What if I Can’t Afford the Down Payment on a Bay Area Home Purchase?

Given the expensive nature of our real estate market, some home buyers worry that they cannot afford the down payment for a Bay Area home purchase. After all, the median price point for our market is currently around $1.3 million. So even a 3% down payment (the minimum amount for most conventional loans) can add up to a sizable investment.

Which begs the question: What if I can’t afford the down payment for a Bay Area home purchase?

How to Afford a Down Payment in the Bay Area

This is a valid concern for some would-be home buyers, especially those with smaller budgets. Some people can afford the monthly mortgage payments associated with a home purchase, but not the down payment itself.

Below, we will explore some of the options people have if they can’t afford a down payment in the San Francisco Bay Area.

1. Understand the truth about down payment requirements.

Some home buyers have misconceptions or misunderstandings about the minimum down payment required for a mortgage loan. One of the most common misconceptions is that you need to put down 20% when buying a house in the Bay Area.

The reality is that there are several mortgage options available with a much lower down-payment requirement.

For example, FHA home loans only require 3.5% down in most cases. Similarly, some conventional mortgage loans allow borrowers to put down as little as 3% of the home’s value. And if you happen to qualify for the VA loan program, you could buy a house without putting any money down.

Some people think homeownership is out of reach because they believe they have to put 20% down. But in these cases, the down payment is more of a perceived obstacle than an actual one.

Spend some time researching the minimum required investment for different mortgage options. Or call us with your questions.

2. Use a low-down-payment mortgage option.

We just mentioned some of the different mortgage products that allow for a lower down payment. If you can’t afford to make a big investment on a Bay Area home purchase, you should look into those programs. You might find that the minimum required investment is much smaller than what you previously thought.

If you have questions about making a down payment in the Bay Area, please contact our staff. We are a local mortgage company that offers a broad range of financing products. We can help you explore your mortgage options to find something that works for your budget.

3. Use gift money from a third-party source.

Did you know that many mortgage programs allow you to use gift money provided by a third-party donor? It’s true. Down payment gifts, as they are known, are typically allowed for FHA, VA and conventional mortgage loans.

You don’t necessarily have to make the entire down payment out of your own pocket. You could use money from a relative, a close friend, or another approved donor.

This is a great option for borrowers who can’t afford to make a down payment in the Bay Area. It could help you overcome the initial investment hurdle associated with a home purchase.

4. Buy a house in a cheaper real estate market.

The San Francisco Bay Area real estate market can be pretty expensive. That’s no secret. But some cities are much more affordable than others, in terms of the median home price.

For example, we recently wrote an article about Solano County being the most affordable housing market in the region. The median home price there is significantly lower than the median for the broader Bay Area. So the upfront investment would be smaller as well.

If you’re having trouble coming up with the down payment funds for a home purchase in the Bay Area, you might need to expand your search zone to include more affordable markets.

5. Postpone your purchase and rent for a while.

If you currently lack the funds needed to make a down payment in the pricey Bay Area, it might be best to rent for a while. This would give you an opportunity to save up for your home-buying expenses, especially if you can minimize the size of your rent payment.

In most parts of the San Francisco Bay Area, renting is cheaper than buying. That means you’ll save money each month by renting, compared to owning. You could put those savings aside in a home-buying fund for your future purchase.

Related: How the down payment process works

Have Mortgage Questions?

Please contact our knowledgeable staff if you have questions about the minimum down payment when buying a home in the Bay Area.

As a mortgage broker, we have access to multiple lenders and loan products. This helps us find the right mortgage option for each individual client, based on their financing needs. Many of the loans we offer have flexible requirements, in terms of the down payment and other features.