We’ll be frank: a starter home in Los Angeles is not the same as a starter home in most of the rest of the country. If you ask LA residents about the average down payment on a house, they’re likely to respond somewhere in the neighborhood of 20%. But this is higher than the national 15% average down payment on a house (or around $64,000) floated by Redfin’s scrutiny of county records. We can forgive Angelenos’ inflated estimate because homes are often pricier in the Southern California market, and down payments commonly surge well over that 20% figure. But this isn’t a bleak blog about how expensive an LA starter home can be. Rather, we’d prefer to highlight a number of helpful programs meant to reduce or even eliminate a huge upfront payment.
The City of Los Angeles: LIPA and MIPA
One need only look to the Los Angeles Housing Department for two of the best resources when it comes to reducing the average down payment on a house for first-time homebuyers. The Low Income Purchase Assistance (LIPA) and Moderate Income Purchase Assistance (MIPA) programs provide subordinate loans that can be used toward a home’s down payment, closing costs on a house, and even acquisition costs. Depending on your standing, you could receive up to $161,000.
All the applicant needs to foot is a minimum of 1% of the purchase price of the home. The city will then share in a portion of the home’s future appreciation. The loan becomes due upon sale, refinance, or after a period of 30 years. In addition, homebuyers must successfully complete an 8-hour educational course about homeowner best practices. The home must also serve as their primary residence.
Los Angeles County: HOP80 and HOP120
Los Angeles County offers its own unique programs that can drastically reduce a first-time homebuyer’s upfront stake in the average down payment of a house. Depending on income, this program is divided into two tiers, known as HOP80 and HOP120. Applicants could receive assistance of up to $100,000, depending on their qualifying tier. The HOP program comes courtesy of the Los Angeles County Development Authority (LACDA).
State Programs That Can Reduce the Average Down Payment on a House in LA
Buyers may also want to look into California’s statewide programs that can be applied to the purchase of an LA home. These include:
- CalHFA My Home Assistance Program: This program provides a deferred-payment junior loan that can cover up to 3% of the purchase price for conventional loans or up to 3.5% for FHA loans.
- GSFA Platinum: You don’t have to be a first-time homebuyer to use this program, which puts 3% to 5.5% toward your mortgage loan. The best part? It’s a grant that never needs to be repaid.
- Mortgage Credit Certificate (MCC): This one’s a bit different in that, rather than providing funds upfront, it instead opts for a dollar-to-dollar reduction on your federal income tax liability. This indirectly allows you to free up more income to qualify for a mortgage loan. The funds for this program are administered through LAHD, despite being a state-run initiative.
Then, there are the programs that aren’t permanent, but return to availability depending on funding. One of the strongest examples is the CalHFA Dream For All program, a shared-appreciation initiative that can help take the sting out of the average down payment on a house in Southern California.
So Why Don’t All First-Time Homebuyers Use These Programs?
While the incentives of these programs are obviously attractive, many buyers balk at the application process. They’re often daunted by rigid income restrictions, mandatory educational courses, and the first-come, first-served model. Some simply don’t meet the qualifications. Others, rather than risk sinking time into paperwork that may go nowhere, throw away their chances at a reduced average down payment on a house.
Then, there are the prospective homebuyers who simply don’t know these programs exist. Either their agent or their lender never clues them in to these advantages. This is a clear disservice. Programs like these can mean the difference between years of saving and moving into a new home this year.
Before You Commit to a Program
It’s worth mentioning that the programs designed to reduce the average down payment on a house are in constant states of evolution. Minimum requirements, available funds, and limitations on income tend to fluctuate. Therefore, before committing to any specific program, it pays to contact LAHD, LACDA, or a reliable lender to see if you meet the latest qualifications. Perhaps the high average down payment on a house in Los Angeles isn’t the hurdle you think!
With a brand that says as much as JohnHart’s, Senior Copywriter Seth Styles never finds himself at a loss for words. Responsible for maintaining the voice of the company, he spends each day drafting marketing materials, blogs, bios, and agent resources that speak from the company’s collective mind and Hart… errr, heart.
Having spent over a decade in creative roles across a variety of industries, Seth brings with him vast experience in SEO practices, digital marketing, and all manner of professional writing with particular strength in blogging, content creation, and brand building. Gratitude, passion, and sincerity remain core tenets of his unwavering work ethic. The landscape of the industry changes daily, paralleling JohnHart’s efforts to {re}define real estate, but Seth works to maintain the company’s consistent message while offering both agents and clients a new echelon of service.
When not preserving the JohnHart essence in stirring copy, Seth puts his efforts into writing and illustrating an ongoing series entitled The Death of Romance. In addition, he adores spending quality time with his girlfriend and Romeo (his long-haired chihuahua mix), watching ‘70s and ‘80s horror movies, and reading (with a particular penchant for Victorian horror novels and authors Yukio Mishima and Bret Easton Ellis). He also occasionally records music as the vocalist and songwriter for his glam rock band, Peppermint Pumpkin.
