Zero-Down Home Purchase Programs in California
Executive Summary
California offers multiple pathways for homebuyers to purchase property with zero down payment or minimal down payment requirements, each with distinct eligibility criteria, cost structures, and timeline implications. As of January 2026, the most accessible programs include federal VA loans for veterans, USDA loans for rural homebuyers, California’s newly reopening Dream For All shared appreciation program for first-time homebuyers, and private credit union adjustable-rate mortgages. The California Housing Finance Agency (CalHFA) administers several state-specific programs designed to reduce upfront costs through deferred payment assistance. Buyers should evaluate their eligibility across multiple pathways, as each program carries different long-term cost implications and restrictions.
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Federal Government Programs: VA and USDA Loans
VA Loans for Veterans and Service Members
VA loans represent the most favorable zero-down option for eligible borrowers, offering 100% financing with no mortgage insurance premium for the life of the loan. With over 28,450 VA loans closed in California last year, this remains the dominant zero-down path for military-connected households. Eligible borrowers include veterans, active-duty service members, reservists, National Guard members, and surviving spouses of service members who died in service or from service-connected disabilities.
Credit requirements are flexible, with most lenders accepting scores of 580–620, though the VA itself does not establish a minimum. This flexibility particularly benefits military veterans whose credit may have been affected by deployments, medical debt, or service-related financial disruptions. Importantly, VA loans have no income limits, allowing high-earning veterans to purchase properties at any price point within the state. The program uses “residual income” rather than debt-to-income ratios alone, evaluating whether borrowers will have sufficient funds remaining after mortgage and other obligations to maintain their lifestyle.
The primary cost associated with VA loans is the funding fee, which finances the program without using taxpayer resources. For first-time use with zero down, this fee is 2.15% of the loan amount. However, approximately 30% of VA borrowers qualify for complete fee exemptions due to service-connected disability ratings (starting at 10%), Purple Heart status, or surviving spouse benefits, making this advantage even more significant for disabled veterans.
Loan limits vary by California county. In high-cost areas (San Francisco, Los Angeles, Orange County, San Diego, Santa Clara, Marin, San Mateo), the limit with partial entitlement is $1,249,125. Standard inland California counties cap partial entitlement at $832,750. Veterans with full entitlement face no official limits; a veteran who has completely paid off a prior VA loan can use their full benefit again, potentially holding two simultaneous VA-financed properties.
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USDA Loans for Rural Homebuyers
USDA loans eliminate the down payment requirement for low-to-moderate-income buyers purchasing in eligible rural areas, covering approximately 92.8% of California’s landmass. The program requires no down payment, allowing 100% financing of the appraised value. With 22,989 active USDA residential loans in California (90% assisting first-time homebuyers), this program has established substantial market presence in the state.
The primary USDA eligibility requirement is income. Household income cannot exceed 115% of the area median income for the specific county. This income limit varies significantly by location—for example, while many California counties follow baseline limits of $119,850 (one to four-person households), Santa Rosa and other high-cost areas allow up to $135,000–$163,000. The income calculation includes all adult household members’ gross income, though certain categories (full-time student income capped at $480, elderly/disabled dependent income capped at $400) receive deductions.
Credit score requirements typically start at 640, though lenders maintain discretion to approve borrowers with scores as low as 620 with compensating factors. USDA loans include an annual guarantee fee (mortgage insurance premium) that is typically lower than FHA insurance costs but still represents an ongoing expense.
Property eligibility requires USDA verification. While 97% of U.S. landmass qualifies as “rural” under USDA definitions, urban cores and densely populated areas within California do not. Buyers must verify their specific property address using the USDA’s online eligibility map, which shows in real-time whether a location qualifies. Approximately 7.2% of California land area remains ineligible for USDA loans due to urban classification.
The loan term is exceptionally long—up to 38 years for very-low-income applicants—and the interest rate as of January 1, 2026 is 5.00% for low-income and very-low-income borrowers. When modified by payment assistance, the rate can decrease to as low as 1%. Closing costs and inspections (including well water and septic tests where required) can be financed into the loan.
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California State Programs
Dream For All Shared Appreciation Loan (Critical 2026 Update)
California’s signature down payment assistance program, Dream For All, is reopening in early 2026 with the most substantial assistance available in the state. Registration opens February 24, 2026 and closes March 16, 2026, with a randomized lottery determining which applicants receive vouchers (not first-come, first-served).
The program provides up to 20% of the home’s purchase price in down payment or closing cost assistance, with an absolute maximum of $150,000. Unlike traditional grants, this is a shared appreciation loan—borrowers repay the original assistance amount plus a percentage of their home’s appreciation when they sell, refinance, or transfer the property. This structure allows the state to recycle assisted funds for additional borrowers. According to the January 2026 CalHFA press release, the average household saves approximately $1,200 per month through Dream For All compared to other financing paths.
