How to Buy a Home in the South Bay with very little down
Using unconventional programs to acquire down payment cash
Owning a home is at the cornerstone of the American Dream.
For most, your home is the largest asset you will own and will also be the largest source of savings. So, from a financial perspective, buying a home is a big goal you should aim for to take advantage of the benefits of being a homeowner. However, with the cost to own a piece of property in the Bay Area these days, coming up with upfront cash is a real roadblock for many would-be homeowners setting their sights on grabbing up coveted real estate in the South Bay region.
Traditionally, you'd want to bring at least 20% of the purchase price as a down payment when you purchase a home, or end up paying PMI (Private Mortgage Insurance) on top of your mortgage. According to Zillow, the December 2020 median home price in San Jose, Ca is around $1,104,081.
You'd need a down payment of roughly $220,000!
While the Bay Area has some of the highest income levels in the nation (median household income in San Jose is $96,662 per year), the cost of living in the area for renters making below the $60k mark can consume upwards of 50% of their income. So, the thought of saving up a $200k down payment can put homeownership out of reach for many first-time buyers.
Luckily, there are a few options available for those looking to buy a home with no money down and don't mind taking an unconventional path to homeownership. Using local county initiatives, tech companies, and other lending programs, there is a solution available for any person with enough determination.
Down Payment Assistance
Here are a few ways to get down payment assistance:
CalHFA - MyHome Assistance Program
This program is for first time buyers and will provide up to $10,000 (or the lessor of 3.5% of the home purchase price) towards the down payment or closing costs. There are income limits that apply but should not hinder the majority of folks in need of down payment assistance. They also have low down payment conventional loans for those that qualify.
Housing Trust Silicon Valley - Empower Homebuyers SCC & HELP programs
A nonprofit organization created in the Silicon valley to help support low-moderate income families with the financial resources to carve a path to homeownership. In addition to a few resources they provide, Housing Trust Silicon Valley also provides down payment assistance to low-income families using two different programs depending on your household income levels; Empower Homebuyers SCC and Homebuyer Empowerment Loan Program (HELP). In most cases, you will still need at least 3.5% of the purchase price saved to be eligible.
Tech Companies
If the above options don't work, try getting a Shared Appreciation investment. There are a few tech companies in the area that will help provide down payment cash by entering a co-investment agreement where the company shares a portion of your future home appreciation gains in exchange for cash today without a payment. Unison, Landed, a few other equity sharing companies exist today and are doing business in the Bay Area - you still may need to save up at least 3%.
Conclusion
If you are looking to buy a home in the Bay Area and need help saving up a large enough down payment, try looking into the various down payment assistance programs that are available today. Although the unconventional route may involve a lot more moving parts (and paperwork), if you are determined to become a homebuyer there are options available to you.
Not sure what's the right option for you? Let's chat so that we can explore these options and determine the best solution for you!
