San Diego Home Buying Guide

How Much Money You Really Need to Buy a Home in San Diego

By Natalie Joy Harris, REALTOR®, SRES  |  October 29, 2026  |  Estimated read time: 9 minutes

If you have been watching San Diego prices and wondering whether you have "enough" to buy, you are not alone. The honest answer is that the price tag is only part of the picture. The cash you need on closing day is made up of several pieces, and once you can see each one clearly, the whole process feels far more manageable.

The Four Buckets of Cash You Will Need

1. Earnest money deposit

After your offer is accepted, you place a good-faith deposit into escrow. The amount is negotiable, but 3 percent of the purchase price is ideal, and it is what I recommend. This is not an extra cost. It is credited toward your down payment and closing costs at the end, so think of it as paying part of your closing cash early.

2. Down payment

This is the portion of the price you pay yourself rather than borrow. Twenty percent is a common benchmark because it can help you avoid mortgage insurance and may give you a stronger loan structure, but it is not required. Many buyers put down less, and many downsizing homeowners put down more using proceeds from a sale.

3. Closing costs

These are the fees to complete the purchase: lender charges, appraisal, title insurance, escrow fees, recording fees, and "prepaids," such as the first year of homeowners insurance and a few months of property taxes set aside in advance. In California, buyers commonly budget about 2 to 3 percent of the purchase price. Your lender provides a written Loan Estimate within three business days of your application, so you will see real numbers early.

4. Reserves and moving costs

Many lenders like to see a few months of mortgage payments left in your accounts after closing. Beyond that, set aside money for inspections, movers, and the little things every new home needs in the first month. Peace of mind matters here: you want to move in with a cushion, not with a zero balance.

What the Numbers Look Like: Two Examples

The table below uses the August 2026 county medians as round, easy-to-follow examples, 20 percent down, closing costs at 2.5 percent, and a 30-year fixed rate of 7.32 percent. Your actual figures will depend on the specific home, your credit profile, and your lender.

These are illustrations, not a quote. Condos also carry monthly HOA dues, and homeowners insurance is additional. Property tax rates vary by address and may include special assessments such as Mello-Roos.

How a Seller Credit Works at Closing

This is one of the most useful tools in a buyer's toolkit, and one of the most misunderstood. A seller credit (sometimes called a seller concession) is an agreement in your purchase contract that the seller will contribute a set amount toward your closing costs. The seller is not handing you a check. Instead, the money is applied inside escrow, and it lowers the cash you need to bring.

Step by step: how the credit is applied

1. It is written into the contract. Your offer or counteroffer states the credit as a dollar amount or a percentage of the price.
2. Your lender approves it. The lender confirms the credit fits within the limits for your loan program (see below) and lists it on your Loan Estimate and Closing Disclosure.
3. Escrow applies it to your closing costs. On your Closing Disclosure, the credit appears as a credit to you in the section for items "paid already by or on behalf of the borrower." It offsets your fees dollar for dollar.
4. Your cash to close goes down. The final "cash to close" figure reflects the credit, so you wire less to escrow.
5. The seller's proceeds go down by the same amount. On the seller's closing statement, the credit shows as a charge against their proceeds.

A worked example

Suppose you buy the $1,120,000 home above with 20 percent down, your closing costs come to $28,000, you paid a $33,600 earnest money deposit (3 percent), and the seller agrees to a $15,000 credit.

The credit did not change the price, your loan amount, or your down payment. It simply covered $15,000 of your $28,000 in closing costs, so you owe $13,000 in closing costs rather than $28,000.

Rules to know before you count on a credit

• It can only pay eligible closing costs. That generally means lender fees, title and escrow charges, and prepaid items. It cannot be used toward your down payment or required reserves.
• It cannot exceed your actual closing costs, and any excess is lost. If a seller agrees to $35,000 but your eligible costs are $28,000, the credit is reduced to $28,000, and the extra $7,000 is not paid to you; the buyer loses that money. If this might happen, it is often smarter to negotiate a lower price instead.
• If there is an HOA, there is one exception. Excess credit above and beyond your closing costs can be applied to prepaid HOA fees, if applicable, but only up to one year's worth.
• Always double check with your lender. Confirm the allowable credit amount for your specific loan before you write your offer. If the credit you negotiate exceeds what is allowable, the buyer loses the excess.
• Each loan program has a cap. For conventional loans on a primary residence, the limit is generally 3 percent of the price with less than 10 percent down, 6 percent with 10 to 25 percent down, and 9 percent with more than 25 percent down. FHA loans generally allow up to 6 percent. VA loans limit seller concessions to 4 percent, with certain normal closing costs treated separately. In the example above, with 20 percent down on a conventional loan, the 6 percent limit would be $67,200.
• It is a negotiation, not a given. Sellers weigh a credit against the price and the terms of every offer. In some situations a credit is easy to win; in others, a small price reduction is a better trade. We look at the specific home and market conditions together.
• It can fund a lower rate. Some buyers direct the credit toward a rate buydown. As a rough illustration, a half-point lower rate on the $896,000 loan above would reduce the monthly principal and interest payment by about $300. Ask your lender to price the options.

Tips for Buyers Age 55 and Better

Many of the buyers I work with are selling a longtime home and buying again. A few things are worth planning early:

• Coordinate your sale and purchase. If your cash comes from selling your current home, the timing of both closings matters. We can discuss options for keeping the two aligned.
• Look at the property tax picture. California's Proposition 19 allows eligible homeowners age 55 and older to transfer their existing property tax base to a replacement home, subject to rules and limits. It can change what a new home costs to own each month, so it is worth reviewing with a tax professional before you buy.
• Think about the full monthly picture. Add property tax, insurance, and any HOA dues to your payment before deciding how much cash to put down.

Frequently Asked Questions

How much cash do I need to buy a home in San Diego?

For a buyer putting 20 percent down, a helpful planning number is about 22 to 23 percent of the price: 20 percent for the down payment plus roughly 2 to 3 percent for closing costs. On a $1,120,000 home, that is about $252,000 at the midpoint, before moving costs and reserves.

How is a seller credit applied to closing costs?

The credit is written into your purchase contract, approved by your lender, and applied by escrow against your eligible closing costs. It appears on your Closing Disclosure and reduces the cash you bring to closing. It cannot be used for your down payment. Any amount above your actual closing costs is lost by the buyer, except that if there is an HOA, excess credit can be applied to prepaid HOA fees, up to one year's worth. Always confirm the allowable credit amount with your lender.

Is there a limit on how much a seller can credit the buyer?

Yes. The limit depends on your loan program and, for conventional loans, on your down payment. Always double check with your lender to confirm the allowable credit amount for your loan; if the credit exceeds the allowable amount, the buyer loses that money.

Can I buy a San Diego home with less than 20 percent down?

Yes. Many loan programs allow smaller down payments. The trade-offs are typically a larger loan, a higher monthly payment, and in some cases mortgage insurance. A lender can show you the numbers side by side.

This article is for general educational purposes and is not lending, tax, or legal advice. Prices, interest rates, loan limits, and closing costs change and vary by property and borrower. Figures are illustrations; confirm your specific numbers with a licensed lender and your tax professional. Market data sources: San Diego Association of REALTORS® (August 2026), Freddie Mac Primary Mortgage Market Survey (October 22, 2026).

Natalie Joy Harris, REALTOR®, SRES
CA DRE# 01909266 | Coldwell Banker West

Natalie helps San Diego homeowners and buyers, especially those age 55 and better, make confident real estate decisions. Learn more about Natalie.