Here’s Why Some California Home Buyers Put 20% Down

Some home buyers in California choose to put 20% down when buying a house, but that’s not always required. In 2025, some home loan programs allow borrowers to put down as little as 3% of the purchase price.

1. A 20% down payment is not required for all California home buyers; many put down less.
2. Making a 20% down payment helps you avoid paying private mortgage insurance (PMI).
3. A larger down payment could help you qualify for a lower mortgage interest rate.
4. Putting 20% down reduces your monthly payments and long-term interest costs.
5. But it’s not always necessary. Some loans allow borrowers to put down as little as 3%.

Down Payment Requirements for Home Buyers

When researching the home buying process in California, you’ve probably heard about the “standard” 20% down payment. This figure is commonly mentioned within news reports, housing market studies, and similar content.

But why? Why do so many California home buyers put 20% down, and is that kind of investment required for all buyers?

The first thing you should know is that a 20% down payment is not required for all mortgage loans and home purchases in California. Lenders sometimes require 20% down or more, especially for larger “jumbo loan” amounts.

But many home buyers make a smaller upfront investment.

In fact, the average down payment among home buyers these days is closer to 13%. And the average among first-time buyers in California can be even lower than that.

• For a conventional mortgage loan, borrowers can make an investment as low as 3%.
• The FHA loan program allows for down payments of 3.5%.
• VA loans for military members and veterans offer 100% financing with no down payment.

Why Some Borrowers Choose to Put 20% Down

While it’s not always required, there are certain advantages to putting 20% down when buying a home in California. Here are some of the biggest benefits it delivers.

1. You can avoid paying private mortgage insurance.

Private mortgage insurance (PMI) is usually required for conventional mortgage loans that have less than a 20% down payment. When the resulting loan-to-value ratio rises above 80%, PMI is typically required.

According to the government-sponsored mortgage buyer Freddie Mac:

“PMI is an insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.”

This is the main reason why you hear so much about the 20% down payment. A lot of buyers in California choose to invest 20% when buying a home, because it allows them to avoid paying for private mortgage insurance. This could save the homeowner hundreds of dollars per month.

2. You might qualify for a lower mortgage rate

Putting 20% down on a California home purchase might help you qualify for a lower interest rate. That’s because mortgage pricing is often based on risk.

When a borrower makes a down payment of only 3%, the loan is covering the remaining 97% of the purchase price. That represents a higher risk, compared to a borrower who puts 20% down.

3. You’ll end up with a smaller monthly payment.

Not everyone can afford a 20% down payment. In California, especially, home prices can make that kind of investment cost-prohibitive for many borrowers.

But the more you put down on a home purchase, the lower your monthly payments will be.

With all other things being equal, a home buyer who invests 20% will have a much smaller monthly payment than one who invests only 5%.

Home buyers with more money in the bank often choose to put more money down, in order to reduce the loan amount and the size of their monthly payments.

4. It might make your offer stand out in a competitive market.

California real estate markets can be highly competitive due to limited inventory and strong demand. This is something we’ve written about many times in the past.

Making a down payment of 20% or more on a home purchase in California could help your offer rise to the top of the stack. It might make you more competitive against other buyers – and more appealing in the eyes of the seller.

From a seller’s perspective, buyers who can invest 20% or more are generally considered to be a lower risk. While the down payment is not a direct measure of a home buyer’s qualifications, sellers often associate a bigger investment with a “stronger” buyer.

This kind of perception might make a seller more inclined to accept an offer with a 20% down payment, compared to one with little or no money down. It could help your offer stand out, especially in a competitive housing market where multiple offers are common.

Home Loans With a Smaller Required Investment

Putting 20% down on a California home purchase can be a smart strategy – for those who can afford it.

But statistics and surveys have shown that most home buyers cannot afford to make an investment of that size.

That’s understandable. Even for a median-priced home in California, a 20% down payment could add up to more than $150,000. Most home buyers cannot save that much.

Fortunately, there are various low down payment mortgage options that could help you buy a house sooner rather than later. Some of these programs have a minimum required investment as low as 3%.

Using Gift Money From a Family Member

Whether you’re making a down payment of 20% or 3%, you’ll be glad to know that most home loan programs allow for the use of gift money.

Gift money refers to funds provided by an approved third party, such as a family member, to help the borrower cover their down payment and/or closing costs.

Conventional, FHA, and VA loans allow for gift money. This strategy can reduce the amount of money you have to pay up front, out of your own pocket.