California homebuyers will face more challenges with getting loans approved until the state’s budget crisis is resolved.

Buying a home has become harder in California for low to middle income borrowers, those with low down payments, and first-time home buyers with the temporary suspension of the CalHFA loan programs. This suspension is expected to last at least until the January meeting of the Pooled Money Investment Board (PMIB), or until the state’s budget crisis is resolved.

The role of the PMIB is to loan money to state agencies to advance program funds which will later be repaid through bond issuances. PMIB loans are used by CalHFA to initially fund conventional 30-Year Fixed Mortgage and down payment assistance programs. Members of the PMIB are the State Treasurer, State Controller and State Director of Finance, with the State Treasurer chairing the panel.

CalHFA First Mortgage Fixed Rate Loan Programs and Down Payment Assistance Programs which have been suspended effective December 17 and continuing until at least early January include the following:

• 30-Year Fixed Mortgage products, including:
  • Moderate Income
  • Low Income
  • Nonprofits & Affordable Housing Partnership Program (AHPP)
  • Extra Credit Teacher Program (ECTP)
• California Homebuyer’s Down Payment Assistance Program (CHDAP)
• Extra Credit Teacher Program (ECTP)
• School Facility Fee Down Payment Assistance Program (SFF)

The 100%-financed Community Stabilization Home Loan Program (CSHLP) and SMART Program will still be accepting loan applications during this temporary suspension period.  Down payment assistance from non-CalHFA sources will also continue to be accepted.

Apparently this freeze affects only new loan applications, not those that were already in the CalHFA pipeline as of December 19. If you have a home purchase in process and are unsure of whether your loan is dependent on CalHFA funds or not, please contact your lender!

There may be other options available to you, including FHA products, local loan or grant programs and assistance programs not funded by the CalHFA. It seems that programs like the CalSTRS (California State Teacher Retirement System) 80/17 programs are still available, since they are funded by sources other than the PMIB. However, remember that the federal FHA programs will now require a 3.5% down payment, up from the prior requirement of 3%.

More information on CalHFA loan products and down payment assistance programs.

Desperate for sales, builders are creating department store copies of layaway plans for prospective homebuyers.

Builder layaway plans will be rolling out shortly, encouraging buyers to commit to new home purchases before they have enough down payment funds to actually purchase the home. Plan names range from “PASSBOOK to the American Dream” from Hovnanian to “Buy & Save” plan from Beazer, but all work basically the same.

These plans are supposed to keep buyers on a ”steady savings track” and “act as a motivational time line” so potential homebuyers can accumulate their down payment funds by saving on a regular schedule. Should you save for a home with a department store Christmas club-like program run by a builder? “We kind of tagged on to that idea,” says Klinger of Hovnanian Mortgage. “We’re saving for a house the old-fashioned way, the way that it was always supposed to be.”

Hmmm… my B.S. detector is spiking out at this point…

First of all, you can save on your own by creating a Christmas club-type account at your bank. If you have automatic payroll deposits, you can have a portion of each paycheck automatically allocated to this account, and voila! you have a home purchase fund that’s fully under your control. Secondly, in California there are still down payment assistance programs through CalHFA. While not available to all buyers, these programs are available to many who will be financing under the various FHA programs. And lastly, why would you want to be committed to a builder for some future build date, unless they’re offering you some sort of additional incentives to do so?

Yeah, I’m a Realtor and I sell homes, but puleeeeze don’t insult my buyers’ intelligence!

If you’re working to save up that 3% FHA-required down payment, here are a few simple steps to help out:

• Set up a separate bank account as your “House Fund”. You can open an account normally called a Christmas Fund account at your bank, and use it for your house instead. DON’T TOUCH this account, other than for the purchase of your new home!
• Set up automatic deposits into your House Fund through your payroll department at work. They’ll let you allocate a specific dollar amount or a specific percentage of each check to this new House Fund bank account. If you’re an independent contractor, make a commitment to deposit a certain amount (or percentage) of each check into your House Fund.
• Monitor ALL of your expenses, including Starbucks and doughnuts, and cut the fat (no pun intended) out of your budget. You’ll be amazed at how much the small things add up! Use a debit card instead of cash so all of your expenses are recorded and easily monitored. You can use Quicken or Money to track your expenses to make this process a lot easier.
• Set a time line, and work backwards from there. If you want to purchase a home 6 months from now and need a $7,500 down payment for a $250,000 home, how much will you need to save from each paycheck to get there? If you’re starting with $1,000 in savings, you’ll need to save $6,500 in down payment funds, or $1,083 per month. If this is too much for your budget to handle, plan on extending that time line a bit so you won’t end up living off of Kraft Mac ‘n Cheese for the next several months.
• Talk with a lender about the availability of down payment assistance programs through CalHFA. It could be that you won’t need to save up all those down payment funds after all… wouldn’t that be nice? Your Realtor can help you with the rest… closing costs can often be negotiated as part of the purchase contract, whether you’re buying from the builder or from a regular seller.

