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California raises price cap on state loans to first-time homebuyers
By Jeff Lazerson
What I think: I’m calling this common sense on steroids.
The California Housing Finance Agency or CalHFA recently raised its maximum zero-down sales price to $660,000 from $ 600,000, allowing first-time buyers (no property ownership in the past three years) who meet its underwriting standards to purchase a single-unit, owner-occupied dwelling.
Previously, the maximum sales price varied by county. This will allow folks to be able to purchase in a nearby county that previously may have had a much lower sales price cap. And, maybe, just maybe it allows families to find homes in other counties that have more properties for sale.
The other big deal is meaningful access for moderate-income borrowers (not just low-income borrowers) to this very helpful loan program. CalHFA no longer bases the family income cap on the number of family members (sliding scale of more members meant higher income cap eligibility).
In January 2017, I wrote in these pages that the income for an Orange County household of four could not exceed $117,700 to qualify for CalHFA. Today, that income cap for every household is a whopping $174,200.
“We raised it and simplified it,” said Chris Saur, CalHFA spokesman.
I reported earlier that only 2,557 CalHFA loans were funded in 2015 and 2016 in Los Angeles, Orange, Riverside and San Bernardino counties. That shows that it was a great idea, but it didn’t work well because home prices were too high for the mandated income and price caps.
Federal Housing Administration financing requires 3.5 percent down. Conventional financing requires 3 percent down for loans up to $453,100. Above that, conventional requires 5 percent down.
The down payment can come from a “silent second” of up to 3.5 percent of the down payment. School district employees can receive up to 4 percent for down payment or closing costs. The recorded second lien is accruing at a 2.5 percent simple interest rate requiring no payment.
A silent third trust deed — called Zip 3 or Zip 4 (zero interest program) — can be used to finance the closing costs. That’s a 30-year loan with no payments and zero interest rate due and payable when you refinance or sell. How sweet it is!
How about some more common sense rules and support? The FHA program allows non-occupant co-signors whose income does not count against the cap. Your co-signor is on the note, but not the property deed of trust.
The conventional mortgage insurance is provided at a discounted rate.
Homebuyer education is mandatory by at least one occupant. That’s very important toward successful homeownership.
The maximum total house payment and other credit report type bills (debt-to-income ratio) is 45 percent on all programs. Regular FHA can go to almost 56 percent.
Successful homeownership means being able to afford your new castle.
If you have questions or comments, please contact Jeff Lazerson by clicking here. For more great insight make sure to check out Jeff Lazerson’s Mortgage Grader Radio Show on Sundays at 10 am on AM830 KLAA.
Jeff Lazerson - Mortgage Columnist since 2011