California First-Time Homebuyer Programs
Bay Area First Mortgage Programs
Are you planning to buy your first house in California? Although homeownership is an exciting path, it can also be overwhelming. There are many programs and tips that can help. Let us show you some.
2023 Homebuyer Programs in California
You may think that just because you are from the Golden State, you need to save tens to thousands and have almost perfect credit to be eligible for a mortgage.
This isn't always the case. This California Housing Finance Agency (CalHFA), first-time homebuyer program is designed to help you buy a house, regardless of your credit and financial standing.
1. Conventional Loan Program CalHFA
Who is it for? Homebuyers who have less to down payment.
CalHFA Conventional Loan Program was created to help first-time California homebuyers get a conventional loan at a low rate of down payment. A conventional loan is a home loan that can be obtained through banks or credit unions.
The CalHFA Conventional Loan has a term of 30-years. This means that borrowers will have to make monthly payments on their loans for a period of 30 years. CalHFA may offer lower interest rates to low-income borrowers if they apply for a conventional mortgage.
CalHFA can help find qualified lenders to process this type loan.
Some requirements include:
- A minimum credit score requirement of 640. Low-income borrowers are eligible to apply for these loans with scores as low as 660. For you to be considered low income, your income must be less than or equal the Area Median Income of Fannie Mae for your area. A credit score of 680 is required if your income exceeds this amount.
- 43% or lower ratio of debt-to income: This is the amount you pay in debts or bills divided by your monthly income before taxes. Let's suppose your monthly debts are $2,000, and you earn $6,000 a month. Your DTI ratio would then be $2,000/$6,000 =.33, or 33%.
- California's income limits for counties are strict. To make sure that your income does not exceed these limits, you can check the county limits.
- South San Francisco first-time homebuyer status. You won't likely be approved if this isn't your first mortgage.
- Completion a homebuyer education program: There are recommended courses available on the CalHFA site.
Some mortgage lenders may have additional requirements. CalHFA home loan options typically allow for a down payment of as little as 3.3% of the home's worth. Consider a $200,000 home loan. Only $6,000 would be needed for a down payment.
The mortgage rates for this program are typically lower than the market rate, however they are often higher than those of government-backed home loans.
2. CalPLUS Conventional Loan Program
Who is it for? It is for homebuyers who need assistance in securing funds for closing costs.
CalPLUS conventional loans include all of the benefits of CalHFA's conventional program, but you also have the option to finance closing costs with a zero interest loan.
How does this work? CalPLUS loans may be combined with CalHFA’s Zero Intent Program (ZIP). The ZIP program allows borrowers to pay closing costs by paying 2% or 3% of their mortgage amount.
The interest rate for this ZIP loan is 0%. Payments are deferred over the life of your mortgage loan. The home loan will not be repaid until you sell, refinance, or pay off your mortgage.
CalPLUS borrowers are eligible for assistance with closing costs. However, they will be charged slightly higher interest rates than other CalHFA loan holders.
Some requirements include:
- A minimum credit score of 680 is required for low-income borrowers.
- You must have a DTI ratio less than 43%.
- California's income limit by county does not allow you to make more than your income. You can check the income limits in your county to make sure that your income is within their restrictions.
- You must be first-time homebuyer.
- A homebuyer education program must be completed. CalHFA offers recommended courses.
- CalPLUS loans can be combined with CalHFA's MyHome Program to help with your downpayment. Please scroll further to see our section of MyHome.
3. CalHFA FHA loan program
Who is it for? For homebuyers who are looking for low mortgage rates.
CalHFA FHA loan program for first-time homebuyers is backed by U.S. Federal Housing Administration. FHA loans offer lenders greater security than conventional loans, because they are guaranteed by the federal government. FHA loans are often offered at lower interest rates that conventional loans. Borrowers can also make as little as 3.5% down on these loans.
CalHFA FHA Loan is a fixed loan with a 30-year term that can be obtained through any of the major lenders in California.
Some requirements include:
- Minimum credit score is 640
- You must have a DTI ratio less than 43%.
- California's income limit by county does not allow you to make more than your income. You can check the income limits in your county to make sure that your income is within their restrictions.
- You must be first-time homebuyer.
- You will need to take a homebuyer education course. CalHFA has a list of recommended courses.
- You will need to meet the FHA's requirements for income and property details to be eligible.
4. CalPLUS FHA loan program
Who is it for? FHA borrowers that need assistance raising funds for closing costs.
CalPLUS FHA Loans include all the same features as CalHFA FHA Loans, but can be used ZIP to help with closing costs - just like CalPLUS traditional mortgages.
