California Down Payment Assistance Programs

The California Housing Finance Agency (CalHFA) offers a variety of down payment assistance programs to eligible first-time homebuyers.

The Pooled Money Investment Board (PMIB) voted on December 17, 2008 to discontinue these programs until the State's budget shortfall is resolved.

Here are some of the programs offered (when available):

DOWN PAYMENT ASSISTANCE LOAN PROGRAMS

• Affordable Housing Partnership Program (AHPP)
  A joint effort by CalHFA and cities, counties, redevelopment agencies and housing authorities whereby a deferred payment subordinate loan from a locality is utilized by the first-time homebuyer to assist them with down payment and/or closing costs.

• CalHFA Housing Assistance Program (CHAP)
  Offers a deferred-payment second loan of an amount up to the lesser of two percent (2%) of the purchase price or appraised value.

• California Homebuyer's Downpayment Assistance Program (CHDAP)
  Offers a deferred-payment junior loan of an amount up to the lesser of three percent (3%) of the purchase price or appraised value.

• Extra Credit Teacher Home Purchase Program (ECTP)
  A low interest rate CalHFA first loan, together with a forgivable interest CalHFA junior loan to assist eligible teachers, administrators, staff members and classified employees to purchase their first home.

• High Cost Area Home Purchase Assistance Program (HiCAP)
  Designed to assist first-time homebuyers in the highest housing cost areas of the state.

• School Facility Fee Down Payment Assistance Program (SFF)
  A conditional grant program that provides assistance to buyers of newly constructed homes throughout California.

The drawback to these programs is that they are harder to qualify for and are more restrictive in terms of area, etc. These are loans, and the buyer needs to pay them back, some with equity sharing provisions.

 

Non-Profit Down Payment Assistance Programs

On October 1st, DPA programs were eliminated by HUD. Several Congressmen are currently trying to have them reinstated. As of now, they are not available.

Less restrictive programs in terms of qualification and area include (when available):

• Nehemiah
• HART
• Ameridream

Programs like the Nehemiah or HART (Down Payment Assistance Program or DPAP) offer down payment assistance to anyone qualified for an FHA loan. There are no additional income or asset requirements. Under the Nehemiah and HART Programs (DPAP), buyers can get down payment assistance for up to 6% of the final contract sales price. These funds can also be used to offset closing costs. The program is open to first-time and repeat homebuyers and is approved for new construction or resale homes.

DPAP funds are not available for a second mortgage or home equity loans. The program is intended to help buyers with the purchase of a new home. Once you find a home and make an approved offer, including the appropriate contract verbiage (see below), contact the Watkins Home Loans loan officer about applying for the DPAP Program. The loan officer will assist you in filling out the paperwork. Once approved, the funds will be sent prior to closing.

The seller must participate in the DPAP by making a donation commensurate to the buyer's assistance amount. The DPA also charges a processing fee of $499 that may be paid by the seller, homebuyer, or lender.

Example:

Under a program such as the Nehemiah or HART Program, let's say the seller wants a bottom line selling price of $100,000.

• $100,000 bottom line net required for Seller
• Adjust purchase price offered by the desired down payment assistance of 3% ($3,000) to $103,000

• Finance 97% through FHA or roughly $100,000
• Nehemiah or HART contributes 3% for a total $103,000 purchase price.

To Make this all Work:

• The Seller donates 3% or $3,000 to the DPAP
• DPAP contributes 3% or $3,000 to the Buyer’s purchase through escrow
• The Seller or Buyer contribute $499 as a processing fee
• The Seller nets roughly $100,000
• The buyer gets the property for $103,000, including $3,000 down payment assistance through the DPAP, that does not have to be paid back.
• Everybody wins!

The seller can contribute up to a total 6% via Nehemiah or HART for gift funds.  FHA will allow contributions up to 6% from seller funds, so if a buyer does not have a lot of cash savings to work with, we would write 3% to Nehemiah and 3% toward closing costs.

To make a purchase offer using Nehemiah or HART gift funds, you MUST include appropriate verbiage in the purchase contract.

Recommended sales contract verbiage:

This contract is contingent upon the purchaser(s) receiving a down payment gift from the __________ (Nehemiah or HART) program. The seller agrees to pay ____% of the contract sales price plus a processing fee of $499 to ______ (Nehemiah or HART). The seller's payment will be used to help future homebuyers with down payment gifts. This amount will be deducted from the seller's proceeds at settlement.

To view a short slide show presentation on the HART Down Payment Assistance Program, click here.