Bill Passed: First Time Buyers Down Payment Assitance

Last year, in 2023, California passed an amazing bill that was $300 million that allowed first-time home buyers to get 20% down. 

They called it The Dream For All program, and CalHFA was the nonprofit that facilitated this down payment assistance program. It was a great loan, and many families applied for it. Many families were not able to get it because the program ran out of funds very, very fast.

Out of $300 million, 2,100 families were able to get this program. 

The state just approved 2024, $220 million, which is great because there are going to be a lot more families that can get this program. 

However, it's going to be a lot different than what it was last year. 

Last year, all you had to do to qualify was first come, first serve. 

This year, it's going to be a lottery system.

I'm going to explain how this is going to work. 

So the program is 20% down, so it's still 20% down for a first-time home buyer. 

You get up to $150,000 for your down payment, so you could buy up to $750,000 and get 20% down. 

You could still purchase for more than 750. 

You couldn't get up to 20%, so 150,000 is the maximum loan amount you can get for this program.

It's a shared appreciation, so it's the same as last year, it's a shared appreciation, which means that once that first-time home buyer sells, let's say they own the property for five years or six years. 

They decide to sell the house and want to upgrade or downgrade. 

Well, when they sell, they will have to share part of the equity gain they got for the appreciation of that home. 

So, I will give some examples of what this looks like for the shared appreciation at the end of this video. 

So here are the 2024 details. 

So I'm going to explain why it matters, why it's a great deal for any first-time home buyer, I'm going to explain the requirements, I'm going to explain how to apply for this program, it's different from last year, so last year, this year, it's very different on applying, so you want to make sure you pay attention to that. 

I will give some examples of shared appreciation, and then I will share when this program plans to start. 

So this is why it matters. 

I've never seen a program like this before. 

We know the program gives 20%, but there has yet to be any other program that offers 20% down for a down payment, so the first-time home buyer can avoid paying mortgage insurance. 

They get this very large down payment where they need to make a monthly payment on this amount.

Most first-time home buyer programs only give about 3-3.5% for the down payment. 

Now, there are local city and county programs that offer 20% or more of $60,000-$70,000.

However, they have very low-income limits, so it's extremely hard to qualify for these local city and state programs. 

This program allows someone to make a lot more money. 

In Shasta County, you can look up the loan limits. 

I'll put those in the comments below this video of looking up the actual long limits for each county, but for Shasta County, you can make up to $140,000, which is very, very healthy. 

So, a lot of people will qualify for this program. 

And so if you wanted to buy for 350,000, normally with just a 3.5% down payment assistance that any first-time home buyer would qualify for, their payment would be about $2700 per month, 2700-3700. 

However, with this 20% down, this is why it matters and why it's a great deal. 

The payment with 20% down would only be $2400, which is about a $300 difference per month.

This is a big deal for someone who needs help pushing their budget to 350.

They may only qualify for 300, but now they could bump their approval to 350,000, or it helps someone get into affordable housing.

Maybe they can't afford to find a home for, let's say, the starting price of a home in your area, but now it gets them to get that payment down to where they can actually afford it. 

So here are the requirements: you have to be a first-time home buyer, you must be a US citizen, and you have to qualify for the payment. 

So this is just standard income credit, qualifying. 

You can watch another video that I did. I'll put that here. 

You can watch a video on what it takes to qualify and how to calculate how much you can qualify for so the same underwriting standards. 

In addition, you also want to be a first-generation homeowner. 

What this means, they added this. 

This is something new for the program that wasn't here last year. 

What this means is they're going to ask the buyer if they are a first-generation homeowner. 

If any of your parents currently owns or has owned in the past, then I don't believe you'll qualify for this program. 

There are some exceptions to the rule. 

If you were raised in foster care or adopted, there are exceptions to this rule, but in general, you must be a first-generation homeowner to qualify for this program. 

Now, that will limit a lot more people this time than it did last year, so not as many people will be able to qualify.

So if you are a first-generation potential homeowner, meaning your parents have not bought a house, your parents have never owned a house, this program is definitely for you, so definitely apply and see if you can qualify for this program because it's a good one. 

So, the next thing is you need a minimum credit score of 660. 

If you have a 660 credit score, you can go up to 45% of your income.

