First-time home ownership remains a sought-after goal for many young Californians. First-time home buyers made up 35 percent of all home buyers in 2016, according to information from the 2016 Profile of Home Buyers and Sellers, an annual report published by the National Association of Realtors.
Though the financial environment for buying a home has tightened significantly, home ownership is a goal that can still be achieved by those who are determined to make it happen. California offers first-time home buyer programs that can fit most purchasers’ needs. Here is a brief overview of five of those programs, along with background on the state agency that makes them possible.
The California Housing Finance Agency (CalHFA)
The California Housing Finance Agency, also known as CalHFA, is the state agency that offers and administers the five major first-time home buyer programs for California. The agency has been in existence for more than 40 years. It was chartered in 1975 to serve as the state’s affordable housing lender, tasked with serving low to moderate-income Californians and making low-interest loans available to qualified consumers.
CalHFA is not a lending institution and, therefore, does not make loans directly to home buyers. Instead, the agency works with approved private lenders, specifically banks, to qualify loan applicants and provide accessible mortgage loans.
Most first-time home buyers are likely to deal with CalHFA at some time during their home purchase process.
Conventional Loan Programs
- CalHFA Conventional Loan Program: This loan program offers a first mortgage loan that is insured through mortgage insurance on the conventional loan market. The interest rate stays fixed throughout the loan's 30-year term. Down payment assistance can be obtained by combining this loan with the Extra Credit Teacher Program (ETCP).
- CalPLUS Conventional Loan Program: This program is also secured through conventional means, but it will have a slightly higher fixed interest rate than CalHFA’s standard conventional program. The loan is fully amortized for its 30-year term and is combined with the CalHFA Zero Interest Program (ZIP) for closing costs.
Government-Insured Loan Programs
- CalHFA FHA Loan Program: This first mortgage loan is insured by the Federal Housing Administration (FHA). The interest rate will be fixed for the 30-year term. It can be combined with the ETCP for down payment assistance.
- CalPLUS FHA Loan Program: This loan program provides an FHA-insured first mortgage. The fixed interest rate will be somewhat higher than with the CalHFA Conventional Loan Program. The loan will be fully amortized for its 30-year term. It can be combined with the ZIP program to cover closing costs.
- Cal-EEM + Grant Program: This program combines an FHA-insured Energy Efficiency Mortgage (EEM) first mortgage with an additional grant from Cal-EEM. The grant is intended to improve access to home improvements that boost energy efficiency. The interest rate is fixed for 30 years. The loan can be combined with the ECTP for down payment assistance.
Consistent Requirements Among Loan Programs
All five CalHFA first-time home buyer programs have some requirements and conditions that stay the same from one first-time home buyer program to another.
- Home buyer education: Each first-time home buyer program administered by CalHFA requires a home buyer education course. The course presents in-depth information of interest to those who have just purchased a home and includes details that CalHFA believes are “critical to the success and happiness of a homeowner,” according to the CalHFA Website. Only one occupying first-time purchaser on each loan transaction must take the course. The courses can be taken in person or online.
- Necessary documents: CalHFA recommends that prospective home loan customers have certain documents available for reference when they contact a loan officer. These documents are: 1) pay stubs and income statements, 2) bank statements, 3) employment history, and 4) previous year’s tax returns. Each person included in the loan transaction should prepare these documents and have them available.
- Interest variability: CalHFA stresses that, in each first time home buyer program, the interest rate on the loan will vary. Interest rates will be affected by factors such as lender fees and the loan seeker’s financial circumstances. Interest rates can change from day-to-day. CalHFA-approved loan officers can provide loan seekers with an up-to-date interest rate quote for each first-time home buyer program.
- Occupancy and income requirements: Borrowers must be the ones to occupy the home as their primary residence. Non-resident co-borrowers are not permitted. Loan seekers must also meet CalHFA income limits for the program.
Interested in pursuing a mortgage loan to finance your first home? Übermortage is a qualified CalHFA lending institution and can help you through the first-time home buyer program of your choice. Contact us today to speak with a loan officer or for more information on the first-time home buyer program that is right for you.