The California Dream Program and Other First Time Homebuyer Programs in CA
July 30, 2024
1 min read
A Comprehensive Guide to First-Time Homebuyer Programs in CA
Are you a California first time homebuyer? Here’s what you need to know:
In California, there are several programs to assist people in buying their first homes. These programs include loans and down payment assistance from CalHFA, also known as the California Housing Finance Agency, including the Calornia Dream for All program. If you need help with fixed-rate mortgages or down payments, CalHFA can make buying a home easier for you. Here's a detailed overview of the available programs and how they might benefit you.
First-Time Homebuyer Loan Programs
Like all first-time homebuyer programs, there are some eligibility requirements to participate in these programs. To qualify, the buyer must be a first time buyer with good credit - a score of 660 or higher and plan to occupy the home as their primary place of residence. Anyone else who is co-borrowing on the loan must also live at the house. Eligible borrowers must complete a homebuyer education course and must meet the income limit in their county. Speak to a loan officer from a CaLHFA approved lender to see if you qualify.
The CalHFA FHA Loan Program is designed for first-time homebuyers who qualify for FHA insurance. This program offers a 30-year fixed-rate mortgage with a reliable and predictable payment structure. FHA loans have lower down payment requirements, which can be as low as 3.5% of the home's purchase price. This is particularly beneficial for buyers with less savings.
The CalPLUS FHA Loan Program also provides a 30-year fixed-rate FHA-insured mortgage, but with a slightly higher interest rate than the standard FHA option. What sets this program apart is its combination with the CalHFA Zero Interest Program (ZIP), which helps cover closing costs. This combination can significantly reduce the initial out-of-pocket expenses for first-time buyers.
Eligible veterans and active-duty military personnel can benefit from the CalHFA VA Loan Program. This program offers a 30-year fixed-rate VA-insured loan, which comes with no down payment requirement. VA loans are a great option for those who qualify, providing competitive interest rates and flexible terms.
For those looking to buy in designated rural areas, the CalHFA USDA Program provides a 30-year fixed-rate USDA Guaranteed mortgage. You can combine this program with the MyHome Assistance Program for additional support. USDA loans are attractive for their zero down payment requirement and competitive interest rates.
5. CalHFA Conventional Loan Program
The CalHFA Conventional Loan Program offers a 30-year fixed-rate mortgage with private mortgage insurance. Conventional loans typically require a higher credit score and down payment than FHA or VA loans but offer more competitive interest rates and terms.
6. CalPLUS Conventional Loan Program
The CalPLUS Conventional Loan Program is similar to the standard conventional loan but comes with a slightly higher interest rate. It includes the CalHFA Zero Interest Program (ZIP), which helps with closing costs, making it easier for buyers to manage upfront expenses. Conventional loans typically require higher credit score requirements than FHA loans, but you can stop paying PMI (private mortgage insurance) on conventional loans after you reach 20% home equity.
Down Payment Assistance Programs
Saving for a down payment and closing costs can be one of the biggest obstacles for first-time homebuyers. CalHFA offers several down payment assistance programs to help bridge this gap.
The MyHome Assistance Program provides a deferred-payment junior loan to assist with down payments and/or closing costs. For FHA loans, this program offers up to 3.5% of the purchase price or appraised value. For conventional loans, the assistance is up to 3%. A deferred-payment junior loan is a type of loan that helps borrowers with additional financing needs but does not require regular monthly payments during the life of the loan. Borrowers using the MyHome Assistance Program defer repayment until a specific event occurs, such as selling, refinancing, or paying off their home.
2. CalHFA Zero Interest Program (ZIP)
The CalHFA Zero Interest Program (ZIP) is a deferred-payment second mortgage designed to cover closing costs. It can be used in combination with CalHFA's first mortgage programs. This program offers a fixed amount to reduce upfront costs and delays payments until the home is sold or refinanced.
3. California Dream For All Shared Appreciation Loan
The California Dream For All Shared Appreciation Loan is a newer initiative that offers significant down payment assistance. This program provides 20% of the home’s purchase price as a shared appreciation loan. You must repay the loan when you sell the home, refinance, or pay off the mortgage. Additionally, repayment includes a percentage of the home's appreciation, based on the borrower’s income relative to the area median income (AMI).
This program has a shared appreciation component, where the state participates in, or profits from, the home's appreciation when the house is sold or refinanced.
Loan Amount:
The program provides up to 20% of the home's purchase price as a down payment assistance loan. This substantial assistance can help reduce the amount of money a buyer needs to save upfront.
Shared Appreciation:
When the home is sold, refinanced, or the mortgage is paid off, the borrower is required to repay the initial loan amount plus a percentage of the home's appreciation. The percentage of appreciation repayment depends on the buyer’s income relative to the area median income (AMI).
Income-Based Repayment Terms:
- If the borrower’s income is above 80% of the AMI, they are required to repay up to 20% of the home’s appreciation.
- If the borrower’s income is at or below 80% of the AMI, they must repay up to 15% of the home’s appreciation.
Repayment Cap:
The repayment amount for the shared appreciation component is capped. The total repayment, including the original loan amount and the shared appreciation, cannot exceed 2.5 times the original loan amount. This cap protects borrowers from excessively high repayment amounts.
