The dream of owning a home is still alive for many individuals and families, especially for those who live in Los Angeles. However, the high cost of housing can be a major obstacle to achieving this goal. Fortunately, the California Housing Finance Agency (CalHFA) just launched a new program that can help first-time homebuyers overcome this hurdle: the Dream For All Shared Appreciation Loan Program.
A loan for up to 20% of the home purchase price
The Dream For All Shared Appreciation Loan Program is designed to assist first-time homebuyers in purchasing a home by providing them with down payment and/or closing cost assistance. The program is offered in conjunction with the Dream For All Conventional first mortgage. Dream For All provides a loan for 20% of the home purchase price!
How the program works
The program works by providing the homebuyer with a loan for a percentage of the home purchase price, which must be repaid upon sale or transfer of the home, along with a share of the appreciation in the value of the home. This is known as a shared appreciation loan, and it is a little more complex than a typical mortgage loan.
Understanding the shared appreciation
Shared Appreciation is a little more complex than a typical mortgage loan, so they’ve put together a few examples for us.
EXAMPLE 1: BORROWER IS A CALHFA INCOME HOMEBUYER
- Dream For All provides a loan for 20% of the home purchase price.
- The homeowner pays back the original loan amount plus 20% of any appreciation in the value of the home.
EXAMPLE 2: BORROWER INCOME LESS THAN OR EQUAL TO 80% AMI USING THE HOMEREADY LOOKUP TOOL
- Reduced (0.75:1) program appreciation share
- Program appreciation share is equal to 0.75 times the Shared Appreciation Loan Amount (i.e., the original principal amount) as a percentage of the home value
- Dream For All provides a loan for 20% of the home purchase price.
- The homeowner pays back the original loan amount plus 15% of any appreciation in the value of the home
Eligibility requirements
To be eligible for the Dream For All Shared Appreciation Loan Program, borrowers must meet certain requirements.
- They must be a first-time homebuyer, occupy the property as their primary residence, and meet CalHFA income limits for the program. Non-occupant co-borrowers are not allowed, and CalHFA borrowers must complete two levels of homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.
- The property itself must be a single-family, one-unit residence, including approved condominiums/PUDs. Guest houses, granny units, and in-law quarters may be eligible, and manufactured housing is permitted. Condominiums must meet the guidelines of the first mortgage.
- Another critical requirement of the Dream For All Shared Appreciation Loan Program is completing homebuyer education and counseling. CalHFA believes that this education is essential to the success and happiness of homeowners, especially first-time homebuyers. Only one occupying first-time borrower on each loan transaction is required to take the homebuyer education and counseling course. The course can be taken online or in-person through a HUD-approved Housing Counseling Agency.
What’s the interest rate?
The interest rate for the loan will vary depending on the borrower’s financial circumstances, lender fees, and other factors. Therefore, it is recommended that potential borrowers check with a CalHFA-approved loan officer to receive an accurate rate quote for the program.
How do I apply?
To apply for the Dream For All Shared Appreciation Loan Program, interested individuals should contact a loan officer in Los Angeles who has been approved and trained by CalHFA. When contacting a loan officer, borrowers should have certain documents and information available, including pay stubs, bank statements, employment history, and previous tax returns.
Bottomline
In conclusion, the Dream For All Shared Appreciation Loan Program is an excellent opportunity for first-time homebuyers in Los Angeles who need assistance with down payment and/or closing costs. With a shared appreciation loan, borrowers can purchase a home with less financial strain and fulfill their dream of homeownership. However, it is essential to meet the eligibility requirements, complete homebuyer education and counseling, and work with a CalHFA-approved loan officer to ensure the best possible outcome.
