If you’re dreaming of owning your own place but finding it hard to save for the down payment, we’ve got good news. As a California resident, you may qualify for one or several down payment and closing costs assistance programs designed to make homeownership more affordable.
Both the California Housing Finance Agency (CalHFA) and the Golden State Finance Authority (GSFA) offer programs to help first-time homebuyers with low to moderate income get a mortgage. If you have not owned and occupied a home in the past three years, you’re considered a first-time home buyer in California.
Both of these agencies work with local lending partners, like Ameritrust Home Mortgage, to help people get into affordable, safe and secure homes in the Golden State.
Let’s take a look at how they work:
CalHFA Conventional Loan Program
The CalHFA Conventional program is a 30-year fixed interest conventional mortgage that gives you the option to roll in down payment and closing cost assistance into your mortgage.
- Property must be located in California and be the borrower’s primary residence until it’s sold or refinanced
- In most cases, borrowers must be first-time home buyers and U.S. citizens, permanent residents or qualified aliens
- Must have a minimum credit score of 640, in most cases
- Must meet all income and sales price requirements of the lender and mortgage insurer
- Must take an approved home buyer education course and obtain a certificate of completion
- Must be a single-family, one-unit home
- Some condos and properties with guest houses and in-law quarters are permitted
- Leaseholds/land trusts and co-ops aren’t eligible
- Maximum lot size of 5 acres
- There may be additional program-specific requirements
CalPLUS Conventional Loan Programs
The CalPLUS Conventional program comes with a slightly higher 30-year fixed interest rate, but you can combine it with the MyHome Assistance program for down payment help and the CalHFA Zero Interest Program (ZIP) for closing costs. The ZIP program doesn’t charge borrowers interest on the money it lends through the program. If you choose the higher assistance amount, you’ll receive a higher interest rate on the loan itself.
CalHFA Down Payment Assistance Programs
For many first-time homebuyers, saving up the chunk of money you’ll need to buy a home can be a real challenge. CalHFA offers several down payment and closing cost assistance programs to help you bridge this gap and make monthly mortgage payments more budget-friendly. These are considered “subordinate” or “junior” loans, meaning payments are deferred until your home is sold, refinanced or paid in full.
MyHome Assistance Program
The MyHome Assistance Program is a deferred-payment junior loan that provides up to 3.5% of the home’s purchase price or appraised value, whichever is lower, to help pay for down payment or closing costs. In many cases, you can combine the MyHome Assistance program with other down payment assistance or grant programs.
Zero Interest Program
This program can make your CalPLUS Conventional loan even more affordable by paying a portion of your closing costs. The CalHFA Zero Interest Program provides up to 3% of the total loan amount in the form of a no-interest second loan. Payments are deferred as long as you live in the home. You’ll be required to pay it back in full if you sell, refinance, transfer the title to someone else or default on the loan.
School Teacher and Employee Assistance Program
The School Teacher and Employee Assistance Program is designed for first-time buyers who are teachers, administrators, school district employees and staff members who work at California’s K-12 public schools. These loans provide up to 4 percent of the purchase price toward down payment and closing costs and can only be used with an eligible CalHFA first mortgage loan. This loan can be used only for down payment assistance and/or closing costs.
Another Option: The Golden State Finance Authority (GSFA)
The Golden State Finance Authority (GSFA), a California housing finance agency, offers a down payment assistance program and a tax credit certificate to help potential homeowners with the costs of homeownership. Like CalHFA, their programs are geared towards low to moderate income homebuyers. The notable difference is that you do not have to be a first-time homeowner to take advantage of this program.
Down Payment Assistance (GSFA Platinum® Program)
GSFA provides down payment assistance, currently in the form of a grant that you do not have to repay, up to 5% of the first mortgage amount. The GSFA Platinum® Program is available for purchase or refinance of a primary residence anywhere in California and there is no first-time homebuyer requirement to qualify.
- The grant can be used for down payment or closing costs and does not need to be repaid.
- 640 FICO minimum.
- Grant can total up to 5% of the loan amount. (For example, a $250,000 loan amount could provide a non-repayable grant of up to $12,500).
- Income limits apply.
- Reduced mortgage insurance rates when using a Conventional first mortgage.
- For refinances, the grant can be used to pay down some of the principle balance. This may help certain homeowners eliminate mortgage insurance depending on their LTV percentage.
Tax Credit Certificate (MCC)
A GSHFA Tax Credit Certificate has the potential to save you thousands of dollars each year. It is a dollar-for-dollar credit against your federal income tax liability. With an MCC, 20% of the interest paid on the mortgage can be used as a special tax credit each year for the life of the mortgage. Even if you do refinance in the future, you can reapply for the MCC to continue to receive the annual tax credit. The MCC is available to first-time homebuyers who meet income and sales price limits.
Remember, neither CalHFA or GSHFA accept loan applications or lend money. You will need to work with an approved lender, such as Ameritrust Home Mortgage. We can answer your questions, help determine if you qualify and get you pre-approved. We’re here to help!