ZIP loans can either be offered at 2% or 3.3% of your total loan amount and have interest rates that are 0% deferred for the lifetime of your mortgage loan.
You will pay a slightly higher rate of interest on these loans.
You can layer ZIP with the MyHome loan program so that borrowers get help with down payments.
Some requirements include:
- Minimum credit score is 640
- You must have a DTI ratio less than 43%.
- California's income limit by county does not allow you to make more than your income. You can check the income limits in your county to make sure that your income is within their restrictions.
- It is necessary to be a first-time buyer of a home.
- You will need to take a homebuyer education course. CalHFA has a list of recommended courses.
- You will need to meet the FHA's requirements for income and property details to be eligible.
5. CalHFA VA Loan Program
Who is it for? California veterans, active military personnel and eligible surviving spouses.
CalHFA VA Loan is designed to aid current and former military personnel obtain financing for their home. This loan is provided by the Department of Veterans Affairs. It is usually lower than market rates and requires no down payment. It is also a fixed loan for a period of 30 years.
Some requirements include:
You must be either a veteran or active-duty soldier, or a eligible surviving spouse. Learn more about eligibility at the VA website.
Minimum credit score of 660 is required
You must have a ratio of 43% or less in debt to your income.
California's income limit by county does not allow you to make more than your income. You can check the income limits in your county to make sure that your income is within their restrictions.
You will need to complete a homebuyer's education course. CalHFA offers recommended courses.
VA loan borrowers are required to pay a fee of 1%. To help pay this fee and other closing expenses, however, the MyHome program can be used.
CalHFA will help you find the best VA lender.
6. CalHFA USDA Loan Program
Who is it for? Buyers who are looking for a rural home in California.
CalHFA USDA loan is the best option for anyone looking to buy a home in California. This loan is available through the U.S. Department of Agriculture. It comes with many perks such as 100% financing (no down payments). CalHFA USDA loan is a 30-year fixed loan.
Some requirements include:
The property must not be located in a rural area. CalFHA will help you find out if the location you are interested in buying is allowed.
Minimum credit score is 660
A minimum of 43% debt-to-income ratio is necessary.
Your income must not exceed the USDA income limit for your county. California has different income limits than USDA, so make sure to check that your income is below the limit for your county.
You will need to complete a homebuyer's education course. CalHFA offers recommended courses.
You will need to meet the requirements for eligibility to receive a USDA loan.
7. CalHFA Downpayment Assistance Programs
It is for whom? It is for homebuyers who require assistance in securing down payment funds.
CalHFA offers assistance to help with down payments. These loans can be combined and used with other CalHFA programs provided that you meet the income requirements. MyHome Assistance, the principal program that offers down-payment assistance, has special rules for employees of school and fire departments as well as VA loan borrowers.
MyHome Assistance Program
This program provides a loan up to the lesser amount of $10,000 or 3.5% of your home's loan value at closing. FHA loans allow for up to 3.5%. This loan is available to assist with closing costs or down payment.
MyHome loans are deferred loans. Payments are not due until the loan is repaid or you sell the property or refinance it. MyHome loans are not like ZIP. Interest is charged on top of the principal.
This program is only available to first-time homebuyers who meet income requirements.
MyHome for Fire Department Employees and School Employees. VA Loan Borrowers
These are the special rules for first-time California homebuyers who are:
Teachers
An employee in a K-12 school
Firefighters
Fire Department Employees
The loan covers 3% of the home's worth in the form a simple interest, deferred loan. There is no cap of $10,000.
The $10,000 cap is also exempt for VA loan borrowers regardless of their location.
Check Your Credit Score
National First-Time Homebuyer Programs
Although many grants and programs are available at the local or state level for first-time homebuyers, California residents can also apply for loan opportunities nationwide.
There are many loan options available nationally that can be very beneficial for first-time homebuyers.
Fannie Mae Freddie Mac 3% down options. Fannie Mae, Freddie Mac offer a couple of options to buyers who are looking for a mortgage that requires only 3% down. You will need to meet income requirements and be a first time homebuyer for each program.
FHA loan: First-time borrowers love these loans because they require lower credit scores, and have low down payments. With a 580 credit rating and 3.5% down, you can get a loan. It's possible to get approved for a loan with a credit score of below 580 if you have more money available for a downpayment.
USDA loan: These loans let borrowers from eligible areas get a loan without any down payment. They require credit scores of minimum 640. It is possible to have lower scores.
VA loan: The VA loan's 0% down option allows you to get homeownership if you are a veteran or active-duty servicemember.
Some national home-buying programs are available that can assist first-time buyers.
