Down Payment Options and Assistance Programs

The down payment is the single biggest reason people delay buying a home — and it's also the most misunderstood. You almost certainly don't need 20% down. Between low-down-payment loans, gift funds, and assistance programs, the real number is often much smaller than the one stuck in your head.

Quick answer

You don't need 20% down to buy a home. Conventional loans can start at 3% down, FHA at 3.5%, and VA loans at zero down for those eligible. Many California buyers also use down payment assistance — grants or low-interest second loans — and gift funds from family to cover part or all of the upfront cost.

What you'll learn

The 20% Myth

Somewhere along the way, 20% became the number everyone assumes they need. In reality, it's just the threshold where you avoid mortgage insurance on a conventional loan — not a requirement to buy. Plenty of buyers purchase with a fraction of that. Putting down more lowers your monthly payment and can improve your rate, but waiting years to save 20% often costs more in rising prices and rent than the mortgage insurance would.

Low-Down-Payment Loan Programs

Each major loan program sets its own minimum down payment, and they're lower than most people expect:

  • Conventional: as little as 3% down for qualifying buyers (Conventional 97, HomeReady, or Home Possible), or 5% standard.
  • FHA: 3.5% down with flexible credit guidelines.
  • VA: 0% down for eligible veterans and active-duty service members.
  • ITIN: low-down-payment options for buyers who file with an ITIN.

Lower down payments usually mean some form of mortgage insurance, which can often be removed or refinanced away later.

Down Payment Assistance Programs

California offers a range of down payment assistance programs, typically aimed at first-time and moderate-income buyers. They generally come in two forms: grants that don't have to be repaid, and low- or deferred-interest second loans that sit behind your main mortgage. Many can be combined with FHA or conventional financing, and some help with closing costs too. Eligibility usually depends on income limits, the purchase price, and completing a short homebuyer education course.

See every California first-time buyer program in one place

Gift Funds and Other Sources

If family wants to help, most loan programs allow gift funds toward your down payment — you'll just need a short gift letter confirming the money isn't a loan. Buyers also tap savings, retirement accounts, and sometimes employer programs. The right mix depends on your situation, and a loan officer can help you stack these sources correctly so the funds are accepted at closing.

Key takeaways

Common questions

Do I really not need 20% down?

Correct. Twenty percent only lets you skip mortgage insurance on a conventional loan. Most buyers put down far less and still get approved.

Can I use a gift from my parents for the down payment?

Usually yes. Most programs allow gift funds from family with a signed gift letter showing the money doesn't have to be repaid.

Are down payment assistance programs free money?

Some are grants you never repay; others are second loans with low or deferred interest. It depends on the specific program and your eligibility.

Does a bigger down payment lower my payment?

Yes. A larger down payment reduces the loan amount and can lower your monthly payment, and reaching 20% lets you avoid or remove mortgage insurance on a conventional loan.