As the U.S. housing market recovers, California cities are leading the expansion. Homes in San Francisco, Los Angeles and San Diego are among top-gainers in terms of value nationwide, and other Golden State areas are performing similarly well, including Orange County, San Jose, and Bay Area cities.
Among the reasons why California’s housing market is performing so well is the state government’s active role in helping would-be buyers reach their goal of homeownership.
First-time buyers buyers can use the state’s housing programs to buy a home with just 0.5% downpayment.
California Downpayment Assistance: CHDAP
Since 1975, the state of California has been actively helping its residents become first-time homeowners.
Through its affordable, self-subsidized housing bank — an agency known as CalHFA — California makes available low interest rate mortgage loans and downpayment assistance programs.
For almost 40 years, CalHFA has helped first time home-buyers gain access to homeownership.
The California Homebuyer’s Downpayment Assistance Program (CHDAP) is the agency’s signature program.
CHDAP gives first-time home buyers loans of up to 3 percent of a home’s purchase to be used for downpayment. The most common use of the CHDAP loan is in conjunction with a , which requires just 3.5% down at the time of purchase.
CHDAP provides the majority of the required FHA downpayment, leaving the home buyer to put just 0.5% of the purchase price down on a home. Furthermore, it defers all payments on the loan.
Via the CHDAP, your loan is recorded on title as a second lien but no payments are due whatsoever. You only make payments on your California Homebuyer’s Downpayment Assistance Program loan once your home is sold, refinanced, or paid off in full.
The CHDAP program helps to keep California homes affordable.
CHDAP Mortgage Program Guidelines
The guidelines for the California Homebuyer’s Downpayment Assistance assistance are straight-forward, and similar to the mortgage guidelines of an FHA-backed mortgage.
For example, a buyer using the CHDAP program must be a U.S citizen, permanent resident, or other qualified alien. In addition, CalHFA requires that your debt-t0-income ratio remain at 45% or below.
Other CHDAP borrower eligibility standards include:
- Homebuyer education counseling required for all buyers
- Credit score minimum of 640
- Primary homes only
- First-time homebuyers only, where first-time home buyer is defined as a person who has not owned a home in the last three years
Furthermore, CalHFA enforces household income limits, based on country and the number of people living in your household; and sales price limits based on geography.
Income and sales price limits in Marin County, for example, are higher as compared to limits in Humboldt.
For buyers meeting program eligibility requirements, CalHFA will also verify that the property being purchased meets agency standards.
In general, the property eligibility requirements for the CHDAP are as follows :
- Home must be located in California
- Home must be a single-family residence, which includes condominiums
- Property size may not exceed five acres
Note that manufactured homes and co-ops are not permitted with the CHDAP program, nor are multi-unit homes. Leaseholds and land trusts are excluded as well.
Exceptions to property and income limits exist, however.
CHDAP Federally Designated Target Areas
The CHDAP program is meant to help middle-class, first-time buyers.
As such, it enforces a maximum household income based upon the number of people living in a home. The limit varies by county with high-cost areas such as Los Angeles carrying a higher limit than lower-cost areas including Fresno.
The program enforces a similar series of limits based on property price in a given California county.
However, there are exceptions to the CHDAP income and property limits. For homes which fall within “Federally Designated Target Areas”, the CalHFA waives its limits.
“Targeted” areas are those which the 2000 U.S. Census showed 70% of families earning incomes which were 80 percent or less than the median household income for all of California.
There are 58 counties in California. 45 of them have federally-designated census tracts within them, with many of the targeted zones in or around Los Angeles.
Get Today’s Live Mortgage Rates
The California housing market is making big gains and today’s home buyers are using the California Homebuyer’s Downpayment Assistance Program (CHDAP) to help with downpayments.
Get today’s CHDAP mortgage rates, and ask more questions about the program. Rates are available at no cost and with no obligation to proceed.