The Department of Housing and Urban Development offers the Good Neighbor Next Doors program. This program allows teachers, firefighters, and police officers to purchase eligible HUD-owned properties in eligible areas at 50% off.
Fannie Mae HomePath Buyer Program: Fannie Mae offers this program that allows buyers to purchase Fannie Mae foreclosed properties for as low as 3% down and up to 3% in closing cost assistance.
Tips for first-time homebuyers in California
Here are some additional tips for homebuyers who have not yet mastered the California financing options.
Tip 1: Do your research
The more information you have about home-buying, the better prepared you will be. Do your own research before you rush to buy a home. Ask your friends for help, search the internet for information about your neighborhood and visit My-Down Payment for additional information.
Tip 2: Find a Great Agent
The most important person you will communicate with throughout the process of buying a home is your agent. It is important to work with an experienced agent who understands the California real estate market.
Local agents with this experience can help you navigate neighborhoods that suit your family's financial and family needs. They will show you homes that match your budget and provide valuable advice. They can also represent you in negotiations. Granite Bay Homes will connect you to an agent (Jenifer Whigham) and homes available in your area.
Tip 3: Get preapproved
Preapproval for a mortgage will streamline the home loan application process. Once you have a clear idea of the type of home loan that you are interested in, contact lenders to start the preapproval process. After you've found the perfect home, you will find it easier to apply for financing. This will also give you an idea of what you can afford.
Be approved to purchase a home.
My-Down Payment, lets you go faster to house hunting
California offers many programs that are available to first-time buyers. To begin, research the program that interests you. Next, begin the preapproval process to learn more about your options. Then, you can team up with a local realtor to help you find your dream home.
Advantages and disadvantages of mortgage brokers
A Guide for Mortgage Brokers
A mortgage broker is an intermediary between people who want to purchase real estate and those who offer loans. A mortgage broker helps potential borrowers locate the right lender for them.
After the 2008 real estate market crash, brokers' business practices were scrutinized. The question of whether they act in the best interest of their customers was also raised.
A competent and experienced mortgage broker can help you to find the right mortgage. A mortgage broker has its advantages and disadvantages. Before you commit to one, it is important that you weigh all of them. EYE TAKEAWAYS
A mortgage broker could save you time, money, and effort.
You may be able to access lenders better through a mortgage broker than you do.
However, broker interests might not align with yours.
Direct dealing with lenders may help you get a better loan deal.
Ask potential mortgage brokers to explain how they can help you, their fees and their experience with the lending industry.
Mortgage Broker vs. Lender vs. Loan Officer
South San Francisco Mortgage Broker
A mortgage broker acts as a liaison between a financial institution offering loans secured by real estate and individuals looking for a loan to purchase real estate.
A mortgage broker works closely with the lender and borrower to approve the loan. The mortgage broker collects and verifies all documentation required by the lender to complete the home purchase.
Mortgage brokers often work with multiple lenders and can offer different loan options to the borrower.
The borrower does not have to work with a broker. If they wish, they can also work directly with a lender.
Lender
A lender is an individual or financial institution that provides funds to finance a real estate transaction. The borrower repays the funds and agrees to pay a set amount of interest over a specified time period.
A lender could be a bank or credit union. Any lender can provide a loan to potential homebuyers.
Although a mortgage broker doesn't necessarily have to be involved in the transaction, some lenders might only work with mortgage brokers. If the lender you choose is not listed, you will need to contact a mortgage broker.
South San Francisco Lender
Lenders employ a loan officer. If you contact a lender to obtain a loan, they will be the person you deal with. A loan officer will help a borrower to understand and choose from the available loans.
They will answer any questions and help the borrower to get pre-qualified for a loan. As you close the loan, they can serve as your advocate.
Mortgage brokers do not approve loan applications or provide funds for loans. They assist people looking for home loans to find a lender who can finance their home purchase.
How to choose a South San Francisco mortgage broker
Begin by understanding what a mortgage broker does.
Ask family members, friends, and business contacts for referrals.
Check out online reviews to find complaints.
Meet prospective brokers to get an idea of their interest in helping you obtain the loan you need.
Ask about their experience, what kind of help they provide, and the fees they charge. Also, how are they paid (by borrower or lender).
Ask them if they can help with your particular financial situation.
Advantages
The Broker may save you time and effort
The mortgage brokers are in constant contact with many lenders, some of which you may not be aware of. They can also steer you away form lenders that have excessive payment terms.
However, it's a good idea to do your research before you meet with a broker. Search rates online to quickly find out the average rate for the type you are applying for. To calculate the loan details, use an online calculator. These tools allow you to compare rates quickly and give you additional information when you evaluate a mortgage broker.
