First-Time Home Buyers and ADU Builders in California to Benefit from Revived Programs
The California Dream for All Shared Appreciation Loan program, introduced in late March, provided eligible first-time home buyers with loans amounting to 20% of a house or condo’s purchase price. These loans were highly sought after as they had no interest and did not necessitate monthly repayments.
However, the program’s attractiveness proved to be its downfall. In only two weeks, it reached its application cap, managing to aid an estimated 2,300 individuals before it was effectively stopped.
This quick depletion of the program’s funds was unexpected. Initially, state legislators had allocated $500 million for the loans in the 2022-23 budget. Yet due to a fiscal deficit, Governor Newsom proposed a 40% cut, which led to the program’s funding being reduced to $300 million.
This week, in an agreement between Newsom and state legislators, the program is set to recover $200 million in funding. However, there is no specified date for the program’s restart, according to Chris Saur, CalHFA’s information officer.
Saur states that they are collaborating with government partners and stakeholders to possibly update the program guidelines and delivery system to better fit the current market conditions. Depending on potential changes, a new round of loans could be provided.
During its initial phase, the loans were only available to households earning below CalHFA’s income limit, which is set at $180,000 in Los Angeles County and $235,000 in Orange County. The loans could be used for down payments and closing costs and were arranged as a second mortgage, hence no monthly repayments. Rather, when the mortgage is refinanced or the house resold, the borrower repays the original loan amount and 20% of the home’s value increase.
If the home is sold for the purchase price or less, the buyer doesn’t need to pay the additional 20%. The effective interest rate corresponds to the average annual increase in the home’s value. The maximum amount of appreciation owed is capped at 2.5 times the original loan amount.
Borrowers are required to complete a home buyer education and counseling course and a free online course for shared appreciation loans to qualify for a loan.
In addition, the budget agreement reinstates $50 million for CalHFA’s ADU Grant Program, which provides up to $40,000 to help cover planning and permitting costs for an accessory dwelling unit. CalHFA ceased accepting grant applications in March after Newsom aimed to reclaim the funds allocated in the 2022-23 budget.
However, it remains uncertain if or when these grants will be reinstated. CalHFA stated that they are working with their partners and stakeholders to explore potential updates to the program’s guidelines and delivery system in response to the current market conditions.
