We have a new mortgage program for buyers that combines a 3% down Conventional loan and a CalHFA loan, which will cover ALL of their down payment and ALL of their closing costs. This program will be a great option to help first-time buyers and Millennial buyers purchase a home in 2019. It is available for buyers up to a purchase price of $705,000 in some counties. Check out how to qualify.
Down Payment and Closing Cost Assistance For Buyers
First time buyers and Millennial buyers represent over 40% of all buyers in the market, and this number is expected to increase in 2019.
Not enough buyers know there are home purchase 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 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 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 $500k Home With Zero Down and NO Closing Costs
Check out this example of a $500,000 purchase we recently funded for a buyer client in San Diego.
The buyers had limited funds for the down payment and closing costs, but preferred to save their funds to renovate the home and buy new furniture after purchasing the home.
We got them qualified for a 3% down conventional loan. They received a 3% CalHFA 2nd mortgage to cover the 3% down payment.
We also got them approved for an additional CalHFA 3rd mortgage of 3%, which helped 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 $500k purchase terms
- Purchase price $500k.
- 3% minimum down payment required for conventional financing ($15,000).
- Buyer qualifies for a 3% My Home grant loan to cover ALL of the 3% down payment.
- Buyer gets a 3% grant to cover all the closing costs.
- They got a rate of 5.625% on a conventional 30 year fixed, the monthly principal and interest payment is $2,943.
- Property taxes and homeowner’s insurance were $575.
- The monthly mortgage insurance is $124.
- Their total monthly mortgage payment was $3,642.
- The appraisal fee was the only fee due out of pocket.
Frequently Asked Questions on This Program
Here are the most frequently asked questions that buyers and Realtors have in regards to this program.
- What is the maximum loan amount I can borrow?
You can borrow up to your county loan limit with this program. The maximum sales price for this program is $705k. In San Diego for example, a buyer can finance a conventional or FHA jumbo loan up to $690k. You can check your county loan limit HERE
- What can I borrow up to with conventional financing?
If you need to finance up to $484,350 with conventional financing, the minimum 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 >$484,350 with conventional financing, 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.
- What can I borrow up to with FHA financing?
The maximum sales price for this program is $705k. With FHA financing, the minimum down payment is only 3.5%. As you can get a 2nd mortgage loan from CalHFA for 3.5%, this will cover ALL of the down 3.5% down payment requirement with FHA up a purchase price of $705k.
- 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.
- Is this program for first time buyers only?
This program is for first time buyers and for any buyer who has not owned a home in 3 years.
- 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.
- 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.
- Are co-signers allowed on this program?
Yes co-signers are allowed on this program.
- 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.
- Are there purchase price limits for this program?
The maximum purchase price for this program is $705k.
- Can I use this program on 2nd homes or Investment Properties?
No, this program is for Primary Residences only.
- Do condos also qualify for this program?
Yes this program is available for condos and single familyresidence homes.
A Great Opportunity For Buyers in 2019.
First time buyers and Millennial buyers represent over 40% of all buyers in the current marketplace. This number is expected to grow in 2019 as more and more first time buyers and Millennial buyers enter the market to buy homes.
This program presents a great opportunity for first time buyers and Millennial buyers who want to purchase a home, but assume they don’t have all the funds saved up yet.
There are also buyers who assume because they don’t have funds for closing costs, they can’t buy a home. This program will help take care of both of these concerns and allow buyers to fulfill their dream of owning a home.
Let your family and friends know this program is available to help them buy a home in 2019.
If you have any questions about this program or getting approved for financing, please feel free to contact me at 858-442-2686. I look forward to chatting soon.
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