Save For A Down Payment And Closing Costs
To buy a home in California you need cash for three things: your down payment, your closing costs and reserves. Down payments can start at 3% on some conventional loans and 3.5% on FHA, and closing costs often run roughly 2% to 4% of the price. Planning all three together keeps surprises away.
Key Takeaways
- Budget for down payment, closing costs and reserves, not just the down payment.
- Minimums vary by loan: 3% on certain conventional loans, 3.5% FHA with a 580 score, and 0% on VA for eligible veterans in the right circumstances.
- Lenders check where your money came from, so keep clean records and avoid unexplained deposits.
- Gifts, seller credits and assistance programs can help, but each has rules.
How much do I need for a down payment?
The answer depends on your loan type, property and credit. Here are the general starting points.
| Loan type | Typical minimum down payment | More information |
|---|---|---|
| Conventional | 3% on first-time-buyer and low-to-moderate-income programs; 5% is common; 20% avoids PMI | Conventional down payment |
| FHA | 3.5% with a 580+ score; 10% with a 500 to 579 score | FHA down payment |
| VA | No down payment is generally required for eligible borrowers up to the reasonable value, with exceptions | VA down payment |
| Jumbo | Often 10% to 20% | Jumbo down payment |
VA zero-down has limits. You may still need cash if the price is higher than the appraised value, if you have partial entitlement and the loan exceeds your county limit, or if you pay closing costs, prepaids or points out of pocket.
What are closing costs and how much should I save?
Closing costs are the fees to finalize your loan and transfer title. They commonly include lender or broker fees, appraisal, title insurance, escrow fees, recording fees, prepaid interest, and prepaid homeowners insurance and property taxes. In California, they often run roughly 2% to 4% of the purchase price, depending on the county, loan type, discount points and any seller credits.
We break every line item down in closing costs in California, with a worked example and links to our payment calculators.
What about reserves?
Reserves are money left in the bank after closing. Many lenders look for some months of housing payments, and jumbo loans often require more, commonly 6 to 12 months. Reserves also protect you personally: a new home often needs repairs, and your first property tax installment and insurance renewals arrive on a schedule you do not control.
How do I save faster?
- Set a target. Use the example above or our mortgage calculator to calculate your number, then divide by the months you have.
- Automate transfers. Move money to a dedicated savings account right after payday.
- Trim recurring costs. Cancel unused subscriptions and review insurance and phone plans.
- Pay down high-interest debt. It frees monthly cash flow and improves your debt-to-income ratio.
- Do not drain retirement without advice. Some retirement accounts allow withdrawals or loans for a first home, but tax consequences apply. Ask a tax professional.
What sources of funds do lenders accept?
- Savings and checking. Funds usually need to be seasoned, meaning they have been in the account for a period of time, typically shown by 60 days of bank statements.
- Gift funds. Allowed on many programs with a signed gift letter. See gift funds on a conventional loan.
- Sale of an asset. Proceeds from selling a car or investment can count if documented.
- Down payment assistance. State and local programs exist. See first-time home buyer help in California.
- Seller credits. These can offset closing costs but not usually the minimum down payment. See seller concessions.
Large deposits that do not match your pay will be questioned. Keep a paper trail and tell your loan officer before you move money between accounts.
What is earnest money?
Earnest money is the deposit you put into escrow after your offer is accepted, commonly about 1% to 3% of the price and negotiable. It shows you are serious and is credited toward your down payment or closing costs at closing. If you cancel outside your contract protections, you could lose it, so confirm your deadlines with your agent. We cover offers in make a smart offer.
At Lendia, we help you plan your cash to close
At Lendia, we compare options from multiple lenders, which helps us find the combination of loan type, credits and assistance that fits your savings. Your Licensed Lendia California Loan Officer can estimate your full cash needs before you write an offer. Next, work out your budget in how much home you can afford. Contact us or get a rate quote now.
Frequently Asked Questions
Do I need 20% down to buy a home in California?
No. Twenty percent avoids private mortgage insurance on a conventional loan, but many buyers put down much less using conventional, FHA or VA loans.
Can a family member give me money for the down payment?
Often yes. Most programs allow gift funds from acceptable donors with a gift letter and a paper trail, but rules differ by loan type.
How much are closing costs on a $1,000,000 home?
At the commonly cited range of 2% to 4%, that is roughly $20,000 to $40,000. Your Loan Estimate will show your actual figures.
Are closing costs included in the loan?
Generally no. Some costs can be offset by seller credits or lender credits, and VA and FHA fees can be financed in specific ways, but you should plan to bring cash.
Is there help for first-time buyers?
Yes, assistance programs exist in California, but availability and terms change. Check current availability through your loan officer.
Rates and terms depend on your situation; approval requires qualification.
Talk to a Licensed Lendia California Loan Officer
At Lendia, we review your situation and show you the programs you qualify for.