Average FHA Down Payments for California Cities in 2017

Down payments are a primary concern for home buyers in California. Today, we will look at the average FHA down payment in California’s major cities, based on current home prices. We’ll also talk about how FHA borrowers can get assistance from third parties, in the form of a gift.

How FHA Loans Work

FHA mortgage loans are insured by the government, through the Federal Housing Administration. This insurance gives lenders some degree of protection from borrower default. As a result, the qualification criteria for FHA loans in California are a bit more relaxed than conventional (non-government-insured) mortgage loans.

Basic requirements for FHA loans in California include:

• A minimum down payment equaling 3.5% of the purchase price or appraised value
• A credit score of 580 or higher in order to qualify for the 3.5% option
• A total debt-to-income ratio no higher than 50% (though there are exceptions)

Average Down Payments Across California

As mentioned above, the minimum down payment required for an FHA loan in California is 3.5% of the purchase price or appraised value, whichever is less. This means that the size of your down payment will vary based on the price of the home you’re buying.

Related: Reducing your FHA closing costs

We took a look at the current median home prices for the state, and also within major cities, to get a sense of the average FHA down payment in California. Home price data were obtained from Zillow, CoreLogic and other sources.

• California (statewide): According to Zillow, the median home price for California was $509,600 in October 2017. The average FHA home buyer puts down around 3.5%, which would come to around $17,836 in this case.
• Bay Area: According to the property analytics company CoreLogic, the median home price for the San Francisco Bay Area was $739,900 this month. Applying the minimum 3.5% FHA down payment to this figure would result in an upfront investment of $25,896.
• Los Angeles: The median home value in L.A. was $633,400 in October. Using the minimum investment for FHA, this would come to an average down payment of around $22,169.
• San Diego: The median house value for San Diego hit $586,800 in October 2017. So the average FHA down payment in the area would fall somewhere around $20,538.

Granted, these are just median and average figures for home prices and FHA down payments across California. The amount you would be required to put down when using this program will vary based on the house price and other factors.

Additionally, borrowers can reduce their out-of-pocket expense by using gift money from an approved third-party donor. So let’s talk about that next.

Getting Assistance from Family Members and Other Third Parties

Don’t let the average FHA down payment for California intimidate you. You could reduce your required investment in a couple of ways.

• You could simply buy a more affordable house than the median figures listed earlier, resulting in a smaller upfront investment.
• You could also obtain gift money from a third-party source, to cover some of your down payment.

These days, many mortgage loan programs allow borrowers to obtain gift money from a family member, a close friend, or even an employer. The Federal Housing Administration allows this as well. That means home buyers in California who use an FHA loan could get some of their down payment money from someone else.

The key takeaway from this article is that the down payment for an FHA loan might be more manageable than you think. This program has one of the lowest investment requirements among mortgage loans, and borrowers are allowed to use gift money provided by a third party. This could greatly reduce your upfront, out-of-pocket expense.