03/25/23
If you’ve been struggling to save enough down payment to make buying a home affordable, or if you’ve been struggling to save a down payment altogether, the California Housing Finance Agency (CalHFA) is rolling out a new program that may help you. The Dream for All Shared Appreciation Loan offers a no-payments, no-interest assistance loan for up to 20% of the purchase price on a home. When you repay the loan later, you pay back the original assistance loan, plus 20% of the increase in the value of the home since you bought it.
Here’s an example of how it would work if you used the program to buy a home for $500,000. You’d get a CalHFA, conventional loan for $400,000, which is 80% of $500,000. The CalHFA shared appreciation loan provides the other $100,000, which is 20% of $500,000. Let’s assume that in five years, you choose to sell, and you’re able to get $600,000. The home appreciated by $100,000, and CalHFA gets 20% of that appreciation, which means they would get $20,000. The original assistance loan is still $100,000 (no interest and no payments), so CalHFA gets a total of $120,000.
You’d make strong financial progress in this scenario too. Let’s assume you paid down the loan balance by $40,000 over the five years. CalHFA doesn’t get any of that, and you get 80% of the appreciation. In our example, that would be $120,000 in equity growth.
On top of the equity growth you can gain with no down payment using this program, you can also save a lot monthly compared to other low-cash financing options. Federal Housing Administration (FHA) loans only require 3.5% down, and historically, they’ve been the most common kind of loan to combine with a down-payment assistance program. That’s awesome for those struggling with saving a down payment, but the mortgage insurance costs and the larger loan amount make the payment a lot. The chart below illustrates how, for the same $500,000 home, you’d save an estimated $663 per month using the CalHFA conventional loan combined with the Dream for All Shared Appreciation Loan compared to a typical FHA loan with 3.5% down.
Here are some basic requirements for qualifying to use this program:
- You must be a first-time homebuyer, which means you haven’t owned a primary residence in the last three years. If you owned a home in another state, rented it out to move here, and have been renting the house you live in here for the last three years, you might still qualify.
- You must have a 680 or higher FICO score.
- You must be able to qualify for the CalHFA conventional loan.
- You must complete CalFHA’s homebuyer education class requirements. Details at (https://www.calhfa.ca.gov/dream/)
- Your household income must be below the CalHFA limits for the county where the home is located:
- Los Angeles: $180,000 per year
- San Bernardino: $173,000 per year
- Riverside: $173,000 per year
- Orange: $235,000 per year
- Complete CalHFA Income Limits by County
I was told by the lender who shared this with me that the first round of funding for this program is only $300M. That sounds like a lot of money, but that’s only enough to help 3,000 people across the entire state buy $500,000 homes. The program launches on Monday 3/27/2023, so if you are interested please let us know right away. We’ll connect you with a lender who can help you look at the details of your situation and confirm if this program is a good fit for you.
Call or text Caleb at 626-328-4199 now to get started or use the form below!
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