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How to Afford a House in California: Down Payment & Savings Tips

Saving for a down payment can be a difficult task at the best of times. If you want to buy property in California, it will take discipline and long-term planning. To save a down payment faster, consider restructuring your personal finances and applying for a national or state loan program.
Saving for a down payment can be a difficult task at the best of times. If you want to buy property in California, it will take discipline and long-term planning. To save a down payment faster, consider restructuring your personal finances and applying for a national or state loan program.

California is one of the most expensive housing markets in the country. Across the entire state, the median price for a single-family home is a staggering $549,000. However, if you live in Los Angeles or San Francisco, median house prices are even higher at $898,949 and $1,400,000 respectively. California’s high-priced housing market is largely due to a statewide shortage in available property, bloated housing regulations, and skyrocketing costs for labor, land, and material.

Unfortunately for buyers, California’s high-cost property market appears stable, with the 2019 report from the California Association of Realtors forecasting suppressed housing sales and increased home prices throughout 2019 and 2020. However, if you’re aware of California’s affordability barriers in advance, you can start implementing a range of earning, saving, and financing strategies. With a little time and dedication, these strategies can fast-track the process of saving a down payment in the Golden State.

Ask Your Parents for Help

An increasing number of homebuyers are turning to their parents for help affording a down payment in California. According to 2018 analytic information from the Federal Housing Administration, at least 50% of FHA borrowers in California required family assistance to make a down payment. If your parents are in a financially stable position, asking them for a loan or cash gift can take a lot of mental and financial pressure off your shoulders.

Restructure Your Earning and Spending Habits

Saving for a down payment in California will be both inefficient and stressful if you go about it without a plan. We’ve listed five actions you can take to restructure and improve your earning and spending habits:

  • Identify and stick to a weekly savings goal that fits your down payment affordability timeline.
  • Sell or downsize your vehicle and move to a less expensive rental area.
  • Go over your weekly budget and cut down on non-essential expenses.
  • Temporarily pause or reduce your contributions to retirement accounts and college funds.
  • Increase your earning capacity by requesting a raise or starting a side hustle.

Take Advantage of CalHFA and MyHome Programs

Securing a loan through California’s housing assistance programs is one of the most effective ways to lower your down payment requirements and save you money on closing costs.

CalHFA Loans

The California Housing Finance Agency (CalHFA) offers a range of different loan packages to first-time buyers and buyers with low-to-moderate income levels. We’ve broken down California’s two main loan programs here:

  • CalHFA conventional loans are financed through the conventional market and have a 30-year fixed interest rate. If you have bad credit or a lower down payment, you can apply for a CalHFA FHA loan. FHA loans are guaranteed by the Federal Housing Administration and have their own borrower and property qualifications.
  • CalPLUS conventional loans have a higher 30-year fixed-interest rate but they can be combined with MyHome Assistance or CalHFA Zero Interest Programs. Buyers can access both CalPLUS and FHA financing conditions if they are eligible for a CalPLUS FHA loan option.

MyHome Assistance Program

Under the conditions of the MyHome Down Payment Assistance Program, buyers can access up to 3.5% of a property’s appraisal value or sale price (whichever is the lower value). Buyers can use this junior loan to make a down payment or pay closing costs. The MyHome contribution, which uses a simple interest repayment structure, is incorporated into your CalHFA mortgage and can be deferred for the life of the mortgage.

The key requirements for a buyer to qualify for the MyHome Assistance Program are:

  • Buyers must be a first-time homebuyer.
  • Buyers must complete a course in homebuyer education and counseling.
  • If MyHome assistance is combined with a conventional loan, the buyer must use CalPLUS financing and adhere to CalHFA borrower and property guidelines.

Need To Save More? Contact a Local Real Estate Agent!

If you’re ready to buy, get in touch to connect with a local Clever Partner Agent. An agent in the Clever Partner Network can refine your down payment plan and help uncover additional cost savings. If you buy your home through Clever, you may also be eligible for a Home Buyer’s Rebate, a closing credit that can put up to 1% of the sale price back into your pocket.

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Reuven Shechter

Reuven Shechter is the Outreach Coordinator at Clever Real Estate, the free online service that connects you with top real estate agents to help save on commission. He spreads the word about Clever, disseminating studies to journalists and developing relationships with media outlets. Reuven is passionate about investing in real estate and creating lasting success for families. His writing has been featured in Max Real Estate Exposure, Leverage Marketing, and more.

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