STATEWIDE – As of November 2022, interest rates were still above 7% – impacting affordability, however, there is a program available to help homebuyers reduce the cost of entry into a house. The California Housing Finance Agency (CalHFA) Forgivable Loan offers homebuyers a forgivable loan of up to 10% of the purchase price of a home to use for the down payment.
According to the CALHFA website, home equity has proven to be one of the strongest ways for families to create and pass on intergenerational wealth. CalHFA is committed to improving equitable homeownership for all Californians.
The loan is available for middle income families who meet the income limit requirement.
Equity Builder Forgivable Loan Requirements
The loan is repayable if the purchaser occupies the accommodation for 5 years. Non-occupant co-borrowers are not allowed. Single family one-unit residences, manufactured homes and condominiums are eligible properties. Guest houses, granny units and in-laws may also be eligible.
CalHFA borrowers must complete eHome’s 8-hour homebuyer training and obtain a certificate of completion. The course costs $99. Homebuyer advice is also included in the course. An in-person course is also available through NeighborWorks America or any HUD-approved housing counseling agency.
Increase in housing prices in California
In California, the median home price has risen more than 20% since the start of the COVID-19 pandemic. Even though the housing market is cooling, interest rates have had an impact on purchasing power.
According to CNBC, by the end of 2021, a homebuyer with a monthly mortgage budget of $2,500 could afford a home worth up to $517,500. But for the four-week period ending June 15, 2022, that same buyer could only afford a home worth up to $399,750, a $120,000 drop in buying power.
Although the Forgivable Equity Builder Loan is 0% interest, part of the loan will need to be repaid if the home is occupied for less than five years.
For more information on the Forgivable Equity Builder Loan, visit https://www.calhfa.ca.gov/homebuyer/programs/forgivable.htm