Report: Most California & U.S. Home Buyers Put Down Less Than 20%

According to a recent report based on consumer surveys, 52% of home buyers in California and nationwide make down payments less than 20% when buying a house.

While some borrowers choose to put down 20% or more to avoid paying mortgage insurance, it’s not an industry requirement. These days, some of the major mortgage programs allow for down payments in the 3% range. Despite this, a lot of home buyers in California still think they have to put down 20% or more when buying.

Many California Home Buyers Put Down Less Than 20%

What’s the average down payment among home buyers in California? Do I have to put down 20% when buying a house?

These are common questions among buyers. In fact, the down payment is one of the biggest concerns people have about the mortgage and home buying process. Unfortunately, it’s also an area that is rife with myths and misconceptions.

One of the biggest misconceptions about down payments in California is that home buyers who use mortgage financing have to put 20% down in order to qualify. It’s a fairly widespread misconception, as revealed by numerous surveys over the last few years. But it’s simply not true, and this new report shows that clearly.

This survey (entitled “Consumer Housing Trends Report 2018”) comes from the real estate research team at Zillow. It offers a lot of deep insight into buying trends and buyer behaviors. According to the authors, the report is based on survey responses and information “from a total of 13,439 key household decision-makers” in California and elsewhere across the U.S.

One of their key findings had to do with down payments: The researchers found that 52% of buyers in the U.S. make down payments of less than 20% when purchasing a home.

And that makes sense, when you consider the minimum investment requirements. These days, an eligible borrower in California could qualify for a conventional loan with a down payment as low as 3%. The Federal Housing Administration (FHA) loan program requires an investment as low as 3%. And the VA program for military folks offers financing up to 100% of the purchase price.

Read: Overview of down payment requirements

Other Insights from the Survey

This survey revealed a lot of interesting trends and traits relating to home buyers in California and nationwide. Here are a few highlights:

• Just over half of all home buyers (54%) said they were “somewhat concerned” or “very concerned” about qualifying for a mortgage loan. Many of these concerns relate to the down payment, and may result from the erroneous idea that all home buyers need to put 20% down.
• Most home buyers in California and nationwide get pre-approved for a mortgage loan. According to this massive survey, 80% of them got a pre-approval from a lender before starting the house hunting and buying process.
• All-cash buyers are clearly the minority within the real estate market. Most buyers (77%) use mortgage loans to finance their purchases. That percentage applies to the nation as a whole. It might be even higher in California, given the higher home prices in the state.
• More than half of all buyers (52%) made down payments of less than 20% when buying. Only 23% put down exactly 20% (probably to avoid paying mortgage insurance), while another 20% of buyers made an upfront payment of more than 20%.
• Quite a few home buyers rely on the “Bank of Mom and Dad” to help cover the cost of the down payment. Of those borrowers who used multiple sources to come up with the required investment, 25% used funds gifted from family or friends.

The take-home message for home buyers in California is that a 20% down payment is not always needed. In fact, more than half of all buyers who use a mortgage loan put down less than that amount. Additionally, the funds can come from a family member or other approved source.