California’s “Forgivable Equity Builder Loan” program for first-time homeowners is here!

With the current increase in the inflation index, interest rates on loans have risen from 2% to 5% since the epidemic. If one wishes to currently take out a housing loan, they will notice that the interest rate has more than doubled. As a result, sellers have reduced their expectations from home buyers, relieving them from the overall stress and impact of the rise in interest rates. As the real estate market has begun to cool down, it is no longer dominated by sellers, which has been a good thing for home buyers. What’s even better is that the California government has recently implemented programs that offer forgivable loans up to 10% of the home’s purchase price for first-time homebuyers, such as the Forgivable Equity Builder Loan and the MyHome Assistance Program, as well as the ADU Grant Program for low-income families.

Forgivable Equity Builder Loan
The government will offer homebuyers with a loan of up to 10% of the sale price or appraised amount as a subordinate loan. The subsidized funding is forgivable if the borrower lives in the home for at least 5 years. For example, suppose you purchased a $800,000 home, after placing a 20% down payment, the government will subsidize 10% of the remaining funds. Thus, $160,000 would be made towards the down payment, while the $80,000 forgivable loan is provided (as a subordinate loan), along with your or $560,000 first mortgage lending. What are the application requirements for this type of loan? We will answer your most relevant and concerned questions further below.

1. Who is eligible?
A first-time home buyer or anyone who hasn’t owned property within the last 3 years.

2. If I don’t own a primary residence, but would like to purchase a house to rent. Would I still qualify?
No, the purchased home must be for self-occupation. The applicant must occupy the property as a primary residence, and non-occupant co-borrowers are not permitted.

3. Is this offer available to all first-time buyers? Are there any restrictions on the applicant’s income?
Applicants must meet the income requirements, as this is an assistance program available to low and middle-income families. Income must be equal to or less than 80% of the county’s annual median income in which they plan to purchase a home. For example, 80% of the median income in San Jose is around $133,000. Therefore, the qualified financing of the first mortgage may not be greater than $647,200, and be within 80% to 105% of the loan-to-value (LTV) ratio.

4. Are all property types approved?
The properties included are single-unit properties, condos, planned unit developments (PUD) and mobile homes that meet the Fannie Mae requirements, and accessory dwelling units (ADU) are eligible as guest homes.

5. The 10% Forgivable Equity Builder Loan does not need to be paid back?
That’s right! The Forgivable Equity Builder Loan is interest free. However, homeowners may have to pay back a portion of the loan if the home has been occupied for less than 5 years. When the loan is partially forgiven each year, CalHFA Loan Services will issue a 1099 to the borrower, and they would be subject to taxes.

6. Are there any additional special requirements?
Borrowers wishing to qualify for this government subsidy will have to attend a homebuyer education counseling and receive a certificate, which is valid for one year. E Home’s eight-hour course is the only online course accepted by CalHFA.

In summary, if you are purchasing a home for the first time and are qualified, we recommend that you attend the homebuyer education counseling now, otherwise it might be too when you have already set up an Escrow. If you wish to know more about the preferential programs offered by the California government, please contact our Loan Specialist at TransGlobal. TransGlobal not only offers loans, but also acts as an agent for 100 banking services, such as 0% down payments for low-income individuals, stated income loans, credit loans, as well as large loans for special projects. We also accept ultra-short-term Bridge loans, Commercial business loans and Personal loans. Whether you are looking for a loan or wish to invest in these loans, TransGlobal can help find one that suits you!