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Buy a Home With Zero Down and No Closing Costs With a Conventional CalHFA Loan! Thursday, October 18th, 2018

The #1 reason buyers state for not being able to buy a home is lack of funds for the down payment. We have a terrific program available to help buyers purchase a home with a 3% down Conventional loan combined with a CalHFA loan, which covers the down payment and ALL the closing costs. This program is available up to a purchase price of $705,000 in some counties. Check out how to qualify.

Down Payment and Closing Cost Assistance For First Time Buyers 

Not enough buyers know there are programs available to help them with the down payment and closing costs.

CalHFA (California Housing Finance Agency) offers a down payment and closing cost assistance loan program to help first time buyers purchase a home. A first time buyer is defined as someone who has not owned a home in 3 years.

This program is available with both conventional and FHA financing. CalHFA gives buyers a small 2nd mortgage up to 3.5% to help cover the minimum down payment due with conventional and FHA financing.

If buyers don’t have enough funds for their closing costs, CalHFA will give buyers an additional small 3rd mortgage of either 3% or 4% to help cover all their closing costs.  Many buyers using this program only have to pay the upfront appraisal fee out of pocket.

Payments on the CalHFA 2nd or 3rd mortgage loans are deferred for the life of the first mortgage. The terms are the same as the first mortgage. There are no payments due unless you sell or refinance.

How to Purchase a $450k Home With Zero Down and No Closing Costs 

Check out this example of a $450,000 purchase we helped fund recently for a client. The buyer qualified for a 3% down conventional loan. They received a 3% CalHFA 2nd mortgage to cover the 3% down payment.

They received an additional CalHFA 3rd mortgage of 3% to help cover all their closing costs.

The buyers were able to purchase a home they loved, and the only fee due out of pocket was the upfront appraisal fee.

Here is a summary of the loan terms.

  • Purchase price $450k.
  • 3% minimum down payment required ($13,500).
  • Buyer qualified for a 3% 2nd mortgage CalHFA loan to cover the 3% down payment.
  • Buyer qualified for a 3% CalHFA 3rd mortgage to cover all the closing costs.
  • hey got a rate of 5.75% on a conventional 30 year fixed, the monthly principal and interest payment is $2,534.
  • Property taxes and homeowner’s insurance were $533.
  • The monthly mortgage insurance is $94.
  • Their total monthly mortgage payment is $3,161.
  • The appraisal fee was the only cost out of pocket to buy the home.

How to Purchase a $550k Home With Zero Down and No Closing Costs

Here is another example of a purchase we recently funded for a client. With a purchase of $550k, this meant the loan amount borrowed was >$453,100, so this required a jumbo loan. The minimum down payment for a FHA jumbo loan is 3.5%.

The buyers received a 3.5% CalHFA 2nd mortgage to help cover the 3.5% down payment.

They received an additional 3% CalHFA 3rd mortgage to help cover all their closing costs.

Here is a summary of the loan terms.

  • Purchase price $550k.
  • 3.5% minimum down payment required ($19,250).
  • Buyer qualified for a 3.5% 2nd mortgage CalHFA loan to help cover the 3.5% down payment.
  • Buyer qualified for a 3% CalHFA 3rd mortgage to cover all the closing costs.
  • They got a rate of 5.5% on a FHA 30 year fixed, the monthly principal and interest payment is $3,066.
  • Property taxes and homeowner’s insurance are $645.
  • The monthly mortgage insurance was $375.
  • Their total monthly mortgage payment was $4,086.
  • The appraisal fee was the only cost out of pocket to buy the home.

Frequently Asked Questions on This Program

Here are the most frequently asked questions that buyers and real estate agents have in regards to this program.

1.What is the maximum loan amount I can borrow?

You can borrow up to your county loan limit with this program. In San Diego, a buyer can finance a conventional or FHA jumbo loan up to $649,650, and $679,650 in Orange County and LA.

2.What can I borrow up to with conventional financing?

If you need to finance up to $453,100 with conventional financing, the minumum down payment is 3%. You can get a maximum CalHFA 2nd mortgage loan for 3% to cover all of the 3% down payment.

If you need to finance >$453,100 with conventional, the minimum down payment is 5% for a conventional jumbo loan. You can get a maximum CalHFA 2nd mortgage loan for a maximum of 3.5% which will be applied towards the 5% down payment, so now you just need to cover the remaining 1.5% down payment.

3.What can I borrow up to with FHA financing?

The minimum down payment with FHA is only 3.5% and this includes FHA jumbo financing. As you can borrow a 2nd mortgage loan from CalHFA for 3.5%, this will cover ALL of the down 3.5% down payment requirement with FHA.

4.What credit score is required to qualify for this program?

We only require a 640 credit score to qualify. Please note, the higher the credit score the lower the monthly mortgage insurance will be on the first mortgage loan loan.

5.Is this program for first time buyers only?

This program is for first time buyers only. A first time buyer is defined as someone who has not owned a home in 3 years.

6.Are there any payments due on the CalHFA 2nd or 3rd mortgage loans?

No, the payments are deferred for the life of the first mortgage. There are no payments due unless you sell or refinance.  The terms mirrors that of the 1st mortgage.

7.If I can cover my own closing costs, do I get a lower rate on my mortgage?

Yes, if you only need a CalHFA 2nd mortgage loan to cover the down payment, but you can cover all your own closing costs, you can get a lower rate of 5.125% on the conventional 30 year fixed rate mortgage. Compare this to a rate of 5.75% if you need an additional 3% CalHFA 3rd mortgage loan to cover your closing costs.

8.Are co-signers allowed on this program?

Yes co-signers are allowed on this program.

9. Are there income limits for this program?

Yes there are income limits, but they are pretty high.  For example, the San Diego income limit is $157,000, Riverside and LA is $128,700, Orange county is $174,200. Each county has it’s own county income limit. Contact me for more details if you need to know your county income limit.

10.Are there purchase price limits for this program?

The maximum purchase price for this program is $705k.

11.Can I use this program on 2nd homes or Investment Properties?

No, this program is for Primary Residences only.

12.Do condos also qualify for this program?

Yes, this program is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes.

A Great Opportunity For Buyers

This program presents a great opportunity for buyers who want to purchase a home but don’t have the full down payment saved up yet.  There are also buyers who assume because they don’t have funds for closing costs, they cannot buy a home.

This program will help take care of both of these issues and allow buyers to fulfill their dream of owning a home.  Spread the word to your family and friends that this program is available to them too.

Feel free to contact me directly at 858-442-2686 if you have any questions about this program or getting approved for financing.

I look forward to chatting soon.