This means that your mortgage payment, if you don't have any other expenses or monthly bills, like car payments or credit cards, means that your mortgage payment can go up to 45% of your monthly income if you have a 660 and above. 

And to qualify for the program, you do need a 660. 

And then, if you have a 700 credit score, you could actually go up to 50%, so you can have your mortgage payment plus any other monthly expenses to go up to 50% of your gross monthly income. 

So this is monthly income, gross before taxes. 

Okay, so how do you apply? 

The first thing you want to do is get pre-approved with a lender. Of course, you can get pre-approved with me. 

I'd be happy to help you if you want to get pre-approved and an approval letter. 

Then, after you get pre-approved, you get a form that your lender will complete, and you can find this form on CalHFA's website. 

I'll put the link below for this form as well.

Now, this form is completed, and then it's given to you, the homeowner. 

The homeowner is responsible for uploading this into the CalHFA system. 

Once they get this pre-approval letter and the form that's filled out, you will go into a lottery system. 

So this will be a lottery system where they will draw for who will get this program, so everyone going into the lottery will be qualified first. 

You must be qualified for the lottery, and then they will draw for it. 

How does this work? 

I'm going to show you some examples of the shared appreciation. 

This first one shows you the maximum shared appreciation you would give back to the state. 

This first one, let's say you got $100,000 from the state for your down payment, so it'd be like a $500,000 purchase. 

The rule is that you will only pay 2.5 times the original amount back to the state for the shared appreciation. 

And so this shows you 2.5 times 100,000 is 250,000 plus the 100,000 that you borrowed, so a total of 350,000 would be the maximum that anyone would have to pay back the state for the appreciation. 

The appreciation part of it can get tricky, but stay with me here, and I'll go through it. 

Hopefully, you will understand when I go through the numbers.

So the second example here is the borrow area, where the median income is above 80%, 80% area median income, and up to CalHFA loan limits. 

I put a link for the CalHFA limits. 

Again, in Shasta County, it is about 140,000. 

It'll be different for each county, but it will start around the 140,000 you can make up to. 

Now, if you make under 80% of the area median income, you pay less back to the state. 

You pay more if you meet the income limits, but you pay the state less for the shared appreciation if you have a lower income. 

I'm going to explain what that is. 

This first one, though, is if you are over the area median income but under the CalHFA loan limits, so if you bought for $500,000, 20% for your down payment would be a $100,000 loan that you get, so you get the $100,000 loan from the state. 

Three, four, maybe five years later, you want to sell that home, and you end up selling that home for $700,000. 

Well, $200,000 of equity was gained, so the shared appreciation is 20% of what you pay back on the gain. 

So it's 20% of what you gained, so what that means is, out of the 200,000, you'd pay back $40,000 plus the original $100,000 that you borrowed. 

That total would be $140,000 that you'd pay back to the state. 

So this is the first example, the last example, or the third example, for borrow area median income is under the 80% area median income.

So, your income is under 80% of the area's median income. 

In that case, I will also put the area median income limits or the area median income for each county below this video. 

Put a link where you can look this up, so you may be under this, and in this example, you pay less back to the state of the shared equity. 

You found a home for $400,000; 20% would be $80,000, so you get the $80,000 down payment, and three, four, maybe five years later, you end up selling that home for $600,000. 

Again, $200,000 of equity gain, and here's that 20% that the state, the shared appreciation, and because you're under the area median income, under 80% of the area median income, you only pay 75% of the 20% that you got from the state. 

So what this means is a $200,000 equity gain; 20% of that is $40,000 that goes to the state, but they will only take 75% of the 40,000. 

So that means that you only pay $30,000 to the state instead of the 40,000 plus, then you pay back the original loan you borrowed. 

So you're going to give the State 110,000, leaving you with about $90,000 of equity gain, and this last example of where there was 200,000 of equity, you would have walked away with $60,000 instead 90,000 because you were over the area median income 80% of the area median income. 

So this explains it.

The program is going to come out in the spring of 2024. 

To be ready for the program, feel free to reach out to me. 

You can send me an email.

I'd love to help you get qualified and ready to go where you can get in the lottery system and help you and your family buy your new dream home. 

Thank you so much. 

*The transcription is auto-generated by a program and may not be accurate. In order to ensure you get all the information from the video properly, you must watch the video.