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California Down Payment Requirements: Conventional, FHA, VA & USDA

Do you plan to use a mortgage loan to buy a home in California, sometime in the near future? If so, there’s a good chance you’ll have to make a down payment of some kind.

Today, we’ll look at the minimum down payment requirements in California, for some of the most popular mortgage programs. We’ll cover conventional, FHA, VA and USDA home loan requirements.

Minimum Down Payment Requirements in California

What are the minimum down payment requirements for a home purchase in California? Let’s start with a quick summary, and then take a deeper dive into the various mortgage programs:

The minimum down payment for a mortgage loan in California can range from 0% to 3.5%, in most cases. VA mortgage loans (for military members and veterans) allow 100% financing. The same goes for the USDA home loan program, which is limited to rural borrowers within a certain income range. FHA loans allow for a down payment as low as 3.5%, while conventional or “regular” mortgage loans typically require 3% or more.

Here’s a more detailed breakdown based on the type of financing being used:

Conventional Loans: 3% or More in Most Cases

A conventional home loan is one that is not insured or guaranteed by the government. Emphasis on the word “not.” The conventional label differentiates them from government-backed mortgages offered through the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), and U.S. Department of Agriculture (USDA).

So in that regard, you might think of a conventional loan as a “regular” mortgage product that’s not directly backed by the government.

If you’re going to use a conventional home loan to buy a house in California, you’ll probably have to make a down payment of at least 3% of the purchase price or appraised value.

Fannie Mae and Freddie Mac, the two government-sponsored corporations that buy home loans from lenders, will purchase mortgage loans with up to 97% of the home value. That’s usually the highest they’ll go, in terms of the maximum loan-to-value (LTV) ratio.

In certain scenarios, a home buyer might have to put down more than 3% when using a conventional loan. This is often true for “jumbo” mortgages that exceed the conforming loan limits for the county where the home is located.

Bottom line: The minimum down payment requirement for a conventional loan in California is usually set at 3%, though some borrowers might have to invest more than that.

FHA Loans: 3.5% With Credit Score Stipulations

The Federal Housing Administration (FHA) home loan program is popular with home buyers who have limited down-payment funds and/or past credit issues. This is a form of government-backed mortgage program where lenders receive some degree of insurance coverage from the government.

As for the down payment requirements, California home buyers who use the FHA loan program usually have to make a down payment of 3.5% or more. That’s the minimum investment required for this particular program.

But there’s a credit score stipulation, as well. To qualify for the 3.5% down option mentioned above, borrowers must have a credit score of 580 or higher. Otherwise, they might be required to make a larger investment on an FHA loan.

VA Program Offers 100% Financing for Most Borrowers

VA loans (available for military members and veterans) typically offer 100% financing. This means there is no down payment requirement for a California home buyer who uses a VA-guaranteed mortgage loan. That’s a huge benefit for those who are eligible for this particular program.

Here at Bridgepoint Funding, we specialize in California VA loans and are always happy to help our military service members and veterans. So be sure to reach out to us, if you have questions about this particular program.

USDA Offers 100% Financing for Certain Rural Borrowers

Like the VA program mentioned above, the USDA home loan program also allows eligible home buyers in California to buy a house with no down payment. But the eligibility criteria are fairly strict, limiting this program to a specific group. In short, you have to live in a designated rural area and meet certain income requirements.

Officially known as the “Section 502 Direct Loan Program,” USDA home loans help low-income borrowers obtain housing in select rural areas. According to the USDA: “No down payment is typically required. Applicants with assets higher than the asset limits may be required to use a portion of those assets.”

To learn more about this unique program, refer to the USDA’s direct home loans page.

Mike Trejo

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

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