Here’s Why You Don’t Need a Large Down payment to Buy a Home in California

If you are buying a home in California, you may have heard that you must come up with a 20% down payment to get approved for a loan. We understand many borrowers' frustration since only some have enough saved for a large down payment.

We have good news for you! The 20% downpayment is a myth. In fact, there are plenty of mortgage options available that don’t require any down payment at all! You’ve read it right. That’s zero down on your new California home!

Now is the time to start dreaming again. Don’t let a down payment keep you from pursuing your lifelong desire to own a home.

Let’s discuss your options and look at low down payment and zero down payment programs available in California.

What is a down payment, and why is it important in getting a mortgage?

You can’t escape paying a down payment except on zero-downpayment loan programs.

A down payment is vital since it shows lenders that you are financially responsible and that you have some skin in the game, which can make the difference between getting approved and denied on your loan application.

A down payment also reduces the amount you borrow, which lowers your monthly payments.

A 20% down payment is also a wise decision if you can afford it since you avoid paying for PMI or private mortgage insurance when applying for the popular conventional loan.

PMI is an insurance policy that covers the lender if you default on your loan. 

Lastly, a down payment can help you build equity faster, which may benefit you if you need to sell or refinance. 

If you want to know more about down payment guidelines, you can ask our loan officers for more information.

Is putting down 20% the best move?

A 20% down payment is a good option if you can afford it, but not everyone can pay it, especially with home prices skyrocketing over the past few years.

If putting down 20% would drain your savings and make you “house poor,” this is not the ideal option.

You’d be better off with a smaller down that leaves money in the bank for maintenance, emergencies, and renovations.

The worst decision you can make in buying your new home is making too big of a down payment and leaving you with little to no money for other expenses.

You may be asking, how can I calculate my down payment? You can go to our website and use our online calculator.

What loans offer low downpayment/0% down options?

FHA loans

You can get an FHA loan with as low as a 3.5% down payment. Ask our loan officers if you want to know more about how much down payment is needed with an FHA loan.

Conventional loans

A conventional loan can provide a 3% down payment option, but you need to pay for PMI or private mortgage insurance.

VA and USDA loans

Government-backed VA and USDA loans offer zero down payment programs for eligible and qualified borrowers.

What are the benefits of putting down a smaller amount?

If you can’t afford the traditional 20% down, it’s good to know that a smaller down has benefits.

  • First, you save money upfront and can use the funds for other expenses like closing costs or moving expenses.

  • While you may be paying a higher monthly mortgage payment, you can offset the increase with a lower interest rate, granted that you have good to excellent credit scores.

  • You can buy your new California home sooner than waiting until you’ve saved up for 20%. 

  • Lastly, you can use your money for other investments like stocks or mutual funds.

Are you ready to buy your new California home?

If you are still undecided about buying your new California home because you are intimidated by having to put down a large down, now is the time to reconsider.

We’ve shown in this article that a large downpayment is not a requirement to become a homeowner.

We’ve helped many borrowers become homeowners even with smaller down payments. Being liquid is better than paying a higher down and sacrificing your liquidity.

At Nuline Funding, we can help minimize and manage the trade-offs of putting down a smaller downpayment, so there’s nothing to worry about.

The bottom line is that a down payment does not need to hinder your dream of becoming a homeowner.

Call or send us a message today to learn more about your options.

Let’s get started on your best path forward to homeownership!


* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.