Three California Cities Rank Highest for Average Down Payments

According to a recent study, the California cities of San Jose, San Francisco and Los Angeles currently have the highest average down payments among the 50 largest metros in the U.S. San Diego also made it into the top five. These rankings were determined by the research team at Realtor.com and published earlier in March.

Read on to find out how your down payment could be smaller than the averages shown below.

Average Down Payment Highest in San Jose, San Francisco, Los Angeles

The housing research team at Realtor.com recently reviewed mortgage lending records and other data to determine the average down payment on a house. They looked at the 50 largest metro areas in the country. And California cities dominated the rankings — a dubious honor, but a reality nonetheless.

The three metro areas with the highest average down payment among home buyers were all located in California, and two were in the Bay Area.

Here are the five U.S. metros with the highest average down payments, as of spring 2018:

1. San Jose, CA: 23.9%
2. San Francisco, CA: 22.6%
3. Los Angeles, CA: 17.9%
4. Boston, MA: 16.3%
5. San Diego, CA: 15.9%

According to the report:

“The average down payment in the San Jose metro was highest on our list, at 23.9%, according to our findings. In the nearby San Francisco metro, which came in second, it was just slightly lower, at 22.6%. That number really sinks in when you consider how much homes in the Bay Area cost. The median listing price is $1.2 million in San Jose and $899,000 in San Francisco.”

San Jose actually holds the double “distinction” of being the metropolitan area with the highest home prices and the highest average down payment, among the major metros.

Note: These Are Averages, Not Minimums

It’s important to note that the figures above represent the average down payment for these California cities, and for other metro areas across the U.S. But these are not the minimum down-payment requirements for the various mortgage programs.

Depending on the circumstances, it’s possible to put down much less than the percentages shown above. In fact, in some markets, eligible borrowers can make down payments in the 3% – 3.5% range and still qualify for a mortgage loan.

The real estate markets shown above — particularly San Jose and San Francisco — are highly competitive due to a lack of inventory. So home buyers in those areas often put more money down to make themselves more competitive, and to rise above competing offers. Thus, the average down payments tend to be highest in the hottest housing markets.

Using Gift Money to Minimize Your Investment

On average, home buyers in California cities like Los Angeles, San Diego and San Francisco make larger down payments than buyers in other markets across the U.S. And when you factor in the relatively high housing costs in the Golden State, this initial investment can seem like quite a hurdle.

But there are ways to minimize your upfront, out-of-pocket expense when buying a home — and down payment gifts are one of them.

A down payment gift is exactly what it sounds like. It’s when a third party, such as a family member or close friend, provides funds to help a home buyer cover the down payment (and sometimes closing costs as well). Many of the mortgage programs available in California today allow for gift money from third parties. This applies to conventional and FHA loans alike.

Military members and veterans could also benefit from using the VA loan program, which offers 100% financing. So it’s possible to buy a home in California with no money down, when using this particular program.

The point is, home buyers shouldn’t be intimidated by the above-average down payment percentages shown above. Today’s mortgage industry is pretty flexible, when it comes to the minimum borrower investment.