Why 20% down is a myth
Somewhere along the way, '20% down' became gospel. It's not a requirement — it's just the point where you avoid mortgage insurance on a conventional loan. Plenty of buyers in Sonoma County close every month with 3.5% down, 3% down, or nothing down at all.
Waiting to save a fifth of a North Bay home price can mean waiting years while prices and rents keep moving. The smarter question usually isn't 'how do I save 20%?' It's 'which low-down program fits my situation, and what does it actually cost me per month?'
1. FHA — 3.5% down, forgiving credit
FHA loans are the workhorse for first-time and credit-rebuilding buyers. You can put down as little as 3.5% with a credit score of 580, and the underwriting is more flexible than conventional on things like past credit hiccups and debt-to-income.
The trade-off is mortgage insurance that, on most FHA loans today, stays for the life of the loan. That's not a dealbreaker — many buyers use FHA to get in, then refinance into a conventional loan once they have equity. It's a door, not a life sentence.
2. VA — zero down for those who served
If you're a veteran, active-duty service member, or an eligible surviving spouse, the VA loan is hard to beat: no down payment, no monthly mortgage insurance, and competitive rates. There's a one-time funding fee (waived for many disabled veterans), but otherwise it's the most affordable way into a home that exists.
If you've got eligibility, start here. We see veterans talk themselves out of it because they assume it's complicated — it isn't, and the math almost always wins.
3. USDA — zero down in the right ZIP codes
This one surprises people. USDA loans offer 100% financing — nothing down — and a chunk of the areas around Sonoma County, the outer North Bay, and rural Northern California actually qualify. You don't have to buy a farm; you just have to buy in an eligible area and stay under the income limits for your household size.
If you're open to the edges of the metro rather than the core, this is worth checking before anything else. We can pull the eligibility map for a specific address in a minute.
4. Conventional 97 and HomeReady — 3% down
Conventional loans aren't just for big down payments. The Conventional 97 program lets qualified buyers put down 3%, and income-based programs like HomeReady and Home Possible do the same with a pricing break for moderate-income borrowers.
The advantage over FHA is the mortgage insurance: on conventional, it can be canceled once you reach about 20% equity, so it doesn't follow you forever. If your credit is solid, this is often the lower lifetime cost even though FHA gets more attention.
5. Down payment assistance — someone else's money
California runs several down-payment and closing-cost assistance programs, and they can be stacked with the loans above. Some are grants; some are quiet second loans you repay later or when you sell. Eligibility and funding change through the year, so the move is to check what's open at the moment you're ready to buy.
Gift funds from family count too. On most of these programs, your down payment doesn't have to come from your own savings at all — it just has to be documented.
So which one is yours?
The right path comes down to a few questions: Do you have VA eligibility? Is the home in a USDA area? Where's your credit? And how long do you plan to keep the loan before you'd refinance?
There's no universally 'best' low-down program — there's the best one for your numbers. That's a fifteen-minute conversation, and it's worth having before you fall in love with a house.