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For many people, saving for a down payment is the biggest hurdle they face when wanting to buy a home of their own. This is why there are several down payment assistance programs, also referred to as DPA programs or grants, offered at the federal, state, and local levels to help those who qualify to achieve the American dream of homeownership and all the wealth-building benefits that come with it.
The latest housing authority to announce a new DPA program to homebuyers in California is the California Housing Finance Agency (CalHFA), called the Forgivable Equity Builder Loan. CalHFA is a state-run agency that works with approved participating lenders and mortgage loan officers, including New Way Mortgage.
What Is the Forgivable Equity Builder Loan?
The Forgivable Equity Builder Loan presents an excellent opportunity for first time homebuyers to get up to 10% down payment assistance on their purchase. The best part about this program is that it is a 100% forgivable loan. (“Forgivable” means that it’s free money that doesn’t have to be paid back if you meet certain qualifications.)
If you qualify for this program, you can get up to 10% of your home’s purchase price or appraised value, whichever is the lesser of the two, as a DPA grant that’s forgivable after five years of living at the property. That means that as long as you live in the home for five years, you don’t have to pay the money back.
What Are the Eligibility Requirements for the Forgivable Equity Builder Loan?
First and foremost, to qualify for this program, you must be a first-time home buyer. By definition, that means you haven’t owned a home within the past three years. Additionally, your income must be 80% or less of the adjusted median income for the county in which you’re purchasing the property.
As the income requirement is determined regionally, it varies around the state. In Sacramento, for instance, if you make $72,000 or less per year and meet the other requirements, you can qualify for the 10% DPA grant on your home purchase.
This program is an amazing opportunity to take advantage of, especially when you crunch the numbers and see how much you can save. Let’s say you purchase a home for $600,000 and it appraises for that amount or higher; CalHFA’s Forgivable Equity Builder Loan would cover $60,000 toward your down payment. As that loan doesn’t need to be paid back, it saves you a significant amount of money over the long run.
Aaron Clowes of New Way Mortgage is here to give an overview of the Forgivable Equity Builder Loan program in this quick video:
Ready to see what the program requires? CalHFA’s borrower and property guidelines are listed below:
- Must be a first-time homebuyer.
- Must occupy the property as a primary residence; nonoccupant co-borrowers are not allowed.
- Must complete homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.
- Must meet county income limits set by Fannie Mae:
- Visit ami-lookup-tool.fanniemae.com/amilookuptool/.
- Zoom into the area where you want to purchase.
- Click on that area and use the “80% Area Median Income (LI)” as your income limit.
- Property must be a single-family, one-unit residence, including manufactured housing and approved condominium/PUDs.
- Condominiums must meet the guidelines of the first mortgage.
- CalHFA loan servicing will issue a 1099 to borrowers annually when the loan is partially forgiven.
How Do You Apply for the Forgivable Equity Builder Loan?
New Way Mortgage is an approved mortgage lender with the California Housing Finance Agency to provide the 10% Forgivable Equity Builder Loan. To get started, click here to visit our website or give us a call to determine your eligibility for this grant that can give you the freedom and benefits of homeownership. Give us a call today at 916-465-6639.