Peter Warden The Mortgage Reports Editor May 16, 2022 - 9 min read

California Home Buyer Overview:

The average home purchase price in California is considerably higher than in most states. So eligible first-time buyers really stand to benefit from the homeownership programs described below.

California home buyer stats

Average Home Sale Price in CA1	$856,600
Minimum Down Payment in California (3%)	$25,700
20% Down Payment in California	$171,320
Average Credit Score in California2	721
Maximum California Home Buyer Grant3	Deferred loan up to 17% of home's appraised value (San Diego and Silicon Valley only)

Down payment amounts are based on the state's most recently available average home sale price. "Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you're eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

California First-time Home Buyer Loans

If you’re a California first-time home buyer with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved a 20% down payment. Doing so could be especially challenging in California, where 20% of the average sales price is over $150,000.

But the good news is, you don’t need 20% down. Not by a long shot.

California home buyers can often get into a new home with as little as 3% or even 0% down using one of these mortgage programs:

• Conventional 97: With Freddie Mac or Fannie Mae, you may qualify with a 3% down payment and 620 minimum credit score. You can usually stop paying private mortgage insurance after a few years
• FHA loan: Backed by the Federal Housing Administration, you could qualify for an FHA loan with a 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
• VA loan: Only for veterans and service members, the VA mortgage offers a zero-down-payment option. Minimum credit score varies by lender but often 620. There’s no ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• CalHFA mortgage programs: Government and conventional home loans offered via the California Housing Finance Agency. Offers 30-year fixed-rate first mortgages along with home buyer assistance

Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage, your loan officer can help you find the right match based on your finances and home buying goals.

California first-time home buyer programs

If you’re looking for help with the home buying process, here’s where to turn.

CalHFA

For a California first-time home buyer, a good place to start looking for assistance is the California Housing Finance Agency (CalHFA).

This agency offers a wide range of first-time home buyer loan programs at its own special interest rates, including:

• The CalHFA FHA program
• CalPLUS FHA loan program (which can be combined with the CalHFA Zero Interest Program (ZIP) to cover closing costs)
• The CalHFA VA loan program
• The CalHFA USDA loan program
• CalHFA conventional loan program
• CalPLUS conventional loan program (which can be combined with the CalHFA Zero Interest Program (ZIP) to cover closing costs)

CalHFA also has an eight-hour online homebuyer education course for $99. Participation is mandatory if you want to be eligible for financial help from the agency (more below).

And, it facilitates one-on-one counseling sessions for home buyers, which can be face-to-face or virtual. But fees vary, depending on the service you choose.

The agency has income limits and purchase price limits if you want financial help. And you’ll need a good credit score of 660-680 or higher, depending on some other factors. To see if you’re eligible, use the wizard on the CalHFA website.

CalVet

The CalVet program is open only to veterans, service members, and those in closely associated groups. It says its website “is designed to help you understand the steps to homeownership and discover just how easy and stress-free purchasing a home and securing a CalVet home loan can be.”

The agency provides special VA loan options that can help veterans who wish to buy homes in the Golden State. You can call CalVet loan originators to check your eligibility at (866) 653-2510 (Monday-Friday, 8 a.m.-5 p.m.).

California first-time home buyer grants

The Golden State has countless down payment assistance programs (DPAs) that can provide financial help toward your down payment and often closing costs.

Some of those are local and serve specific counties or cities. But here are the details of the main statewide program:

CalHFA MyHome Assistance

Qualifying home buyers could borrow up to $11,000 toward their down payment and closing costs under the CalHFA MyHome Assistance Program.

To qualify for the MyHome down payment assistance program, homeowners must:

• Be a first-time home buyer
• Purchase a single-family home
• Live in the home as their primary residence
• Complete home buyer education counseling
• Meet income limits

Note, the $11,000 DPA cap doesn’t apply to “school employees and fire department employees, or those purchasing new construction homes, manufactured homes, or homes with ADUs.” An ADU is an accessory dwelling unit, which is a home or apartment that’s part of a larger home.

Regardless of whether that $11,000 cap applies, you can't borrow more than:

• 3.5% of the home’s purchase price or appraised value, whichever is less, for an FHA loan
• 3% of the home’s purchase price or appraised value, whichever is less, for a conventional, VA, or USDA loan

These are loans (second mortgages, aka junior loans) rather than grants.

However, they’re deferred-payment loans. That means you don’t have to make monthly payments. Instead, you pay back the whole amount (plus interest) when you move, sell, refinance, or otherwise change the ownership of your home.

Forgivable Equity Builder Loan

The Forgivable Equity Builder Loan is a newer California home buyer program that aims to help first-time homeowners buy property more affordably. Via this program, buyers can get a loan of up to 10% of the purchase price which is forgivable after five years, provided they continue to live in the property full-time during that period.

To qualify for the Forgivable Equity Builder Loan, you must:

• Be a first-time home buyer in California
• Buy a single-family, one-unit residence
• Live in the home as your primary residence
• Complete a home buyer education course if borrowing through CalHFA
• Meet county income limits

To find out if you qualify for the Forgivable Equity Builder loan program, find a loan officer in your area who is approved by CalHFA and work with them to apply.

California’s big cities are some of the most costly in the nation. So home buyers in these areas will want to know what to expect.

Los Angeles first-time home buyers

The median home listing price in Los Angeles was $1,019,000 in April 2022, according to Redfin. That was up by 12.5% year-over-year.

If you want to buy a home at that median price, your down payment options might fall between:

• $30,570 for 3% down payment
• $203,800 for 20% down payment

The City of Los Angeles Housing and Community Investment Department (HCIDLA) has a couple of programs that can help first-time buyers. These are the Low Income Purchase Assistance (LIPA) program and the Mortgage Credit Certificate (MCC).

The former can provide deferred payment loans of up to $90,000 to low-income borrowers. These loans have no monthly payments and are repayable when you move or refinance.

There are similar programs for those buying outside the LA city limits run by the Los Angeles County Development Authority.

Where to find home buying help in California

All the organizations we’ve listed above should provide advice freely to any first-time home buyer in the state of California.

In addition to our selection, the US Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources:

Statewide and regional CA home buying programs

• California Housing Finance Agency (CalHFA): Homebuyer programs, including downpayment and closing cost assistance, and foreclosure prevention resources
• CalVet Home Loans: For Veterans to buy a home in California
• Community Contacts: Find out if your community offers homeownership assistance
• HUD approved housing counseling agencies
• State of California Housing and Community Development

CA home buying programs by city and county

• CA home buyer programs by city
• CA home buyer programs by county

https://themortgagereports.com/77361/california-first-time-home-buyer-programs-grants