What You Actually Need for a Down Payment in California

I get asked this more than anything else in my business, and I have been getting asked it for over three decades. Some version of: John, how much money do I actually need to buy a house?

I want to answer that honestly, which means starting with what I can't do. I can't hand you a dollar amount. Not because I'm holding out on you, but because the number depends entirely on the price of the home you end up choosing, and on the day most people ask me, neither one of us knows yet what that home is.

What I can give you is the part that holds still. Every loan program has a published minimum down payment, and it's expressed as a percentage of the purchase price. Learn the percentages and the arithmetic becomes yours to do, on any house, on any afternoon, without calling anybody.

Then there's the part that catches people, and it catches a lot of them. The down payment is not the whole number. It's the first number.

Why the honest answer is a percentage

If you ask me at a barbecue how much cash you need and I give you a figure off the top of my head, I have told you almost nothing. The same percentage produces very different amounts depending on what you buy. Two buyers can be working from identical program rules and walk into escrow with cashier's checks that look nothing alike, purely because of the price of the house each one chose.

So the percentage is the durable fact and the dollar amount is the local one. The percentages below have been in place a long time. They're published by the agencies and the programs themselves, and they apply the same way anywhere in the state.

The arithmetic is the easy part. Take the purchase price, multiply by the percentage for your program, and that's your down payment. That is genuinely the whole calculation, and it's the one piece of home-buying math you can do on your phone while you're standing in the driveway.

The program minimums, one at a time

Here's the landscape as it stands. I'll define the terms as I go, because the names are worse than the concepts.

• FHA: 3.5% down. FHA is a government-insured loan program, and it's often where buyers with shorter credit histories find the door open. Three and a half percent of the purchase price.
• Conventional: as low as 3% down. Conventional means the loan follows Fannie Mae or Freddie Mac guidelines rather than a government insurance program. Certain conventional programs go as low as 3%. Not every buyer qualifies for the lowest tier, but the tier is real.
• High balance: generally 5% to 10% down. In higher-cost California counties there's a loan size that sits above the standard conforming limit and still follows conforming rules. We call that high balance. Generally speaking, a stronger credit profile supports the low end of that range and a weaker one pushes you toward the high end. In my business we call the strengths in your file compensating factors, meaning everything other than the down payment: credit history, reserves, how your debt ratios look.
• Jumbo: generally 10% down or more. A jumbo loan exceeds the county loan limit entirely, which means the agencies aren't standing behind it and the lender is carrying more of the risk directly. Absent significant compensating factors, plan on 10% at the low end, and sometimes more.
• VA: potentially zero down. If you're an eligible veteran, VA financing may not require a down payment at all. You'll need your DD-214, which is your discharge paperwork, and a Certificate of Eligibility, which is the document confirming your VA entitlement. This is the one place in the market where zero down is genuinely on the table, and in 36 years I have never gotten tired of telling a veteran that.

Those are the program minimums. They are the floor, not the whole story.

Mortgage insurance is the part people miss

This is the piece buyers most often walk in without knowing about, and I would much rather you hear it from me today than discover it when you're reading your payment breakdown.

Mortgage insurance protects the lender, not you, if the loan doesn't perform. It's the cost of putting down less than the traditional 20%, and it works differently depending on your program:

• Conventional, less than 20% down: you'll have mortgage insurance. Most people know it as PMI, private mortgage insurance. Put down 20% or more on a conventional loan and it generally doesn't apply.
• FHA, any down payment: you'll have mortgage insurance. FHA calls it MIP, the mortgage insurance premium. That holds even if you put down more than the 3.5% minimum. It's simply how the program is built.

Here's the structural detail that matters to your budget. On both programs there is typically an upfront component and a monthly component. The upfront piece shows up in your loan costs at closing. The monthly piece lands inside your payment, right alongside principal, interest, property taxes, and homeowner's insurance. So when you're deciding what you're comfortable paying every month, mortgage insurance is part of that number, not a footnote underneath it.

VA is the outlier. VA loans generally don't carry monthly mortgage insurance, although most VA borrowers do pay a one-time funding fee, which can often be financed into the loan, and certain veterans are exempt from it entirely. Ask your loan officer which category you fall into before you assume either way.

A minimum is a floor, not a ceiling

Everything above is a program minimum, set by the agencies and the government programs. The lender who actually funds your loan can be stricter, and plenty of them are.

The industry calls these overlays: additional requirements a lender layers on top of the published guidelines, usually around credit score, reserves, or debt ratios. They're legal, they're common, and they mean two lenders can look at the same buyer and ask for different amounts of money down. It's been my experience that this catches people off guard more than almost anything else in the financing conversation.

So treat these percentages the way you'd treat the speed limit sign on the highway. It's real, published information, and it is not the only thing that determines how the drive actually goes. The number you personally need comes from a written estimate on your specific transaction, with your credit, your income, your debts, and an actual property in it. Nothing short of that is your number.

The down payment is not the finish line

Here's the part I want to say plainly, and I mean it kindly. I meet buyers who saved with real discipline, hit their down payment figure exactly, and haven't set aside a dollar for anything else. Then escrow opens, the rest of the costs arrive, and that's a difficult conversation to be having that late in the process.

Closing costs sit on top of the down payment. They are a separate category of money entirely. In my business we sort them into two kinds. Non-recurring closing costs are the one-time charges you pay during escrow and never pay again once it closes. Recurring costs are the ones that continue after you own the home.

Some of those costs are unavoidable if you're financing. Others can be negotiated between the two parties, and knowing which is which is exactly the sort of preparation that pays for itself. I'm not going to itemize them here, because they deserve their own post and they're getting one later in this series. For today, I want you holding two numbers in your head instead of one: the down payment, and then closing costs on top of it.

How to get to your own number

Start with the math you can do yourself. Purchase price multiplied by your program's percentage gives you the down payment for any house you're considering. Run it at a few different price points and you'll quickly get a feel for the range you're actually operating in.

Then get it in writing. Once you've made a loan application, federal rules generally require the lender to give you a Loan Estimate, which is a standardized disclosure form, within three business days. That form is where your estimated cash to close actually lives. Read it closely and ask about every line you don't understand. No question about that document is too small to raise, and after 36 years I still read every line of them.

There's also a step I can sometimes take earlier than that. For some qualified buyers using conventional financing, I can support the pre-approval review with findings from Fannie Mae's automated underwriting system, which produces a Fannie Mae Desktop Underwriter (DU) certificate. That shows how the agency's own system reads a file rather than how a person guesses it reads. It isn't available for every buyer or every loan type, so ask whether it fits your situation. Where a DU certificate does apply, treat it as a credible starting point and nothing more: DU findings are not a final loan approval. Every loan stays subject to final underwriting once there's a real property and a signed contract in front of me.