A broker may have better access
To get a retail mortgage, you may not be able contact some lenders directly. Because some lenders only work with mortgage brokers, they rely on them to find them the right clients. Due to their volume of business, brokers may be able get rates from lenders that are lower than you could get on your own.
You may be able to manage your fees with a broker
There are many fees involved in obtaining a mortgage or working with a lender. These fees include appraisal fees, application fees and origination fees. Sometimes, brokers can get lenders to waive certain fees. This could save you hundreds of thousands of dollars.
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Advantages
The interests of a broker may not align with your own.
When shopping for a mortgage, your ultimate goal is to find one that offers low fees and an affordable interest rate. It's a long-term commitment and you need to protect your financial interests.
The lender may charge a fee to a mortgage broker for bringing in new business.
The amount of the mortgage can affect the fee and it will vary from lender to lender.
Brokers may try to maximize their commission by getting you into a mortgage. Many brokers tried to get their clients mortgages they couldn't afford. This was evident after the 2008 market crash.
The best deal for you may not be found by a broker
A lot of homebuyers assume that a broker will offer a better deal than what they can get on their own. However, this is not always true. Sometimes, lenders offer homebuyers better rates and terms than they offer mortgage brokers.
You can always shop around to find out if the broker is offering you a great deal. A mortgage calculator can help you determine if there are better options.
A broker fee may be due
The lender may pay mortgage brokers or you. The fee paid by the lender should be covered. If not, it is possible that you will be directed to a higher-priced loan. Before you decide how good a deal, consider the cost of the fee if you have to pay it. Before you sign anything or work with a broker, be sure to resolve all fees upfront.
To find out which mortgages are available, spend some time talking to lenders.
Brokers Often Do Not Guarantee Estimates
A mortgage broker will often use the term "good faith estimate" when they present you with offers from lenders. The broker assumes that the final terms of the deal will be included in the offer. This is not always true. Sometimes, the terms may be changed by the lender based on your application. You could end up paying more or higher interest.
Some lenders do not work with mortgage brokers
This trend has been growing since 2008. Lenders found that brokers-originating mortgages are more likely to default than direct loans. You may not be able access these lenders through a broker. However, they may be able offer better terms than what you can get through the broker.
What does a mortgage broker do?
As a third-party intermediary between borrower and lender, a mortgage broker is responsible for completing real estate transactions. A broker will gather information about a client and contact multiple lenders to help them find the best loan. The broker will review your credit history to determine what type of loan arrangement can be arranged for you. The broker acts as the loan officer and collects all necessary information. They work with both the borrower and the lender to close the loan.
What is the Average Cost of a Mortgage Broker?
The fees a mortgage broker receives from borrowers are combined with commissions paid by lending institutions that want them to originate loans. Although the costs can vary, a mortgage broker typically earns between 1% to 3% of the loan amount. The amount the borrower pays will depend on what type of loan they have, which broker they use, and how much commissions the broker receives from the lending institution.
The pay of a mortgage broker could appear on your closing costs sheet. There may be upfront fees, fees for loan administration, fees for loan origination, or a commission. It is important to clarify the fee structure with your mortgage broker early in the process, so that there are no surprises at closing.
What is the Payout for a Mortgage Broker?
A mortgage broker is typically paid only when a loan is closed and funds are released. Lenders may pay mortgage brokers according to their accounting schedules. This can take up to 30 business days after closing the loan. Most brokers are risk-free and don't charge borrowers any upfront.
What are the best times to use a mortgage broker?
If you are looking for home loans not readily available, a mortgage broker is the best choice. A broker may be able to help you get loans that are beneficial to you, even if your credit isn't great. A broker can help you find lenders that might be of interest to you, regardless of your financial situation. Lenders may be eligible for lower interest rates through mortgage brokers than commercial loans.
The bottom line
Are you looking for a mortgage broker to help you? Working with a broker can help save time and effort in the application process and possibly save you a lot of money over your loan term.
Some lenders only work with mortgage brokers. This means that borrowers can access loans that they would not otherwise have access to. South San Francisco Brokers can also get lenders to waive appraisal, origination, application and other fees.
It is important to review all fees, including any you may have to pay the broker or owe to the lender. Also, the fees that the broker can help avoid. You can make a decision on whether you need a mortgage broker by weighing the pros and cons. Being guided by a California mortgage broker will save you time and headaches during the financing process. Most mortgage brokers have years of experience and act more as an advisor rather than a typical California loan officer. Homebuyers contact independent mortgage broker Jason Whigham (916) 413-3967 and get all your answers answered.
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