Regardless of other financial vehicles, we all know owning real estate is the primary way to accumulate wealth and financial security. Especially with the high cost of rent, it’s hard for a first-time buyer to collect the funds to purchase. There are numerous (400+) programs from California or local government agencies and various lenders on a proprietary basis that can help with down payment and costing cost assistance, or even cases a forgivable loan that doesn’t have to be repaid.
If a potential buyer and property meet the program criteria, these programs can be very valuable. Program guidelines are always changing, and new funds are allocated and depleted. This is an overview of some of the programs, but a program and buyers qualification must be evaluated on a case-by-case basis.
Most of the programs require a short homebuyer education and counseling class to be completed (standard financial and budgeting education that should be taught in high school). There are extra programs for buyers who work in education, law enforcement, firefighting, and healthcare professions, or in the military.
Also an existing or previous homeowner generally can still qualify for most of the “first-time buyer” programs if: Borrowers who own or have owned rental properties may be a first-time homebuyer if they can document that they have not occupied any of the rental properties as their principal residence at any time within the past three years.
Only select lenders participate in these programs. Some have overlay underwriting guidelines. I’m approved with several lenders on the wholesale side and each loan/borrower has to be shopped. The qualifying income amounts are adjusted mid-year, and can be applicable to the Area Median Income (AMI).
California Housing Finance Agency (CalHFA) CalPLUS Conventional with Zero Interest Program (ZIP)
Maximum Amount
3% of Total Loan Amount
Benefits
- Competitive rates.
- Borrowers with income less than or equal to HomeReady’s 80% Area Median Income (AMI) LI income limits are eligible for discounted Mortgage Insurance (MI) coverage and MI rates.
- Deferred payment, zero interest rate, long term subordinate mortgage.
- Guest houses, granny units and in-law quarters are eligible for financing under certain conditions.
- No borrower minimum contribution required.
- No purchase price limits.
- Fannie Mae Homestyle Energy is allowed.
- Borrowers who own or have owned rental properties may be a first-time homebuyer if they can document that they have not occupied any of the rental properties as their principal residence at any time within the past three years.
Maximum Annual Household Income by Household Size
1-8: $180,000
Min Buyers Contribution
None
First Time Homebuyer Required?
Must be first-time homebuyer
Home Buyer Education
Required for FTHB
Home Buyer Obligations
- Must occupy property as primary residence.
- Must secure pre-approval for 1st mortgage with a participating lender.
California Housing Finance Agency (CalHFA) MyHome Assistance Program
Maximum Amount
3.5% of Purchase Price
Benefits
- Deferred, low interest rate loan that can be used for down payment assistance and/or closing costs.
- Can be combined with an MCC, however, MCC cannot be used to credit qualify.
- Borrowers who own or have owned rental properties may be a first-time homebuyer if they can document that they have not occupied any of the rental properties as their principal residence at any time within the past three years.
Maximum Annual Household Income by Household Size
1-8: $180,000
Min Buyers Contribution
None
First Time Homebuyer Required?
Must be first-time homebuyer
Home Buyer Education
Required
Product type
2nd Mortgage
Repayment Terms of the Loan or Assistance
MyHome term is the same as the 1st loan not to exceed 30 years.
Deferred?
Yes, for 30 years
Forgivable?
Yes
California Housing Finance Agency (CalHFA) Forgivable Equity Builder Loan
(presently out of funds)
Maximum Amount
10% of Purchase Price
Benefits
Forgivable loan at 10% of the sales price or appraised value, whichever is less. Amount is forgiven over time at a pro-rated amount. Full amount is forgiven after 5 years. Term of loan will be the same as the 1st mortgage loan.
Maximum Annual Household Income by Household Size
1-8: $68,880
Min Buyers Contribution
Based on 1st mortgage guidelines.
First Time Homebuyer Required?
Must be first-time homebuyer
Home Buyer Education
Required
Home Buyer Obligations
- Must secure pre-approval for 1st mortgage with a participating lender.
- Must occupy property as primary residence.
First-time homebuyer exception:
- Borrowers using HUD Section 184 Indian Home Loan Guarantee or FHA Section 203(h) Program does not have to be a First-Time homebuyer when the previous property was:
- . Located in an area declared a Major Disaster in California no more than one (1) year ago and posted on the Federal Emergency management Agency (FEMA) website.