Need help figuring this all out? Call me! You can reach me at 661.670.0349 or email me at Linda@SantaClaritaRealEstateBlog.com.

California Housing Agency offers down payment assistance to qualified first time homebuyers.

One of the biggest challenges facing first time homebuyers is coming up with enough money for a down payment. Fortunately, first time homebuyers in California may be able to take advantage of the down payment assistance programs offered by CalHFA (California Housing Finance Agency). These programs provide either low-interest or no-interest loans for qualified first time homebuyers to cover their down payment or closing costs, and are considered to be “junior” loans (2nd mortgages). Payments are generally deferred on the 2nd mortgages created by these programs.

Homebuyer Qualifications

• In order to qualify for the CalHFA down payment assistance program, you must be a first time homebuyer. For purposes of CalHFA, a first time homebuyer is someone who has not owned and occupied their own home during the last 3 years. However, this requirement may not be necessary if you are buying in a Federally-designated Targeted Area.
• Certain income requirements must also be met for the CalHFA program. For Los Angeles County, the moderate income limits are $90,960 for 1-2 person households and and $106,120 for households with 3 or more occupants. The low income limits are $54,576 and $62,762, respectively.
• The home purchased must be within certain purchase price limits for the county. For Los Angeles County, the maximum purchase price is $729,750 for most areas, and may be as high as $734,891 for new construction purchases in Targeted Areas.
• CalHFA down payment assistance funds are only available for owner-occupied homes. You must live in the home for the entire term of the loan, or until the home is sold or refinanced.
• The homebuyer must meet the lender’s credit, income and loan requirements.
• The homebuyer must a citizen or other national of the United States or a qualified alien. 
• The homebuyer must complete homebuyer education counseling and received a certificate of completion through an eligible homebuyer counseling organization. 

Available Down Payment Assistance Programs

Be sure to check with a qualified CalHFA lender for updates to any of the program requirements. As of the time of this writing, the available down payment assistance programs are as follows:

• Affordable Housing Partnership Program (AHPP)
  • A joint effort by CalHFA and cities, counties, redevelopment agencies and housing authorities. A deferred payment subordinate loan from a locality assists first-time homebuyers with down payment and/or closing costs. 
• California Homebuyer’s Downpayment Assistance Program (CHDAP)
  • Creates a deferred-payment junior loan of an amount up to the lesser of three percent (3%) of the purchase price or appraised value. 
• Extra Credit Teacher Home Purchase Program (ECTP)
  • A low interest rate CalHFA first loan, together with a forgivable interest CalHFA junior loan to assist eligible teachers, administrators, staff members and classified employees to purchase their first home. 
  • Amounts range from $7,500 to $15,000, depending on the location of the property, or 3% of the purchase price, whichever is greater. This junior loan is only available when combined with a CalHFA first mortgage loan. Interest on the junior loan is deferred and may be reduced to zero if the borrower meets continued eligibility requirements. 
  • This program may be combined with other CalHFA-approved down payment assistance loans or grants (with the exception of CHDAP) to help in the purchase of the home.
  • In order to qualify for this program, the homebuyer must be employed by a High Priority K-12 public school. High Priority schools are those with API scores in the bottom 50%, have no API scores and 70% of the student are eligible for free or reduced cost lunches, or are county continuation schools. In the Santa Clarita Valley, Bowman High School is the only continuation school.
• School Facility Fee Down Payment Assistance Program (SFF)
  • A conditional grant program that provides assistance to buyers of newly constructed homes throughout California. 

Finding a Lender

If you’re a first time homebuyer wanting to take advantage of the California down payment assistance programs, you must use a lender who is qualified by the CalHFA. You can search for lenders here for an updated list. Santa Clarita area lenders qualified for these programs include the following:

• First Mortgage Corp (661) 964-0700
• Universal American Mortgage (661) 702-0140
• CTX Mortgage (661) 255-1854
• Wells Fargo Mortgage (661) 284-6446 and (661) 799-4682
• Washington Mutual Mortgage (661) 254-8700
• National City Bank (661) 260-2751
• Wescom Credit Union (888) 493-7266 x5900

Happy house hunting! If you need a qualified Realtor to help you find your home, please contact Linda Slocum at (661) 670-0349.