Achieving the American Dream can be an expensive journey no matter where you decide to live; however, some places are going to be a lot more expensive than others. For example, the median price for a home in a coastal county in California, such as Santa Clara County, is going to be over $1 million, while the median price for a home in the middle of South Carolina will be about $165,000.
The California Housing Finance Agency (CalHFA) is one agency that’s helping serve a gap in the market—low- to moderate-income families. We spoke with Eric Johnson, the official spokesman for CalHFA, about the agency and how their programs are helping thousands of Californian residents get into their dream home.
What Is the California Housing Finance Agency?
CalHFA was created in 1975 and chartered as the state’s affordable housing lender. The agency is self-funded, doesn’t take any tax dollars and works in cooperation with private banks. CalHFA offers a few different down payment assistance programs and closing cost assistance, but is focused on helping first-time home buyers that may struggle to afford the closing costs associated with buying a new home.
The agency has conventional and government insured loans for first-time homebuyers, down payment assistance programs and a mortgage credit certificate tax credit program.
Down Payment Assistance Programs
The California Housing Finance Agency has several options available for those who need help with closing costs or the down payment on their home.
“Our research has found that there are a lot of Californians with a new job and good credit, but they haven’t been able to save up for a down payment,” said Johnson. He has also noticed that there are some places in California where the rent is actually higher than a mortgage payment, so it makes more sense for people to purchase their own home.
Also called a second or subordinate loan, these types of loans are deferred until the home is sold, refinanced or paid in full. The three available programs include:
- My Home Assistance Program is a deferred-payment junior loan that enables borrowers to get up to 3.5% of the purchase price to use for a down payment or to cover closing costs.
- School Teacher and Employee Assistance Program (School Program) is a junior loan up to 4% of the purchase price, which can be combined with an eligible CalHFA first mortgage loan. This program is specifically for teachers, school district employees, administrators and any staff member working for a California K-12 public school (including Charter and county/continuation schools).
- The CalPLUS Conventional Program combined with the CalHFA Zero Interest Program (ZIP program) includes a low-interest loan for up to 3% to 4% of the sales price for closing cost assistance. This is a long-term deferred payment loan.
Johnson said the agency is on track to finance more than 7,000 loans through their down payment assistance programs this year.
Program Requirements for Down Payment Assistance
Borrowers must meet the following requirements to qualify for any of the above CalHFA down payment assistance programs:
- Occupy the property as their primary residence
- Complete homebuyer education counseling and obtain a certificate of completion
- Meet income limits (varies)
Johnson said income limits can vary by county due to the differences in the cost of living. In order to qualify for the My Home Assistance Program and School Program, borrowers must also be a first-time homebuyer. Borrowers for the My Home Assistance Program must also meet lender and mortgage insurer/guarantor requirements. You should have paystubs, bank statements, employment history and previous tax returns handy when you’re ready to apply.
Visit their website for a full list of property requirements and guidelines for each program.
Another program that helps Californians with homeownership assistance is the Keep Your Home California Program. This program was designed for the hardest hit states of the 2008 financial crisis. The program helps those who already have a home, but are at risk of losing their home due to financial hardship. It is a free program that has provided nearly $2 billion in funding to help homeowners keep their homes. The program is now closed but may return in the future.
“We’ve helped more than 60,000 people over the course of our existence. With the housing industry in California being so tough, it’s more important than ever that we are able to help people,” Johnson said.
Moving forward, CalHFA is working on creating programs for Indian preservations and auxiliary dwellings, like granny flat loans.