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Buying your first home? See if you qualify for a 0% interest down payment loan

California is trying to make it easier for first-time buyers in a brutal housing market.
(Sam Hodgson / San Diego Union-Tribune)

Low-income Californians looking to buy a home have a new tool at their disposal: an interest-free loan to use toward their down payment that, if certain criteria are met, doesn’t have to be paid back.

The California Housing Finance Agency started offering this help last month through the Forgivable Equity Builder Loan assistance program. The Times outlined the program in March as part of a series on how to buy a home in Southern California.

Here are more details on what’s on offer, as the state tries to make it easier for first-time buyers in a brutal housing market.

A no-BS guide to buying your first home in Southern California.

Do I qualify for the loan?

To qualify, you must be a first-time home buyer and have a household income of no more than 80% of the median income in your area, typically defined as low-income. In Los Angeles County, that means you need a household income of $68,880 or less.

If you meet those criteria, you can get up to 10% of your home’s purchase price to use toward your down payment.

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Previously, low-income households could receive up to 3.5% of their home’s purchase price through a different state program. That money was not only less but also had to be paid back with interest.

Most people don’t buy a home with a 20% down payment. Here’s how you can put down less and get more help with down payment and closing costs.

Will I have to pay back the loan?

The Forgivable Equity Builder Loan carries a 0% interest rate and is forgiven in full if you stay in your new home for five years. If you don’t stay in your home that long, you will have to pay back a portion of the money.

The loan is for your down payment and you still must qualify for a mortgage, which covers the remaining cost of the house.

How can I apply for this program?

Eligible Californians can apply for the assistance through private lenders approved by the state. A list is available here.

It’s important to work with a real estate agent and lender who is informed about state assistance programs and their various criteria. The California Assn. of Realtors has a searchable database that allows you to look up other state and private assistance programs according to certain criteria, such as income and job.

You can learn more about this particular zero-interest down payment loan here.

Where and what kind of homes does this program cover?

You can use the down payment help to buy a single-family house, town home or condo throughout California.

Because the down payment program is limited to low-income buyers, it will be of most use for people buying in more affordable places.

Low mortgage interest rates have helped drive up home prices for a decade. What happens now that the rate for a 30-year mortgage has hit 5%?

Why is the state doing this?

Soaring home prices, turbocharged during the pandemic as people sought out more living space, have made buying a home even more out of reach for many Californians, especially those buying for the first time. The state is looking for new ways to help.

“Home equity has proven to be one of the strongest ways for families to build and pass on intergenerational wealth and CalHFA is committed to improving equitable access to homeownership for all Californians,” Tiena Johnson Hall, CalHFA’s executive director, said in a statement when the program was announced.

The Times has heard from many readers about how challenging and confusing it can be to embark on the home-buying process. To make some pretty technical information easier to understand, we drew up the Great SoCal House Hunt, a step-by-step guide to buying a home for the first time in Southern California. You can get started with it here.


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