New First Time Home Buying Program: Dream for All
There’s no secret. Buying a home in Santa Cruz and in California in general is not an easy task. But a new state program from the California Housing Finance Agency or CalHFA called The Dream for All Program launched on Monday March 26th, 2023, is for first time home buyers that aims to make the process just a little bit easier. The California Dream for All Program provides home buyers with financial assistance equal to 20% of a home’s purchase price. Those funds can be used for a down payment and closing costs when purchasing your first home.
You must be a first time home buyer, but we’ll get into that in a little bit because first time home buyers doesn’t have to be your very first home. We’ll talk about that in a minute. How awesome is this?
Hi, I’m Shemeika Fox, Santa Cruz Real Estate Expert, and your personalized real estate concierge.
Now let’s get into it. You’re probably wondering, Shemeika, 20% of a home’s purchase price sounds great but how does the California Dream for All, or DFA Program work?
The Dream for All Program offers first time home buyers in California a Shared Appreciation Loan. A Shared Appreciation Loan, also known as a Shared Appreciation Mortgage, or SAM, is a type of home loan that grants a portion of the home’s appreciation to the lender in exchange for a below market interest rate. The borrower benefits from a lower monthly payment and the lender receives a share of the profit when the home is actually sold on the open market.
Shared appreciation is a little more complex than a typical mortgage loan. Let me give you an example to help simplify. Let’s say you’re buying a home that’s $500,000. For this home, you would receive 20%, or a hundred thousand dollars to help with the down payment and closing costs. And your first mortgage loan would be $400,000. After Fox Realty Group, yes successfully brings you to the closing day. You get the keys to your new home and you get to enjoy the Santa Cruz home ownership lifestyle. It’s beautiful.
Once you decide to sell your home, you would be required to pay back 20% assistance you received plus 20% of the home’s appreciation, right? So you are going to be paying this back on the rebound. So going back to our example. Say the home you bought for $500,000 has now appreciated $140,000 after living in it for five blissfully happy years, making your home price now valued at $640,000. 20% of $140,000, the home’s appreciation is $28,000 and the original amount you borrowed was $100,000.
So in this scenario, you would be required to pay back the lender a total of, you got it, $128,000 upon the successful sale of your home. So borrowed money plus 20% of appreciation.
And if you sell your home with Fox Realty Group and it hasn’t appreciated in value, the Dream for All Program would only require that you paid back the original 20% loan. In this case, that would be $100,000.
It’s as simple as that.
So are you eligible for the Dream for All Program? Let’s look at the six eligibility requirements for borrowers.
- This program is open to first time home buyers in California. That means if you’ve never owned a home, you’re a first time home buyer. It also means, as I said before, if you have owned a home three years prior but haven’t bought since, you are right back to being a first time home buyer again. Can you believe it? And you can take advantage of all of the benefits of the Dream For All Program.
- Borrowers must also plan to live in the new property that they are buying. Meaning that it must be your primary residence and they do not allow non-occupant co-borrowers to co-sign for the loan.
- Home buyers must meet income requirements depending on their county. The limits vary depending on what California county you live in, but ranges from $159,000 to $300,000. For Santa Cruz County, borrowers must make under $236,000 a year.
- CalHFA borrowers must complete two levels of home buyer education counseling and obtain a certificate of completion through an eligible home buyer counseling organization. You can take these courses online or in person. Visit the CalHFA website under the borrower eligibility requirements to find CalHFA approved resources and courses.
- A one year home warranty is required.
- And lastly, you must have a credit score minimum of 680.
What are the property requirements for the Dream for All Program?
Single family homes, planned unit developments or PUDs, condominiums and manufactured homes are all permitted. However, some restrictions may apply for condos and manufactured homes.
Once you find a home, talk to your lender to make sure that the home you want is in compliance with the Dream for All Program guidelines.
Why should you use a Dream for All loan?
The DFA loan offers a lower interest rate than other assistance programs for first time home buyers, lower monthly payments because you avoid paying private mortgage insurance or PMI, and because of your lower loan amount, you have increased your buying power due to a larger down payment and lower interest rate. And monthly payments. You do not have to repay the 20% assistance until you sell or transfer the property. Meaning there is no monthly repayment of the assistance loan that you borrowed for that down payment. So the 20% doesn’t have to be paid back until you sell your home.
The Dream for All Assistance Program is not a handout or a subsidy that will be a burden on the California taxpayer because it will be self-sustaining for the returns on the shared equity. However, due to Governor Newsom’s severe $700 million budget cut to the Dream for All Program, they anticipate there will only be enough funds to help approximately 2300 families. So get your applications in quickly because this will not last forever.
So if the Dream for All Program sounds like a program that you would like to take advantage of, please reach out to me today to get started on your Santa Cruz home buying journey.
Let’s recap one last time.
In summary, California Dream For All DFA is a new program offered by CalHFA that provides eligible home buyers with down payment assistance toward their first home. Home buyers receive a Shared Appreciation Loan to help them reach a down payment of up to 20% of their home’s purchase price without the need to make monthly interest payments on the Shared Appreciation Loan. The higher down payment reduces the amount of your primary mortgage, which can result in lower monthly payments. It may also help you avoid costly private mortgage insurance or PMI and higher interest rates. The main goal of the Dream for All Program is to increase access to homeownership for low and moderate income Californians and to provide opportunities for wealth accumulation through homeownership.
I mean, that sounds like a win-win. If you would like to learn more about the Dream for All Program, please reach out to me. I’m happy to connect you with a preferred lender and I would love to guide you during the home buying process.
I’m Shemeika Fox, your Santa Cruz Real Estate Expert and your personalized real estate concierge.
