The Homebuyer’s Corner
You Do Not Need 20 Percent Down to Buy a Home in California
Written by Armando Novelo, NMLS 237243, a mortgage loan officer in West Covina with over 20 years of experience helping Southern California buyers.
No. You do not need 20 percent down to buy a home in California. The 20 percent figure is not a law, not a requirement, and not something most buyers actually use. It is a threshold that eliminates private mortgage insurance on a conventional loan. That is it. Somewhere along the way it became the standard that everyone assumed they had to hit before they were allowed to buy, and that assumption has kept more San Gabriel Valley families on the sideline than any interest rate ever has.
Let me show you what the math actually looks like.
Where the 20 Percent Number Came From
Private mortgage insurance, or PMI, is a monthly cost added to your conventional loan payment when you put down less than 20 percent. It protects the lender, not you, in case you default. Once your loan balance drops to 80 percent of the home's value, PMI cancels automatically. Twenty percent down means you start there from day one and never pay PMI at all.
That is genuinely valuable. Nobody wants to pay mortgage insurance. But the leap from "PMI cancels at 20 percent equity" to "you need 20 percent to buy a home" is a misunderstanding that has taken on a life of its own. The 20 percent threshold is a cost optimization target, not a purchase requirement.
Most conventional loans allow as little as 3 to 5 percent down. FHA loans allow 3.5 percent down with a credit score of 580 or above. VA loans for eligible veterans require zero down. These programs exist specifically because the government and the lending industry understood decades ago that requiring 20 percent would lock out the majority of working households from homeownership entirely.
What 20 Percent Actually Looks Like on a $750,000 Home
This is where the myth becomes painful.
On a $750,000 home in the San Gabriel Valley, 20 percent down is $150,000. That is the number buyers think they need. Here is what they actually need under different programs.
FHA at 3.5 percent down is $26,250. Conventional at 5 percent down is $37,500. Conventional at 3 percent down for first-time buyers under certain programs is $22,500.
The difference between the myth and the reality on a $750,000 purchase is $112,500 to $127,500. That is not a rounding error. That is the difference between buying now and waiting five to ten years to save a number you never actually needed.
And that gap widens every year that home prices in the SGV continue to appreciate. The $750,000 home you are waiting to save 20 percent on may be an $850,000 home by the time you get there. The finish line moves while you are running toward it.
The Real Cost of Waiting for 20 Percent
I have a friend who is a nurse. She spent years doing everything right, saving methodically, watching the market, waiting until she had the full 20 percent down for a home in Glendora. When she started saving, that home was around $400,000. She needed $80,000. By the time she had saved it, the same home was $646,000. The goal post had moved $49,200 further away while she was chasing it.
What nobody told her early enough is that she never needed $80,000. She could have bought that $400,000 home years earlier with $14,000 down on an FHA loan. The equity she would have built in the years she spent saving would have far outpaced what she accumulated sitting on the sideline. The PMI she would have paid along the way would have been a fraction of the appreciation she missed.
This is the real cost of the 20 percent myth. Not the PMI. The years.
What PMI Actually Costs and Why It Is Not the Enemy
If you put less than 20 percent down on a conventional loan, you will pay PMI. On a $750,000 purchase with 5 percent down, your loan amount is $712,500. At a PMI rate of roughly 0.5 to 0.8 percent annually for a buyer with good credit, you are looking at approximately $297 to $475 per month added to your payment.
That is real money. But here is how to think about it.
PMI on a conventional loan cancels when your loan balance drops to 78 percent of the original purchase price, which happens through your monthly payments plus any appreciation. In a market where home values are moving, that point can come faster than the amortization schedule alone suggests. You can also request cancellation once you reach 80 percent loan-to-value and your payment history is clean.
Meanwhile, every month you are in the home you are building equity, getting the mortgage interest deduction, and living in a place that is yours. The PMI is the cost of accessing all of that now rather than waiting years to avoid it.
If you saved aggressively and eliminated PMI immediately by putting 20 percent down, how long would it take you to recoup the years of appreciation and equity you missed while saving? That math rarely favors those who wait.
What Down Payment Assistance Does to This Equation
Here is where it gets even more interesting for buyers in the San Gabriel Valley.
City, county, and state programs exist specifically to help first-time buyers cover the gap between what they have saved and what they need for a down payment. We covered the full landscape of what is available in this article, specifically in the section on how city, county, and state programs stack. And we covered how the different structures of those programs work in this article, in the section on silent second loans and grants.
The short version is that many buyers in the SGV who think they need to save $37,500 for a 5 percent down payment on a $750,000 home may qualify for programs that cover some or all of that amount. CalHFA programs, city assistance programs in West Covina, La Puente, Pomona, Azusa, South El Monte, and others can reduce what a buyer needs to bring to closing significantly. Some buyers in this market are purchasing with as little as 1 to 2 percent out of pocket when programs are stacked correctly.
The 20 percent myth is bad enough on its own. When buyers apply it to a market where assistance programs exist that most people never hear about, the damage is compounded.
The One Scenario Where 20 Percent Down Makes Sense
I want to be honest here because not everything is about getting in as fast as possible with as little down as possible.
If you have 20 percent available, your credit is strong, and your monthly budget is tight enough that eliminating PMI from day one meaningfully changes your quality of life, putting 20 percent down is a legitimate choice. You are not paying PMI, your loan balance is lower, and your monthly payment is more manageable.
The problem is not people who choose to put 20 percent down. The problem is people who believe they have no choice but to wait until they have it.
Those are two completely different situations and only one of them is true.
What to Do If You Have Been Waiting
Stop running the old calculation and run the real one.
Find out what you actually qualify for today. Not based on 20 percent down but based on your actual income, your actual credit, and the programs available for your situation. That number is almost always different from what buyers assume, and it is almost always in a direction that means they could have started sooner.
A pre-approval review takes less time than you think. What you find out might change your timeline by years. We covered exactly what that process involves and why starting it early matters in this article, specifically in the section on what loan programs have rules that take time to meet.
The finish line is not 20 percent. It never was.
Armando Novelo, NMLS 237243, is a mortgage loan officer at Super Mortgage Bros, powered by Golden Empire Mortgage. He has been helping Southern California buyers and homeowners since 2002. His office is located in West Covina, CA.
Article Published: August 20, 2026
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Armando Novelo
NMLS 237243
Super Mortgage Bros
1900 W. Garvey Ave S. #100
West Covina, CA 91790
Phone: (626) 200-1838
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