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A Path to Affordable Homeownership in California: The CalHFA Dream for All Shared Appreciation Loan Program

A Path to Affordable Homeownership in California: The CalHFA Dream for All Shared Appreciation Loan Program

The California Housing Finance Agency (CalHFA) Dream for All Shared Appreciation Loan (SAL) program is a unique opportunity for first-time homebuyers in California to receive assistance with their down payment and closing costs. The program is designed to help low- to moderate-income households overcome one of the biggest barriers to homeownership: saving for a down payment. In this blog post, we will explore the CalHFA Dream for All SAL program in depth, including how it works, its benefits, eligibility requirements, and more.

Key Takeaways

  • The program provides valuable assistance to first-time homebuyers in California who are struggling to save for a down payment and closing costs.
  • The program is based on a shared appreciation model, which allows homebuyers to benefit from any increase in property value when they sell, refinance, or transfer the property.
  • To be eligible for the program, homebuyers must meet certain requirements, including being a first-time homebuyer, meeting income limits, and completing a homebuyer education course.

What is the CalHFA Dream for All SAL Program?

The CalHFA Dream for All SAL program is a deferred-payment, zero-interest second mortgage loan. The loan is designed to provide assistance to first-time homebuyers who are purchasing a primary residence in California. The loan is based on a shared appreciation model, which means that CalHFA will share in the appreciation of the property value with the homebuyer at the time of sale, refinance, or transfer of the property.

How does the CalHFA Dream for All SAL Program work?

The CalHFA Dream for All SAL program provides up to 20% of the purchase price or appraised value, whichever is less, in the form of a second mortgage loan. The loan is for a term of 30 years and is deferred for the first five years. This means that no payments are required during the first five years of the loan. After the five-year deferral period, the loan is repaid with interest over the remaining 25 years.

When the home is sold, refinanced, or transferred, the CalHFA Dream for All SAL loan must be repaid. The amount to be repaid is the initial loan amount plus a share of the appreciated value of the property. The share of the appreciated value is based on the percentage of the original loan amount to the original purchase price or appraised value, whichever is less. For example, if the original loan amount was $50,000 and the original purchase price was $300,000, the shared appreciation percentage would be 20% ($50,000 / $300,000). If the property appreciated by $100,000, the amount due to CalHFA would be $20,000 (20% of $100,000).

What are the benefits of the CalHFA Dream for All SAL Program?

The CalHFA Dream for All SAL program has several benefits for first-time homebuyers in California:

  1. Assistance with down payment and closing costs: The program provides up to 17% of the purchase price or appraised value, whichever is less, to help with the down payment and closing costs. This can help make homeownership more affordable for low- to moderate-income households.
  2. Deferred payments: The loan is deferred for the first five years, which means that no payments are required during this time. This can help reduce the financial burden on first-time homebuyers during the early years of homeownership.
  3. Zero interest: The loan does not accrue interest, which can help reduce the overall cost of homeownership.
  4. Shared appreciation: The shared appreciation model allows homebuyers to benefit from any increase in property value when they sell, refinance, or transfer the property. This can help build wealth over time.

Who is eligible for the CalHFA Dream for All SAL Program?

To be eligible for the CalHFA Dream for All SAL program, homebuyers must meet the following requirements:

  1. First-time homebuyer: The homebuyer must be a first-time homebuyer, which is defined as someone who has not owned and occupied a primary residence in the past three years.
  2. Income limits: The homebuyer’s income must be within the program’s income limits vary by county and are based on the number of people in the household. In general, the income limits for the CalHFA Dream for All SAL program are set at 140% of the area median income (AMI).
  3. Credit score: The homebuyer must have a credit score of at least 640. However, the program allows for certain exceptions for borrowers who have a credit score of at least 600.
  4. Occupancy requirements: The homebuyer must occupy the property as their primary residence within 60 days of closing the loan.
  5. Homebuyer education: The homebuyer must complete a homebuyer education course prior to closing the loan.
  6. How to apply for the CalHFA Dream for All SAL Program?

To apply for the CalHFA Dream for All SAL program, homebuyers should follow these steps:

  1. Find a CalHFA-approved lender: Homebuyers should work with a CalHFA-approved lender to apply for the program. A list of CalHFA-approved lenders can be found on the CalHFA website.
  2. Complete a loan application: Homebuyers will need to complete a loan application with their lender. The lender will review the application and determine if the homebuyer is eligible for the program.
  3. Complete homebuyer education: Homebuyers must complete a homebuyer education course prior to closing the loan. The course can be completed online or in person and covers topics such as budgeting, credit, and the homebuying process.
  4. Provide documentation: Homebuyers will need to provide documentation to their lender to verify their income, employment, and other information.
  5. Close the loan: Once the loan is approved, the homebuyer will need to attend a closing to sign the loan documents and receive the funds.

Conclusion

The CalHFA Dream for All Shared Appreciation Loan program is a valuable resource for first-time homebuyers in California who are struggling to save for a down payment and closing costs. The program provides assistance in the form of a deferred-payment, zero-interest second mortgage loan that is based on a shared appreciation model. This model allows homebuyers to benefit from any increase in property value when they sell, refinance, or transfer the property. The program has several benefits, including assistance with down payment and closing costs, deferred payments, zero interest, and shared appreciation. To be eligible for the program, homebuyers must meet certain requirements, including being a first-time homebuyer, meeting income limits, and completing a homebuyer education course. If you are a first-time homebuyer in California and are interested in the CalHFA Dream for All SAL program, be sure to find a CalHFA-approved lender and begin the application process today.

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