Proposed Program Will Provide Up To 17% For Buyers Toward The Purchase Price Of Their Home
Home prices in the Santa Clarita Valley have gone up 12% since last year. With a median price of $740,000, most homes are out of reach for first time home buyers. Complicating the issue is that
mortgage interest rates continue to rise, making it even harder for potential buyers to enter the market. Add to that the fact that 20% down for a $740,000 home is $148,000. Who has the ability to easily save that kind of money?
What other options are currently available for home buyers?
There are options to the 20% down payment, however. FHA loans will fund with as little as 3.5%, and other GSE (Government Sponsored Enterprises, Such as Fannie Mae, Freddie Mac, HomeReady and HomePossible programs) can go as low as 3%. The downside to many of these programs is that Primary Mortgage Insurance (PMI) is added to the buyer’s mortgage until the equity exceeds 20% of the purchase price. This means a higher mortgage rate for the foreseeable future until either the loan principle is paid down, or the equity increases through the rise of home values.
Veterans of the Armed Forces may take advantage of programs offered through the Veteran’s Administration (VA) via the “VA no/no” (No money down, no closing costs), but considering the reality of the average buyer being able to afford the monthly payment on a $740,000 mortgage hovers around $6000 when you include impounded insurance and property taxes. OUCH!
What is California Dream For All?
In July 2021, the California Legislature enacted Assembly Bill 140, which provided for a study by the California State Treasurer, in collaboration with the California Housing Finance Agency and the California Department of Housing and Community Development and other relevant parties, to develop a project known as the “California Dream for All” program. The program has been funded by way of the state budget to the tune of $500 million, with the hopes that it may be expanded to $1 billion in the future.
The “Shared Appreciation Loan”
California’s Dream For All program provides qualified buyers up to 17% of the purchase price of the home, thus reducing the buyer’s portion of a down payment to a manageable 3% (An amount many buyers could actually save). This is achieved through a Shared Appreciation Loan, which means the buyer doesn’t have to repay the loan until they either sell or refinance the home. Once this occurs, the state would be reimbursed for the 17 percent share of the home value. The funds would then be reinvested into the program, thus helping more first-time homebuyers purchase a home and begin developing wealth.
Where can I apply?
The California Dream For All program has yet to be launched as the participating parties work out the details. Most reliable sources state it could be available as early as 2023. Complete information on the program may be found here.