buyers choose to put down 20% to avoid having to pay for mortgage insurance.
• 3% ($21,538) — The minimum down payment for a conventional / non-government-insured mortgage loan is 3%, for eligible borrowers. On a median-priced home purchase in California as of January 2021, that would come to around $21,538.
• 3.5% ($25,127) — The minimum down payment for an FHA loan in California is 3.5% of the purchase price or appraised value. Based on the current median home value in early 2021, that would result in an upfront investment of around $25,127.

Of course, home prices can vary widely from one region of California to the next. The San Francisco Bay Area tends to be the most expensive overall, followed by the Central Coast region and Southern California. As a result, the average and minimum down payments tend to be higher in those areas as well.

Clearing the Down Payment ‘Hurdle’

Don’t be too discouraged by the minimum down payment figures shown above. California home buyers with limited funds still have options, when it comes to making the minimum required investment.

One option is to use money provided by a family member or close friend. Most mortgage programs available today allow for “down payment gifts” provided by approved third-party donors. The caveat here is that the money must truly be a gift, and not a short-term loan. The person providing the funds must sign a letter to this effect.

Home buyers in California might get some additional relief later this year, in the form of a tax credit. President Biden is proposing a tax credit for first-time buyers in California and nationwide. His proposed credit would offer an “advanceable” credit of up to $15,000. This means buyers could get the money up front, potentially at closing. So it could help to offset their down payment and/or closing costs.

For now, Biden’s plan is still in the proposal stage. It would have to get approval from the House and Senate before being signed in the law. And it might get “whittled down” along the way. Still, it’s something to keep an eye on.

Mortgage Rates Remain Favorable for Home Buyers

Housing continues to grow more expensive in California. That’s no secret. And with steadily rising home prices, the average and minimum down payment for a mortgage loan in the state also continues to climb.

But there’s some good news in the mortgage world. Earlier this month, the average rate for a 30-year fixed mortgage loan sank to its lowest level in 50 years. According to Freddie Mac, 30-year mortgage rates averaged 2.65% during the first week of January.

Rates have increased a bit since then, but industry analysts expect them to remain fairly low throughout 2021.

Disclaimer: This article offers insight into the minimum and average down payment for a house in California, based on 2021 home-price trends and mortgage requirements. Every home loan scenario is different because every borrower is different. Therefore, portions of this article might not apply to your particular situation.