Eligibility Requirements for Dream For All:
All borrowers must be first-time homebuyers (no ownership interest in the past three years). Additionally, at least one borrower must meet the definition of “first-generation homebuyer,” meaning neither parent has owned a home in the United States, or the applicant was placed in foster care at any point. At least one borrower must be a current California resident.
Income limits are the most restrictive element and vary significantly by county. Examples from 2025/2026 data: Los Angeles County: $168,000; San Diego County: $207,000; Del Norte County: $148,000; Santa Clara County: $309,000; Alameda County: $253,000. Buyers should verify their county limit, as limits exceed $300,000 in expensive Bay Area and coastal counties but remain under $190,000 in rural inland areas.
Minimum credit score is 680, substantially higher than federal programs. Maximum debt-to-income ratio is 45% for most borrowers (can reach 50% with credit score above 700, strong compensating factors, and automated underwriting approval). The property must be a primary residence and single-family home, townhome, or eligible manufactured home on a permanent foundation. Condominiums are allowed. Vacation homes and investment properties disqualify the applicant.
Shared Appreciation Mechanics:
Repayment is triggered only upon sale, refinance, payoff, or title transfer—there are no monthly payments during ownership. The appreciation calculation depends on income level. For households exceeding 80% of area median income (AMI), the state receives 20% of net appreciation; for households at or below 80% AMI, the state receives 15%. Crucially, the appreciation amount owed is capped at 2.5 times the original Dream For All loan amount. If property values decline, borrowers still owe the full principal but avoid additional appreciation obligations.
Loans cannot be stacked with other CalHFA down payment assistance, and combined loan-to-value (CLTV) must fall between 95% and 105%. This requirement limits additional borrowing flexibility.
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MyHome Assistance Program
CalHFA’s MyHome program provides a simpler alternative without appreciation sharing. It offers a deferred-payment junior loan up to 3.5% of the purchase price (FHA-backed loans) or 3% (conventional loans). This assistance does not require repayment with monthly payments; instead, the loan is repaid when the property transfers or the first mortgage is paid off.
MyHome pairs with CalHFA’s conventional or FHA first mortgages. For first-time homebuyers using CalHFA FHA loans, MyHome can bridge the gap between a 3.5% FHA down payment minimum and zero down, though this is not technically zero down. Combined with the ZIP (Zero Interest Program) for closing costs, borrowers can reduce total out-of-pocket expenses substantially.
ZIP (Zero Interest Program)
The ZIP program provides zero-interest financing for closing costs when used with CalPLUS or MyHome. Closing cost assistance of 2–3% of the total loan can be financed at zero interest, with funds paid directly to ZIP principal and used exclusively for closing costs and prepaid items.
Local and County Programs
Los Angeles County
The Los Angeles County Development Authority (LACDA) administers the Home Ownership Program (HOP), which provides deferred-payment loans for down payment and closing costs. Applicants must be first-time homebuyers with income below county limits, invest a minimum of 1% of the down payment from their own funds, and occupy the property as their primary residence. Maximum total contributions (own funds plus gifts plus closing funds) cannot exceed $150,000 (HOP80) or $200,000 (HOP120).
The City of Los Angeles Housing and Community Investment Department (HCIDLA) operates separate programs including the Low Income Purchase Assistance (LIPA) program, which offers deferred payment loans up to $140,000 with no monthly payments—only repayment upon sale or refinance.
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San Diego County
The San Diego Housing Commission First-Time Homebuyer Program provides down payment/closing cost assistance up to $10,000 or 4% of purchase price (whichever is less), plus a deferred-payment second trust deed loan up to 19% of the purchase price at 3% simple interest annually, for buyers earning no more than 80% of San Diego’s area median income.
Private Lender Zero-Down Adjustable-Rate Mortgages
Multiple California credit unions offer zero-down adjustable-rate mortgages (ARMs) as an alternative to government programs. These programs are particularly valuable for buyers who exceed income limits or prefer conventional financing flexibility.
California Coast Credit Union and Frontwave Credit Union both offer 0% down ARM mortgages with 100% financing and fixed rates for 5–7 years before adjusting annually. These loans typically do not require mortgage insurance despite zero down payment, a significant cost advantage. Seller concessions up to 3% can cover closing costs. No income limits apply, making these programs accessible to higher-earning buyers priced out of government programs.
Orange County Service Credit Union provides 0% down ARMs with fixed periods of 5, 7, or 10 years, followed by annual adjustments. Lower mortgage insurance coverage requirements (relative to standard PMI) mean lower monthly payments than conventional low-down alternatives.
CalVet (California Veterans) offers state-backed loans specifically for California veterans, with below-market rates and flexible credit standards, achieving rates often lower than federal VA loans. While technically not zero-down in all cases, CalVet provides no down payment options with full-entitlement lending. Loan limits align with federal conforming limits ($832,750 standard counties, $1,209,750 high-cost counties in 2026), and no PMI is required.
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Comparative Cost Analysis
The true cost of zero-down financing extends far beyond the down payment amount. Understanding long-term expense differences is critical for buyer decisions.
