HOW DO CALHFA BUYER ASSISTANCE PROGRAMS WORK?

CALIFORNIA BUYER ASSISTANCE PROGRAMS

The State of California, like most other States in the Country, has a Housing Finance Agency (CalHFA) for the purpose of providing down payment and closing assistance programs to low to moderate income homebuyers.

The California Housing Finance Agency (CalHFA) offers both Conventional, and FHA first mortgages, along with a many assistance options that can be stacked behind the purchase money loan to help cover the costs of the buying a home.

CalHFA’s first mortgage loans do not require that the homebuyer be a first buyer, however, some of the assistance programs do have a requirement that the buyer has not owned a home in the past 3 years.

CALHFA FIRST MORTGAGE PROGRAMS

When you apply for an assistance program through the State of California, you have to first qualify for the purchase money loan, also known as a first mortgage.  The assistance part of the program is a silent second mortgage that is automatically included if you qualify for the purchase money loan.

CalHFA offers both Conventional and FHA first mortgage programs.  CalHFA first mortgage programs are not first time homebuyer programs, however, you cannot own any other real estate at the time of the purchase if using a CalHFA first mortgage loan.

CalHFA purchase money loans typically have very competitive, and even below market interest rates that are published on their website.  Lenders to not determine the interest rates for CalHFA programs.

CALHFA CONVENTIONAL LOANS

CalPLUS Conventional Loan Program – The CalPLUS conventional program is a Fannie Mae conventional loan program that includes discounted private mortgage insurance.  Conventional loans are 30 year fixed rate mortgages.  CalPLUS includes a zero interest program (ZIP), that does not require payments for the life of the first loan.  The ZIP assistance program provides a silent second mortgage equal to 3% of the first loan amount and be used for down payment or closing costs.

CalHFA conventional Loan Program – The conventional program is similar to the CalPLUS program except that it does not include the ZIP assistance program.

CALHFA FHA LOANS

CalPLUS FHA Loan Program – The CalPLUS FHA loan program is a FHA insured first mortgage.  Similar to the CalPLUS Conventional, CalPLUS FHA includes a zero interest rate silent second mortgage with no payments for the life of the loan.  The ZIP assistance program provides a down payment and closing cost assistance up to 3.5% of the first mortgage amount (including the up front mortgage insurance premium).

CalFHA FHA Loan Program – The CalHFA FHA loan program is similar to the PLUS program except that it does not include the ZIP assistance program.  The CalHFA FHA mortgage tends to have VERY aggressive interest rates that are typically lower than you can find on the open market.

CALHFA DOWN PAYMENT ASSISTANCE PROGRAMS

Zero Interest Program (ZIP) – The ZIP program can only be used with either a CalPLUS Conventional, or CalPLUS FHA first mortgage program.  ZIP provides between 3% and 3.5% of the first mortgage amount as a zero interest rate silent second mortgage that can be applied toward down payment or closing costs.

MyHome Assistance Program – The MyHome Assistance program is a new program in October 2015 that replaced the CHDAP California Homebuyer Downpayment Assistance Program that has been around for many years.  The MyHome program offers a 3% simple interest silent second mortgage.  MyHome assistance is equal to lesser of 5% of the purchase price, or appraised value, and can be used toward down payment or closing costs.  To qualify for the MyHome Assistance program you must be a first time homebuyer, which means you cannot have owned a home for the past 3 years.

Extra Credit Teacher Program (ECTP) – The Extra Credit Teacher Program is a silent second mortgage that is available to teachers and qualified employees that work in Title 1 Schools throughout California.  Aqualifying school is one that has an (last reported) API score of 5 or lower. The ECTP program offers the greater of 3% of the sales price or $7,500 ($15,000 in high cost counties) for down payment or closing costs.

CALHFA QUALIFYING BASICS

All California Housing Finance Agency loans have the same qualifying requirements, which makes it easier to explore your options, and choose the assistance program that best meets your home buying goals.

Common qualifying guidelines for CalHFA First Mortgage and Assistance Programs

Income Limits – CalHFA first mortgage programs and MyHome Affordable programs can have different income limits based on the County you are buying in, the CalHFA first mortgage you are using, and the number of people that will live in the home.

Debt to Income Ratios – The maximum debt to income ratios for all CalHFA first mortgage programs is limited to 45%.  In the case of FHA mortgages, this is significantly lower than what FHA allows (46.99% / 56.99%).  If your debt to income ratios exceed 45%, you might want to take a look at the NHF Platinum Homebuyer Grant, which allows FHA limits.

Maximum Loan Amount – This can get a bit tricky because CalHFA mentions both maximum loan limits, and maximum sales price limits on their website.  In 99% of the cases, the maximum loan limit when using a CalHFA mortgage is $417,000.  Even though CalHFA FHA loans allow high balance loans, income limits, and debt to income limits tend to make it unrealistic that you will be able to qualify for a loan above $417,000.

First Time Homebuyer – CalHFA first mortgage programs do not require that you be a first time homebuyer. Both the Extra Credit Teacher Program, and MyHome Assistance programs require that no borrower on the loan has owned a home in the past 3 years.  For CalHFA, this is the definition of a first time buyer.

Current Homeownership Requirement – For non-first time homebuyers and at the time of loan closing, the borrower may not have an ownership interest in any residential dwelling per Fannie Mae Guidelines (a manufactured home, regardless of the type of property ownership, is considered a residential dwelling for this purpose). Ownership in a timeshare is acceptable.

Homebuyer Education – All CalHFA programs require that buyers attend an 8 hour homebuyer education course.  This course can be done either attend an online homebuyer education class or attend an in person homebuyer education class at an approved provider.

HOMEBUYER ASSISTANCE AVAILABILITY

The California Housing Finance Agency lends throughout the entire State of California.  If you are a new homebuyer looking for buyer assistance in the State of California, CalHFA is the first place you should look!