Mortgage Market Update
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California Launches Innovative Shared Appreciation Home Loan Program
The Golden State’s ongoing housing crisis has been exacerbated by rising interest rates, which have made the purchase of new homes even more difficult for cash-strapped Californians. However, a new State program may offer some hope to low-to-moderate-income Californians who can afford to make monthly mortgage payments but lack the liquidity required for the down payment on a first home.
The State of California launched a new shared appreciation home loan program Monday to assist qualified first-time homebuyers with a unique form of down payment assistance.
The program, also known as the California Dream For All Program, is administered by the California Housing Finance Agency (CalHFA) and offers eligible homebuyers a loan for 20 percent of the home’s purchase price or appraised value, whichever is lower. The homebuyer would not make any payments on the loan until they sell, refinance, or transfer the property. At that point, the homebuyer would then pay back the original down payment loan plus a 20 percent share of any appreciation in the home’s value.
A key program feature, according to CalHFA’s website, is the “recyclability of funds so that more Californians can receive assistance.” In other words, the State will utilize the dollars it receives from its share in the appreciated values of the homes it financed the purchase of to offer new loans through the program.
The program does include income eligibility requirements which vary by County. First-time homebuyers in Santa Clara County are eligible if their household makes less than $300,000 annually.
However, the program is limited by the amount of funding it was allocated by the Governor’s budget. According to a tweet by State Treasurer Fiona Ma, whose office spearheaded the study of the program concept last summer, the Dream For All Program allocation of $300 million will support “an estimated 2,300 first-time homebuyers.”
For that reason, eligible first-time homebuyers in the South Bay may want to consider exploring the program sooner rather than later. For more information, interested homebuyers can visit the program’s page on CalHFA’s website.
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