Down Payment Assistance Programs Available in California

Down payment assistance (DPA) is money provided by a government agency or non-profit to help you cover your down payment and sometimes your closing costs. It comes in several forms: grants (free money that does not need to be repaid), deferred second mortgages (no monthly payment, due when you sell or refinance), and shared appreciation models (the agency shares in the increase in your home value).

Here is what I would want you to know: these programs exist, they are real, and many buyers do not know about them. If you are a first-time buyer in California, you may qualify for thousands of dollars in assistance that you never have to pay back. I check every program for every client.

The MyHome Assistance Program from CalHFA provides up to 3.5 percent of the purchase price as a deferred second mortgage. There is no monthly payment on this second mortgage. It sits behind your primary loan and is only due when you sell, refinance, or pay off the first mortgage.

MyHome can be used for your down payment or closing costs, and it is designed to be combined with a CalHFA first mortgage (FHA or conventional). The program has income limits that vary by county. In Orange County, the limits can be generous due to the high-cost market. Contact me for current income limits and whether you qualify.

The Dream For All Program is a shared appreciation program that provides up to 20 percent of the purchase price as a deferred second mortgage. There is no monthly payment. When you sell or refinance, you repay the original amount plus a share of the appreciation in your home value.

For example, if you receive $100,000 in assistance and your home appreciates by $200,000, you might repay the $100,000 plus a share of the $200,000 appreciation. The exact share depends on the program terms. This program has been very popular and funding has been limited, so contact me to check current availability.

The ZIP (Zero Interest Program) provides up to 3.5 percent of the purchase price as a deferred second mortgage for closing costs. Like MyHome, there is no monthly payment and it is due when you sell, refinance, or pay off the first mortgage.

ZIP can be combined with MyHome, meaning you could get up to 7 percent of the purchase price in assistance (3.5% for down payment from MyHome plus 3.5% for closing costs from ZIP). This can make buying a home possible with very little out of pocket.

Each program has its own requirements, but here are the general guidelines. You must be a first-time home buyer, which means you have not owned a primary residence in the past 3 years. You must meet income limits, which vary by county and program. You must complete a homebuyer education course (typically online and free). And you must occupy the home as your primary residence.

Some programs have additional requirements. Dream For All, for example, has had specific eligibility windows and funding limits. Income limits in Orange County can be quite generous because it is a high-cost area. I check every program for every client because the rules change and new programs are added.

Here is how the process works. First, you call me and I check which programs you qualify for based on your income, location, and first-time buyer status. Next, I help you complete the CalHFA-approved homebuyer education course (usually a few hours online).

Then, I structure your loan to combine the assistance program with the right primary loan (typically FHA or conventional). I submit both the primary loan and the assistance program together. The approval process is similar to a standard loan, with the added step of the assistance program approval.

The whole process typically takes 30 to 45 days from application to closing, similar to a standard purchase. The assistance funds are disbursed at closing and appear on your closing disclosure.

Here is what I would want you to watch for. First, some assistance programs have a recapture period. If you sell or refinance within a certain number of years (typically 3 to 6), you may have to repay some or all of the assistance. Make sure you understand the recapture terms before you commit.

Second, some programs have a slightly higher interest rate on the primary loan. The trade-off for getting assistance money is that your first mortgage rate might be 0.125 to 0.25 percent higher than market. I show you the math so you can decide if the assistance is worth the slightly higher rate.

Third, funding for some programs is limited and runs out. Dream For All, in particular, has had funding caps that were reached quickly. If a program is out of funding, I help you find alternatives or wait for the next funding round.

Finally, the programs require you to live in the home as your primary residence. If you convert it to a rental, you may have to repay the assistance. I help you understand the occupancy requirements before you commit.