How Much Do You Need to Put Down on a Home in California?

Home buyers in California tend to have a lot of questions about down payments. And that’s understandable, since it’s one of the bigger hurdles along the path to homeownership.

One of the most common questions is: How much do you need to put down on a home purchase in California? The answer to this question might surprise you.

Surveys have shown that many home buyers believe they need to put down at least 20% of the purchase price. But that’s not always the case. In fact, data provided by the Urban Institute showed that more than one-fourth of California home buyers put down 3.5% or less during 2017.

Nationally, the Median Down Payment is Around 5%

The Urban Institute (an economic and social policy think-tank based in Washington, D.C.) has done a lot of research into down payment trends among U.S. home buyers. They’ve published a number of reports on the subject, and they’ve created an interactive map tool that offers insight at the state level.

Here’s one of their more noteworthy findings: The median down payment among home buyers who used a mortgage loan in 2017 was 5%. The “median” means that half of borrowers put down more than that percentage, while the other half made a smaller investment on their purchase.

That’s much lower than the 20% that many folks believe is necessary.

About 27% of Buyers in California Put Down 3.5% or Less

Some home buyers in California do choose to put down 20% or more when buying a property. But in many cases, this is a personal choice rather than a requirement of the loan program. Borrowers with sufficient funds sometimes choose to make a 20% or higher down payment in order to:

• reduce the size of their monthly housing payments, and
• avoid paying private mortgage insurance (PMI) on the loan.

According to the Urban Institute, about 43% of California home buyers who used a mortgage last year made a down payment of 20% or more. About 27% of buyers put down 3.5% or less when purchasing a property. (The rest fell somewhere in between those two brackets.)

These statistics dispel the notion that all buyers need to put down 20% or more when buying a home in California. The reality is that a lot of folks make a much smaller investment toward their purchases. This is one area where the mortgage industry has become more flexible over the last couple of years.

So How Much Is Needed?

Circling back to the question at hand: How much do you need to put down a home in California? The minimum required investment can vary from one mortgage program to the next.

FHA: For example, the Federal Housing Administration (FHA) loan program allows home buyers in California to make a down payment as low as 3.5%. To be eligible for this option, borrowers typically need to have a credit score of 580 or higher due to HUD requirements.

Conventional: Over the past couple of years, both Fannie Mae and Freddie Mac have eased their criteria for the loans they can purchase from lenders. These changes apply to conventional mortgage loans, which are not insured by the government. Long story short, eligible home buyers in California could qualify for a conventional loan with a down payment as low as 3%.

VA: Our state has the large military population of any state in the country. So there are quite a few home buyers who could benefit from using the VA loan program. With this unique program, California home buyers might not need to make a down payment at all. That’s because it offers financing of up to 100% of the purchase price. Learn more in our VA loan library!