- . Had been the borrower’s primary residence
- . Had been destroyed or declared uninhabitable with supporting documentation supplied from either (i) the insurance company or (ii) the local government jurisdiction.
· Product type
- 2nd Mortgage
· Repayment Terms of the Loan or Assistance
- If the borrower(s) occupy the home for five (5) years, the full amount is forgiven.
FHA/VA: Assumption is permitted when the first mortgage is assumed.
· Deferred?
- Yes, for 5 years
· Forgivable?
- Yes
CBC Mortgage Chenoa Fund – FHA Forgivable DPA
Maximum Amount
5% of Purchase Price
Benefits
- Assistance up to 5% of the sales price or appraised value, whichever is lower.
- 3.5% soft second has no payment, zero-interest, forgivable after 36 consecutive on-time payments on the FHA first mortgage.
- 5% soft second has no payment, zero-interest, forgivable after 120 payments on the FHA first mortgage (as long as never 60+ days late).
- Manual underwriting is permitted.
- High Priced Mortgage Loan (HPML) transactions are allowed as long as CFPB & TRID requirements are met.
Maximum Annual Household Income by Household Size
No income limits. To get the best rates, qualifying income should be less than or equal to 135% of AMI.
Payment Shock –
600–639: 125% or less. (Borrowers with a 31/45% DTI may exceed the payment shock limit without needing an exception.
640+: No overlay.
Min Buyers Contribution
None
First Time Homebuyer Required?
Current ownership allowed
Home Buyer Education
Required
Home Buyer Obligations
- One of the borrowers must occupy the property as their primary residence.
- Must secure pre-approval for 1st mortgage with a participating lender.
· Product type
- Combined Assistance
· Repayment Terms of the Loan or Assistance
- Forgiveness Conditions:
– The forgivable second mortgage may be forgiven at the end of its 30-year term—this applies even if there are late payments. Forgiveness at the end of the loan’s 30-year term requires the borrower’s request and the borrower’s payment of processing the lien release.
– The forgivable second mortgage will lose its forgivable status permanently if the borrower refinances the first mortgage and state law allows the second mortgage to subordinate without the consent of CBCMA. The loan will remain unforgivable even if the 30-year term is met.
· Deferred?
- Yes, for 30 years
· Forgivable?
- Yes
Golden State Finance Authority (GSFA) OpenDoors Program – FHA, VA, USDA
Maximum Amount
7% of Total Loan Amount
Benefits
- Up to 7% financial assistance for down payment and closing costs.
- Homebuyer doesn’t have to be a first-time homebuyer to qualify.
- Borrowers may have ownership in other property at time of closing, per agency
- guidelines.
- No GSFA income limits but need to show financial ability to repay the mortgage.
- Manual Underwriting is permitted. Each borrower must have at minimum one credit score.
- GSFA doesn’t underwrite the loan.
- Max Loan Amount: $726,200 (not effective for FHA until case numbers assigned 1/1/23).
Maximum Annual Household Income by Household Size
Follow agency guidelines. No GSFA set income limits.
Min Buyers Contribution
None
First Time Homebuyer Required?
Current ownership allowed
Home Buyer Education
Recommended
Maximum Assets Test
N/A
Home Buyer Obligations
- Must occupy property as primary residence.
- Must secure pre-approval for 1st mortgage with a participating lender.
Product type
Combined Assistance
Repayment Terms of the Loan or Assistance
Any ‘Gift’ portion of the DPA does not have to be paid back.
Deferred?
Yes, for 30 months
Forgivable?
Yes
TAX CREDIT
Los Angeles County CDC Mortgage Credit Certificate (MCC)
Program available only in unincorporated areas of Los Angeles County and certain cities.
Maximum Amount
20% of mortgage interest paid can be taken as a federal income tax credit.
Benefits
20% of mortgage interest paid can be taken as a federal income tax credit.
Maximum Annual Household Income by Household Size
1-2: $135,120, 3-8: $157,640
Min Buyers Contribution
None
First Time Homebuyer Required?
Must be first-time homebuyer
Home Buyer Education
Required
Maximum Assets Test
Based on 1st Mortgage Guidelines.
Home Buyer Obligations
Reside in home as principal residence for 9 years or may be subject recapture of tax credit.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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