Mortgage Insurance Costs: Conventional loans with less than 20% down require private mortgage insurance (PMI), typically costing 0.30% to 1.15% of the loan balance annually. On a $400,000 loan with 5% down, PMI adds $138–$529 per month, cumulatively exceeding $40,000–$50,000 over the loan’s life until removed at 80% loan-to-value ratio.
VA loans carry no mortgage insurance at any down payment level. USDA loans include a mandatory guarantee fee but typically lower than FHA’s mortgage insurance premium (MIP). FHA loans require upfront MIP of 1.75% and annual MIP ranging from 0.50% to 0.75%, depending on loan size and down payment, with no cancellation option unless 10%+ down was provided and 11 years of payments made.
Dream For All Appreciation Cost: While no monthly payment is required, repayment of appreciation upon sale can be substantial. On a $500,000 home purchased with $100,000 Dream For All assistance (20%), if the home appreciates to $700,000, the state’s 20% share of $200,000 appreciation ($40,000) is owed at sale, plus the original $100,000. The total repayment of $140,000 represents a significant reduction in net proceeds, though the buyer still benefits from $560,000 in equity gain (gross).
Funding Fees (VA): The 2.15% VA funding fee on a $400,000 loan equals $8,600 added to loan balance. Over 30 years at 6%, this represents approximately $15,000+ in total interest cost. Disabled veterans avoiding this fee save substantially.
ARM Rate Risk: Credit union zero-down ARMs typically offer lower initial rates (often 0.25–0.50% below 30-year fixed) during the fixed period, but adjustable rates afterward carry upside risk. If rates rise to 8%+ after a 7-year fixed period, monthly payments could increase by $300–$500+.
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Eligibility Summary and Timeline for 2026
Zero-Down Home Purchase Programs in California – January 2026 Comparison
Zero-Down Program Eligibility Decision Tree for California Homebuyers – 2026
The decision pathway for finding the right zero-down program depends on four primary factors: veteran status, income level, first-time buyer status, and location. The flowchart illustrates how these factors determine eligibility across programs.
Zero-Down Program Eligibility Decision Tree for California Homebuyers – 2026
For immediate action in early 2026, the Dream For All program registration (February 24–March 16) represents a time-sensitive opportunity for first-time and first-generation homebuyers within income limits. Eligible applicants should prepare documentation immediately, as the lottery-based system means preparedness matters even though selection is randomized—failure to prepare may result in missing the registration window entirely.
Veterans should prioritize exploring VA loans immediately, as no application deadline exists and 2026 loan limits have been established. CalVet provides an alternative for California veterans seeking state-backed financing.
USDA loan applications proceed year-round, with processing times varying by county funding availability. Buyers interested in rural properties should use the USDA eligibility map to verify property qualification before beginning the loan process.
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Practical Recommendations
For Veterans: Explore VA loan eligibility first. The elimination of PMI, combined with no income limits and flexible credit underwriting, typically provides the most favorable terms available. A 2.15% funding fee is substantially cheaper than conventional PMI over time.
For First-Time Homebuyers in California with Income Below County Limits: Register for Dream For All if you meet first-generation homebuyer criteria (neither parent owned a U.S. home, or you were in foster care). Even though selection is lottery-based, registration is free and the assistance is substantial. Simultaneously apply for CalHFA MyHome or local county programs as backup options.
For Low-to-Moderate-Income Buyers in Rural Areas: Verify USDA eligibility immediately using the online map. USDA loans offer true zero down with competitive rates and are often unavailable to urban buyers. Processing times vary by location, so apply early.
For Buyers Exceeding Income Limits or Seeking Speed: Private credit union zero-down ARMs provide an alternative without income restrictions. Evaluate the rate lock period carefully—a 7-year fixed ARM makes sense only if you plan to refinance or sell within that timeframe. These loans typically close faster than government programs.
Credit Score Considerations: Buyers with scores below 640 should prioritize VA loans (more flexible), while scores above 680 open access to most CalHFA programs. If credit is below 620, USDA flexibility may still provide options; consult a lender about compensating factors.
Timing: Dream For All registration in February 2026 is uniquely time-sensitive. USDA and VA loans have no deadline. Standard CalHFA programs accept applications year-round through approved lenders.
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Conclusion
Zero-Down Home Purchase Programs in California – January 2026 Comparison
Zero-down homeownership is achievable in California through multiple pathways, each serving distinct borrower profiles. Federal programs (VA and USDA) serve veterans and rural buyers with the lowest long-term costs. California’s Dream For All shared appreciation program provides unprecedented assistance for first-time homebuyers but with lottery-based selection and income restrictions. Private credit union offerings eliminate income limits but introduce rate adjustment risk. Local county programs in Los Angeles and San Diego supplement state initiatives with smaller but accessible assistance amounts.
The optimal choice depends on personal circumstances: veteran status, income, location, credit profile, and timeline. Eligible borrowers should explore multiple options simultaneously, as approval through one program does not preclude pursuing others.
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