Do you need 20% down to buy a house?

No. Most buyers do not need 20% down. Many homebuyers purchase with 3% to 5% down depending on the loan program.

Can you buy a house with no money out of pocket?

Yes. Some buyers use down payment assistance programs, gift funds, or seller credits to reduce or eliminate out-of-pocket costs.

How Much Down Payment Do You Need to Buy a Home in the Central Valley?

Q: How much down payment do you need to buy a home in California?

Most homebuyers in California need between 3% and 5% down for a primary residence. First-time homebuyers may qualify for as little as 3% down on conventional loans or 3.5% down with FHA loans.

Q: What is considered a first-time homebuyer?

A first-time homebuyer is someone who has not owned a primary residence in the past three years.

Q: What is the minimum down payment for an investment property?

Most investment properties require at least 20% down. Some loan programs like DSCR loans may require 20% or more depending on the scenario.

Quick Answer: How Much Down Payment Do You Need?

Most homebuyers in California’s Central Valley need between 3% and 5% down to purchase a primary residence. First-time homebuyers may qualify for as little as 3% down (conventional loans) or 3.5% down (FHA loans). In some cases, buyers can purchase a home with little to no money out of pocket using down payment assistance programs or gift funds.

Where This Applies: Central Valley Homebuyers

I’m Chris Hall, mortgage lender with Rate, and I help buyers throughout:

Modesto
Stockton
Manteca
Ripon
Tracy
Turlock
Stanislaus County
San Joaquin County

If you’re buying anywhere in the Central Valley, these guidelines will apply to you.

Do You Need 20% Down to Buy a Home?

No — and this is one of the biggest myths in real estate.

Most buyers today purchase homes with far less than 20% down. While putting 20% down can reduce your monthly payment and eliminate mortgage insurance in some cases, it is not required.

How Much Down Payment Do First-Time Homebuyers Need?

If you haven’t owned a home in the past three years, you are considered a first-time homebuyer.

Your main options:

• 3% Down (Conventional Loan)

Low down payment option
Ideal for buyers with strong credit

• 3.5% Down (FHA Loan)

More flexible guidelines
One of the most common programs for first-time buyers

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Can You Buy a House With Little to No Money Out of Pocket?

Yes — many buyers in the Central Valley are doing exactly that.

Here’s how:

• Down Payment Assistance Programs

These programs can cover your entire down payment in some cases.

• Gift Funds

Family members (parents, siblings, etc.) can contribute to your down payment.
Funds can often be sent directly to escrow.

• 401(k) or Retirement Funds

You may be able to borrow against your retirement savings.

Example Scenario:

Purchase Price: $500,000
3% Down Payment: $15,000

That $15,000 may come from:

Assistance programs
Gift funds
Retirement accounts

Can You Buy Another Home Without Selling Your Current One?

Yes — and this is a strategy many homeowners are using right now.

If you already own a home, you may be able to:

• Buy your next home with as little as 5% down

(as a primary residence)

• Keep your current home as a rental

This can create long-term income and wealth

• Use equity from your current home

Through a HELOC (home equity line of credit)

What Is an Acceptable Source for a Down Payment?

Acceptable sources include:

Personal savings
Gift funds from family
401(k) or retirement accounts
Equity from another property

Not allowed:

Credit cards
Unsecured borrowed funds

How Much Down Payment Do You Need for an Investment Property?

Investment properties require higher down payments.

Typical options:

• Conventional Investment Property

Usually 20% down or more

• DSCR Loans (Debt Service Coverage Ratio Loans)

Typically 20%+ down
Based on rental income, not personal income

Example:

Purchase Price: $500,000
20% Down Payment: $100,000

For many investors, this down payment is the biggest barrier — but there are strategies to help plan for it.

What Is a First-Time Homebuyer?

A first-time homebuyer is defined as someone who has not owned a primary residence in the past three years.

This means you may still qualify for first-time buyer programs — even if you owned a home in the past.

What Is an FHA Loan?

An FHA loan is a government-backed mortgage designed to help buyers qualify with:

Lower down payments (3.5%)
More flexible credit requirements

It is one of the most commonly used loan programs for first-time homebuyers.

What Is a DSCR Loan?

A DSCR (Debt Service Coverage Ratio) loan is designed for real estate investors.

Instead of qualifying based on personal income, the loan is based on whether the property’s rental income covers the mortgage payment.

Frequently Asked Questions About Down Payments

Do you need 20% down to buy a home?
No. Most buyers purchase with 3%–5% down.

Can I buy a house with no money out of pocket?
Yes. Down payment assistance, gift funds, and seller credits can reduce or eliminate upfront costs.

What is considered a first-time homebuyer?
Someone who has not owned a home in the past 3 years.

Can I use a gift for my down payment?
Yes. Family members can provide funds, often sent directly to escrow.

What is the minimum down payment for an investment property?
Typically 20% or more.

Work With a Central Valley Mortgage Expert

Every buyer’s situation is different. The best way to understand your options is to create a personalized plan based on your goals.

Chris Hall is a mortgage lender with Rate, specializing in helping homebuyers and real estate agents in California’s Central Valley navigate:

Low down payment strategies
First-time homebuyer programs
Investment property financing

If you’re thinking about buying a home in Modesto, Stockton, Manteca, Ripon, Tracy, or Turlock — reach out anytime.

📞 Call, text, or email
🌐 Visit: CentralValleyMortgageNews.com

Central Valley Mortgage News