Minimum Down Payment for a Bay Area Home Purchase: Summer 2018 Update

It’s no secret that the Bay Area real estate market is expensive. Home prices here have risen steadily in recent years, largely due to a shortage of inventory. As a result of these trends, many home buyers have questions (and sometimes concerns) regarding the minimum down payment for a home in the Bay Area.

This is a topic we’ve covered before, but many of the variables have changed since then. So it’s high time for an update. Here’s a fresh look at the minimum down payment needed to buy a home in the San Francisco Bay Area, as of summer 2018.

Median Down Payments in S.F. Bay Area

According to a report by ATTOM Data Solutions at the end of last year, the median down payment for single-family homes and condos purchased with a mortgage loan was $20,000. But that’s for the national as a whole. Down payments in the Bay Area tend to be higher, for the simple fact that homes here are more expensive.

In fact, that same report went on to list four California metro areas as having the highest median down payments in the country. Out of the 99 metropolitan statistical areas nationwide that were analyzed in the report, the following had the highest median down payment among home buyers:

• San Jose, California ($247,000)
• San Francisco, California ($170,000)
• Los Angeles, California ($118,000)
• Oxnard-Thousand Oaks-Ventura, California ($105,000)
• Boulder, Colorado ($99,900)

The numbers in parentheses represent the median down payment in the latter part of 2017 (the most recent data available when this blog post was published).

Your Investment Could Be Much Lower

As a home buyer, there are three things you should know about these figures above:

1. They represent the median down payment for each area, which is basically the midpoint for all borrowers. That means half of all borrowers made down payments larger than these numbers, while the other half put less money down. So the minimum investment needed to buy a home in the Bay Area could be much lower than the numbers shown above.
2. Down payment size is directly related to the price of the house being purchased. And home values vary widely across the greater San Francisco Bay Area region. Consider the difference between the median home price in San Jose ($1,089,200) and Vallejo ($403,400), as of June 2018. As a result of this variation, the minimum down payment needed when buying a home in the Bay Area can differ quite a bit depending on where you live.
3. Also, there are ways to offset your initial investment when buying a house. For instance, some borrowers use down payment gift money from a family member or other approved source. You can learn more about gift money contributions here.

Minimum Requirements for FHA, VA and Conventional

We’ve looked at the median investment among home buyers, which is the midpoint among all mortgage loan borrowers. But what what about the minimum down payment for a Bay Area home purchase? What’s the lowest possible amount you can put down when buying a house in the area?

Conventional — With a conventional loan, the minimum down payment could be as low as 3%. (“Conventional” means it is not guaranteed or insured by the government.) This is a relatively new development. According to a June 2018 report by CoreLogic, the percentage of conventional mortgage loan borrowers making down payments below 5% rose from less than 2% in 2014, up to 9% during the first quarter of 2018. This is largely because Fannie Mae and Freddie Mac are now offering expanded options for conventional loans with a down payment of 3%.

FHA — In the Bay Area, the minimum down payment for an FHA-insured mortgage loan is 3.5% of the purchase price or the appraised value (typically whichever is less). This program also offers relatively flexible qualification criteria for borrowers.

VA — Through this unique program, eligible borrows in the Bay Area can buy a house with no money down. That’s if you stay within the official loan limits for a VA loan. If you’re eyeing a house that is priced above those limits, you might have to make a minimum down payment equaling a certain percentage of the difference.