The myth that you need a 20% down payment to buy a home has cost this region countless qualified buyers who simply didn't know better. The reality is that you can get into a home in Riverside with significantly less cash than that — but you do need to understand all three components of the required cash: the down payment, closing costs, and reserves. Here's the complete picture.
Part 1: The Down Payment — Busting the 20% Myth
A 20% down payment eliminates Private Mortgage Insurance (PMI), which is a meaningful advantage. But it is absolutely not a requirement for most loan programs. FHA loans allow down payments as low as 3.5% and are specifically designed for buyers with moderate credit or limited savings. Conventional loans are available with as little as 3% down for first-time buyers and 5% down for repeat buyers, though PMI applies at these levels. VA loans — available to eligible veterans and active-duty service members — require zero down payment and have no PMI.
To make this concrete: on a $650,000 home, a 20% down payment is $130,000. A 5% conventional down payment is $32,500. A 3.5% FHA down payment is $22,750. These are very different cash requirements, and understanding which loan program matches your situation is the critical first step in budgeting.
Part 2: Closing Costs — The Number Buyers Forget
Closing costs are the fees paid to third parties who facilitate your purchase: the lender (origination, underwriting, and appraisal fees), the escrow company, the title insurance company, and various government recording fees. In California, closing costs for the buyer typically run 2% to 3% of the purchase price. On a $650,000 purchase, that's $13,000 to $19,500.
There are strategies to reduce this burden. In a more balanced market, it's sometimes possible to negotiate a seller credit toward closing costs — the seller reduces their net proceeds by an agreed amount that covers some or all of your closing costs. Your agent can advise you on whether this is a realistic ask in the current market environment for your price point and target neighborhood.
Part 3: Cash Reserves — What's Left After Closing
Lenders don't just want to know you can make your down payment and cover closing costs — they want to see that you have money left over. This is called 'reserves,' and it's measured in months of your total housing payment (principal, interest, taxes, and insurance — collectively called PITI). Most lenders require two to three months of PITI in reserves after closing. On a $650,000 purchase at 7% with taxes and insurance, your PITI might be approximately $5,200 to $5,600 per month. Two months of reserves means you need roughly $10,400 to $11,200 remaining in your account after paying down payment and closing costs.
Putting It All Together: A Real-World Scenario
Let's make this specific. You're purchasing a $650,000 home with a 5% conventional down payment. Your down payment is $32,500. Your estimated closing costs are $16,000 (roughly 2.5%). Your required reserves are $11,000 (two months PITI). Your total estimated cash needed to close: approximately $59,500.
That is a genuinely achievable number for many families — particularly compared to the $130,000 the 20% myth implies. The specific numbers will vary based on your loan type, credit profile, the lender you work with, and what you can negotiate from the seller. But the range is significantly more accessible than most aspiring buyers assume.
The only way to know your exact number is to talk to a lender with your specific financial information. We can connect you with trusted local mortgage professionals who will give you a clear, honest picture of what you actually need to buy in today's Riverside market. Reach out to us and we'll make that introduction.
