Introduction
If I had a dollar for every time a first-time buyer told me they were waiting to save up 20% before buying a home, I’d have a very nice collection of dollars. And honestly, I don’t blame anyone for thinking that – it’s one of those real estate myths that just refuses to die.
The truth is, in California, most first-time buyers don’t need anywhere close to 20% down. Depending on the loan type you qualify for and the programs available in San Joaquin and Sacramento counties, you could be looking at a down payment of 3%, 3.5%, or in some cases nothing at all. I’ve helped families buy their first home in Lodi and Stockton with significantly less than they expected – and they’ve never looked back.
Let me break down exactly what you need to know about down payments so you can stop waiting and start planning.
Where the 20% Myth Comes From
The 20% rule has a very specific – and actually pretty reasonable – origin. When you put less than 20% down on a conventional loan, lenders require you to pay something called Private Mortgage Insurance, or PMI. PMI protects the lender if you default on the loan. It typically runs between 0.5% and 1.5% of your loan amount per year, added to your monthly payment.
So the advice to put 20% down isn’t wrong – it’s just not the only option, and for a lot of California buyers, it’s not the realistic option either. Median home prices in San Joaquin County are well into the $400,000s, which would put a 20% down payment at $80,000 or more. That’s a lot of money to save up, especially if you’re also paying rent.
The good news is there are better paths forward.
FHA Loans: The Most Common First-Time Buyer Option
FHA loans are backed by the Federal Housing Administration and are specifically designed for buyers who don’t have a massive down payment saved up. With an FHA loan, you can buy a home with as little as 3.5% down – as long as your credit score is 580 or above. If your score is between 500 and 579, you’d need 10% down.
On a $400,000 home, 3.5% is $14,000. That’s still a meaningful amount of money, but it’s a very different conversation than $80,000.
FHA loans also have more flexible debt-to-income requirements, which can be helpful if you’re carrying student loans or car payments. The tradeoff is that FHA loans require mortgage insurance premiums (MIP) for the life of the loan in most cases, which adds to your monthly payment. Whether that’s the right call depends on your situation – and that’s a conversation I’m always happy to have with my clients.
Conventional Loans With 3% Down
Many people don’t realize that conventional loans – the kind not backed by a government agency – now offer down payment options as low as 3%. Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs are two of the most widely used, both designed specifically for low-to-moderate income buyers.
Unlike FHA loans, conventional loans with PMI allow you to cancel the mortgage insurance once your home equity reaches 20%. So while you’re paying PMI in the early years, it’s not permanent the way FHA MIP often is.
To qualify for conventional loans, most lenders want to see a credit score of at least 620, though the better your score, the better your interest rate.
CalHFA: California’s Own Down Payment Help
California has its own housing finance agency – CalHFA – and if you haven’t looked into what they offer, you should. The California Housing Finance Agency provides several programs specifically designed to help first-time buyers in California afford a down payment and closing costs.
The CalHFA MyHome Assistance Program offers a deferred payment loan that covers up to 3.5% of the purchase price to use toward your down payment or closing costs. You don’t pay it back until you sell the home, refinance, or pay off the first mortgage. That essentially means you could get into a home with very little out of pocket.
There’s also the CalHFA Zero Interest Program (ZIP), which provides zero-interest assistance specifically for closing costs. These programs aren’t unlimited – there are income limits and home price caps that vary by county – but many buyers in San Joaquin and Sacramento counties qualify. I work regularly with lenders who specialize in CalHFA financing, so if you want to know if you qualify, the fastest way to find out is to just reach out to me and I’ll connect you with someone who can run your numbers.
USDA Loans: Zero Down for Eligible Areas
If you’re looking at homes in rural or semi-rural areas – and parts of San Joaquin County qualify – a USDA Rural Development loan might be worth a serious look. USDA loans require zero down payment, and they’re backed by the US Department of Agriculture.
Areas around Lodi and some surrounding communities in San Joaquin County fall within eligible USDA zones, though eligibility changes and should always be confirmed. Income limits apply, and the property itself has to meet certain USDA standards. But for buyers who qualify, a zero-down loan in a community you love is genuinely an option.
USDA loans also tend to have competitive interest rates and lower mortgage insurance costs compared to FHA – another reason they deserve consideration.
VA Loans: The Best Deal in Mortgage Lending
If you or your spouse served in the military, this one’s for you. VA loans, backed by the Department of Veterans Affairs, offer zero down payment, no private mortgage insurance, and some of the lowest interest rates available anywhere. They’re one of the most valuable benefits available to veterans and active-duty service members, and in my view, not enough buyers know to ask about them.
There are some fees involved – a VA funding fee, for example – but for most veterans, the long-term savings compared to a conventional or FHA loan are substantial. If you’re a veteran buying in the Lodi, Stockton, or Sacramento area, let’s talk about whether a VA loan makes sense for your situation.
Don’t Forget: You Need More Than Just the Down Payment
One thing I always make sure my clients understand is that the down payment isn’t the only cash you’ll need at closing. There are also closing costs.
Closing costs in California typically run between 2% and 3% of the purchase price – so on a $400,000 home, that’s $8,000 to $12,000. These costs cover things like lender fees, title insurance, escrow fees, prepaid property taxes, and homeowners insurance. Some sellers will agree to pay a portion of closing costs as part of the negotiation, which can help.
The programs I mentioned earlier – like CalHFA ZIP – can be used toward closing costs, not just the down payment. And some lenders offer lender credits in exchange for a slightly higher interest rate, which can reduce your upfront cash needs even further.
The honest answer to how much you need saved to buy a home in California is: it depends on your loan type, purchase price, and what programs you qualify for. But it’s almost always less than people assume. The best first step is a conversation with a lender, and I can introduce you to one I trust.
What This Means for You Right Now
If you’ve been waiting to buy a home in San Joaquin or Sacramento County because you’re not sure you have enough saved, I’d encourage you to stop waiting and start finding out. The answer might surprise you.
I’m Angelica Cervantes, a bilingual REALTOR with Berkshire Hathaway HomeServices Drysdale Properties in Lodi, CA. I work with first-time buyers across San Joaquin and Sacramento counties every day, and I can connect you with trusted lenders who specialize in low-down-payment options and California-specific programs.
Reach out for a free, no-obligation consultation. We can talk through your situation honestly and figure out whether you’re closer to buying than you think. Call or text: 209-880-8063. Available in English and Espanol.
