California Dream for All: A Path to Homeownership for First-Time Homebuyers
The California Dream for All program is a state-sponsored initiative aimed at assisting low- and moderate-income first-time homebuyers in achieving homeownership by providing shared-appreciation loans for down payment assistance. Administered by the California Housing Finance Agency (CalHFA), this program has been introduced under Senate Bill 197. The Dream For All Shared Appreciation Loan (Shared Appreciation Loan) is to be used in conjunction with the Dream For All Conventional first mortgage for down payment and/or closing costs. The program became available on Monday, March 27, 2023.
California Dream for All Details
- Offers up to 20% of the home purchase price to be used for down payment and/or closing costs.
- Can be combined with other CalHFA products.
- The Shared Appreciation Loan is a second lien on the property.
- First-Time Homebuyers only (haven’t owned a property in the last 3 years).
- There are no payments due on the second lien unless the following takes place:
- Transfer of Title
- Sale of Property
- Payoff of the first lien
- Formal filing of Notice of Default
- This loan is not assumable.
Who is this beneficial for?
The California Dream for All program is designed to benefit low- and moderate-income first-time homebuyers who might struggle to afford the down payment and closing costs associated with buying a home. This program offers up to 20% down payment assistance that acts as a second lien on the property.
Who should apply?
First-time homebuyers with low to moderate income who require financial assistance to achieve homeownership should apply for the California Dream for All program. This program is specifically tailored to help them afford the down payment and closing costs associated with purchasing a home.
What are the benefits?
The primary benefit of the California Dream for All program is that it provides homebuyers with down payment assistance, which can be a significant financial hurdle for many first-time homebuyers. By offering shared appreciation loans, the program helps homebuyers reach a down payment of at least 20% of their home’s purchase price, reducing the primary mortgage amount and making homeownership more affordable.
Who can get approved for California Dream for All?
Buyers that meet the following criteria:
- Credit score of 680+ for buyers that have standard incomes that don’t exceed the CalHFA Area Median Income
- Credit score of 660+ for borrowers that make less than 80% of the CalHFA Area Median Income
- Must be a First Time Homebuyer (cannot have owned a property in the last 3 years)
- Loan amount cannot exceed county limits
How does shared appreciation work?
A shared appreciation loan is a type of financial assistance where the borrower and the lender both benefit from the future appreciation in the value of the property. In the context of the California Dream for All program, CalHFA provides a shared appreciation loan to help first-time homebuyers reach the required down payment. As the home’s value appreciates over time, both the homeowner and CalHFA will share in the increased value.
For example, let’s assume a first-time homebuyer wants to purchase a home priced at $600,000. To reach a 20% down payment ($120,000), the homebuyer might receive a shared appreciation loan of $120,000 (the whole 20% available) from the California Dream for All program. If the home’s value appreciates to $700,000 over time, the appreciation would be $100,000. The shared appreciation agreement stipulates a 20% share for CalHFA in this case, and the homeowner would need to repay the original $120,000 loan plus $20,000 (20% of the $100,000 appreciation) to CalHFA when they sell the property or refinance the loan.
The California CalHFA Dream for All program is an essential initiative for low- and moderate-income first-time homebuyers who need financial assistance to achieve homeownership. By providing shared-appreciation loans, the program helps homebuyers reach the required down payment, making homeownership more accessible and affordable.