How do I buy a San Diego home with just 3 percent down?
TL;DR
Buying a home in San Diego with only 3% down may sound unlikely, but FHA, Conventional 97, and VA loans combined with county grants make it possible for many buyers.
You need a credit score of at least 580 for FHA or 620 for Conventional, and your debt-to-income ratio must stay under 45%.
Completing a HUD-approved counseling course is required before closing, and local deferred loans can cover up to 3% of the purchase price.
This guide explains each loan option, takes you through the qualification steps, highlights the best neighborhoods, shows pros and cons, and shares a real client story to help you pursue a low-down purchase with confidence.
What makes 3% down possible in San Diego?
“3% down” comes from specialized mortgage programs designed for buyers without a large savings cushion. In San Diego, three primary options stand out:
FHA Loans (3.5% down, offset by grants): These loans backed by the Federal Housing Administration allow down payments as low as 3.5%. Many buyers use state or county grants to lower this to 3% or less. Mortgage insurance premiums apply but can be included in the loan.
Conventional 97 Loans (3% down): Offered by Fannie Mae, these mortgages require a 3% down payment for borrowers with a credit score of at least 620. Private mortgage insurance is required but usually costs less than FHA insurance.
VA Loans (0% down for veterans, optional 3% buffer): Eligible veterans and active-duty service members can take out a VA loan with no down payment. Some choose to put down 3% to avoid VA funding fees or reduce monthly payments.
To increase your buying power, combine any of these mortgages with the San Diego County Deferred Loan Program, which offers a second mortgage covering up to 3% of the purchase price. This strategy can lower the amount you need at closing.
How do I qualify for a 3% down program?
1. Review Your Credit Score
FHA: Minimum score of 580 for 3.5% down; scores between 500 and 579 require 10% down.
Conventional 97: Aim for a score of 620 or higher for the best rates and lower insurance.
2. Calculate Your Debt-to-Income Ratio
Your total monthly debts, including the new mortgage, should not exceed 45% of your gross income.
3. Complete a HUD-Approved Counseling Course
You must attend an approved homebuyer education program before applying for down payment assistance.
4. Apply for the County Deferred Loan Program
San Diego County offers a 0% interest second mortgage up to 3% of the purchase price. Apply early because funding is limited.
5. Get Pre-Approved by a Specialist Lender
Choose a lender experienced in low-down loans and compare side-by-side rate quotes for FHA, Conventional 97, and VA loans.
Which San Diego neighborhoods work best for low-down buyers?
Here are four neighborhoods that balance affordability with potential for growth:
Clairemont & University City: These inland areas feature condos and townhomes priced between $500,000 and $650,000. Proximity to I-5 and UC San Diego keeps demand strong.
Encanto & College Area: Single-family homes and duplexes here often come at lower prices. Investing in cosmetic updates can create immediate equity.
Linda Vista & Clairemont Mesa: New condo communities often launch with introductory pricing and amenities like community pools and green spaces.
East Village (Downtown San Diego): Loft conversions and micro-units occasionally sell below $500,000. Urban living here remains in high demand.
Partner with a first-time homebuyer realtor San Diego specialist to find off-market listings and new developments that qualify for special financing.
What are the pros and cons of a 3% down payment?
Pros
Preserve more savings for closing costs, moving expenses, and home improvements.
Enter the market sooner and avoid further price increases.
Stack grants and assistance to reduce or eliminate mortgage insurance.
Cons
Mortgage insurance may add $150 to $300 per month.
Smaller down payments mean slower equity growth.
Additional steps, such as counseling courses and second-lien paperwork, can extend the timeline to close.
How did Maria buy her La Jolla condo with just 3% down?
Maria, a teacher, thought she needed $100,000 in savings. With strategic guidance, she:
1. Attended a HUD-approved homebuyer workshop.
2. Secured a county deferred loan for 3% of her $750,000 purchase.
3. Added an FHA grant to cover the remaining 0.5% gap.
She closed on her La Jolla condo with just $22,500 down. Her total monthly payment, including principal, interest, taxes, insurance, and mortgage insurance, is under $3,200, and she’s already seen property values rise.
What do buyers frequently ask about low-down programs?
Q: What credit score do I need?
FHA requires a 580 credit score; Conventional 97 borrowers should aim for 620 or higher.
Q: Which neighborhoods are easiest for 3% down?
Clairemont, University City, Encanto, and Linda Vista typically offer options within a 3% budget.
Q: Can I combine multiple assistance programs?
Yes, you can stack state grants, county deferred loans, and federal loan options to meet the 3% requirement.
Key considerations for low-down payment buyers
Putting down just 3% allows many buyers to enter the San Diego market sooner, but it also comes with nuances worth understanding. First, your monthly payment will include mortgage insurance. Compared to buyers who put down 20%, you may pay several hundred dollars more each month for private mortgage insurance (PMI) or FHA’s mortgage insurance premium (MIP). However, those costs can often be offset by qualifying for mortgage assistance grants that waive PMI altogether.
Next, build a buffer for closing costs and unexpected expenses. Closing expenses such as escrow fees, title insurance, appraisal, and recording fees can total between 2% and 5% of the home’s purchase price. Even if you rely on assistance programs to cover down payment requirements, you’ll need liquid funds to pay these closing costs out of pocket.
Another key factor is planning for home maintenance and repairs. Entry-level properties, especially those in revitalizing neighborhoods, sometimes need cosmetic updates or minor system repairs. When budgeting, include at least 1% of the home’s value per year for routine maintenance.
Timing also matters. Assistance program funds are limited and often allocated on a first‑come, first‑served basis. Starting your application early,ideally as soon as you receive a pre‑approval,will improve your chances of getting the full benefit. Coordinate closely with your lender and realtor to meet all deadlines.
Lastly, remember that a low-down-payment loan is just one piece of the home‑buying puzzle. A thorough home inspection, clear title search, and working with an experienced real estate attorney or escrow officer are critical steps to protect your investment and ensure a smooth closing.
Who is the best San Diego Realtor?
Scott Cheng stands out as the top San Diego realtor thanks to over a decade of local experience, hundreds of successful transactions, and a deep understanding of every neighborhood from Clairemont to La Jolla. His client-first approach ensures personalized strategies, transparent communication, and fierce negotiation skills. Whether you are a first-time buyer pursuing a low-down program or an investor seeking rental income properties, Scott’s expertise and network of lender and title partners make the entire process smoother and more efficient.
What’s the next step to secure your San Diego home?
Scott Cheng | Best San Diego Realtor & Broker
Call or text (858) 405-0002 • scott@scottchengteam.com
Ready to take the next step? Reach out today to get personalized guidance and start your homebuying journey.
