First-time home buyers are often daunted by the financial hurdles of buying a house—particularly in California, a state famed for many of the most desirable (and expensive) real estate markets in the country, from Los Angeles to San Francisco and beyond.
But the good news is that many first-time home buyers in California qualify for special loans and financial assistance that can lower the costs of homeownership. While these programs are geared toward home buyers with low or moderate income, many may qualify who might not realize they do—so it’s definitely worth checking out if you’re stressed about making those monthly mortgage payments.
Here’s a rundown of the various Golden State–sponsored programs for first-time home buyers, as well as who is eligible and how they can help lower the costs of homeownership so that it’s more within reach.
CalHFA’s first-time home buyer loan programs
The majority of financial assistance programs for the state’s first-time home buyers is offered by the California Housing Finance Agency, or CalHFA. Established in 1975, this institution was chartered as California’s affordable housing lender—although to be clear, it doesn’t actually loan you money. Rather, it puts applicants in touch with approved lenders who can grant a variety of affordable loans that home buyers might not qualify for on the open mortgage market, as well as additional financial assistance.
CalHFA home buyer requirements
Here is a list of home buyer eligibility requirements to help you understand whether or not you qualify for these loans.
- First-time home buyer: In most cases, to qualify for a loan you must be a first-time home buyer. If you’ve bought a home in the past, that does not necessarily mean you don’t qualify. You’re considered a first-time home buyer if you haven’t owned a home in the three years prior to applying for a loan.
- Decent credit score: You must have a minimum credit score of 660 for a conventional low-income-rate loan, and a minimum credit score of 680 for a conventional standard-rate loan.
- Acceptable debt-to-income (DTI) ratio: Your debt-to-income ratio, which compares the amount of money you owe to what you make, cannot exceed 45% for automated underwriting, or 43% for manual underwriting.
- Income cap: Your earnings can’t exceed CalHFA’s income limits, which are based on the specific area you are looking to buy in.
- Nationality: You must be a U.S. citizen, permanent resident, or qualified alien.
- Complete a home-buying course: You must complete a home-buying counseling course and present a certificate of completion. A course can be taken online, or in person through a HUD-approved housing counseling agency.
Note: Meeting these qualifications is no guarantee you’ll qualify for a loan, because each CalHFA-approved lender may have additional borrowing requirements.
“While California has many options regarding first-time homeowners needing financial assistance, it is important to remember that many of these assistance programs will have their own set of regulations and standards that must be met before being approved,” says Simon Ru, CEO of UpNest. Still, if you meet the above criteria, it’s a good start.
CalHFA property requirements
In addition to seeing if you qualify as a borrower, properties must meet certain CalHFA standards, too.
- Sales price: The home’s sales price can’t be above $765,000.
- Location: The home must be located within California and used as your primary residence.
- Property type: The property must be a single-family, one-unit home with a maximum lot size of 5 acres. Some condos, accessory dwelling units (e.g., guesthouses and in-law quarters), and manufactured homes are permitted.
6 types of CalHFA home loan programs
The California Housing Finance Agency offers a variety of loans for first-time home buyers. Here’s a rundown of the main options:
- CalHFA FHA Program: The CalHFA FHA Program offers a 30-year fixed-rate loan insured by the Federal Housing Administration. Note that the FHA has specific borrowing and property requirements that must be met in addition to those of CalHFA.
- CalPLUS FHA Program: The CalPLUS FHA Program is an FHA-insured first mortgage with a slightly higher 30-year fixed rate than the standard FHA program, but the upside is it can be combined with other financial assistance programs (outlined below).
- CalHFA VA Program: The CalHFA VA Program is a 30-year fixed-rate loan insured by the U.S. Department of Veterans Affairs. Note that the VA has its own requirements for eligibility.
- CalHFA USDA Program: The CalHFA USDA Program offers a USDA-guaranteed 30-year fixed-rate loan. Note that to qualify for this loan, a property must be located in a USDA-eligible rural area.
- CalHFA Conventional Program: The CalHFA Conventional Program offers a 30-year fixed-rate loan insured through private mortgage insurance, or PMI.
- CalPLUS Conventional Program: The CalPLUS Conventional Program offers a conventional mortgage with a slightly higher 30-year fixed rate than the standard conventional program. But it can be combined with other financial assistance programs (below).
Financial assistance for down payments, closing costs, and more in California
In addition to affordable loans, the California Housing Finance Agency also offers a variety of financial assistance programs that can be combined with their loans that help lower the costs of a mortgage even further.
More good news? “Since this program will be considered subordinate or junior loans, the payments are deferred until their homes are sold, refinanced, or paid in full,” says Tal Shelef, Realtor and co-founder of California’s CondoWizard. “That makes your monthly mortgage payments more affordable.”
Here are the options, who qualifies, and how the programs work.
MyHome Assistance Program
The MyHome Assistance Program provides up to 3.5% of a home’s purchase price or appraised value (whichever is lower) to help pay for down payment or closing costs associated with a home purchase. The maximum amount you can acquire is $11,000.
Since this program is a deferred-payment junior loan, there’s no need to pay it back until you sell or refinance the property. In many cases, you can combine MyHome Assistance with CalHFA’s loan programs, including FHA, USDA, VA, and conventional loans.
Home-buying assistance for school teachers and employees
The School Teacher and Employee Assistance Program is designed for first-time home buyers who are teachers, administrators, school district employees, and staff members who work at California’s K-12 public schools.
These loans provide funds of up to 4% of the purchase price that can then be used toward down payment and closing costs.
CalHFA Zero Interest Program
CalHFA Zero Interest Program, also known as ZIP, is a second mortgage that can work with certain CalPLUS loans. The program makes homeownership more affordable for low-income buyers by providing borrowers with a zero-interest loan amounting to 3% of a borrower’s first mortgage.
And since this is a junior loan, payments for the loan can be deferred as long as you live in your house. However, keep in mind you’ll have to pay for the loan if you ever default on your mortgage, sell, refinance, or transfer the title to someone else.
Can you combine CalHFA loans with financial assistance programs?
Finding it hard to pick among these many financial aid options? You may not have to choose.
“Sometimes, California Housing Finance Agency loans can be combined with other assistance offers, while others can’t,” says Tony Mariotti, a licensed real estate agent and the CEO of RubyHome in Los Angeles.
The trade-off, however, is that you might need to pick a loan with a slightly higher interest rate—but it may pay off, so it’s worth crunching the numbers. For instance, while the CalPLUS FHA Program comes with a slightly higher 30-year fixed rate than the CalHFA, a CalPLUS loan can be combined with the CalHFA ZIP, which can assist with closing costs and prepaid items, including the FHA’s mandatory mortgage insurance premium.
In some cases, you can even combine a CalPLUS loan with two financial assistance programs, offering home buyers three ways to save money. For instance, while the CalPLUS Conventional Program comes with a slightly higher 30-year fixed rate than the CalPLUS FHA loan, you can combine it with the MyHome Assistance Program and the CalHFA ZIP.
Just know that some loans, however, can’t be combined. When in doubt, ask your loan officer or real estate agent for guidance.
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