California FHA Moderate Income Purchase Assistance Program
The California FHA Moderate Income Purchase Assistance Program is a great option for first-time home buyers in California looking for support in making their dream of homeownership a reality. This program is designed to help moderate-income households afford homes by providing assistance with the down payment and closing costs, making homeownership much more attainable.
Program Overview
This program specifically supports first-time homebuyers who are looking to purchase a home using an FHA loan but need financial assistance for the initial costs associated with the purchase, such as the down payment or closing costs. Administered by the California Housing Finance Agency (CalHFA), it’s a loan product that can make the home-buying process less daunting for those who fall into the “moderate-income” category.
Key Features:
- Moderate-income focus: This program is designed to help buyers who earn too much to qualify for low-income programs but still struggle to save enough for a down payment or closing costs.
- FHA-backed loans: The assistance works alongside FHA loans, which already have more lenient credit requirements and lower down payment thresholds (3.5% of the home’s purchase price).
Eligibility Criteria
The California FHA Moderate Income Purchase Assistance Program is designed for first-time homebuyers (defined as someone who hasn’t owned a home in the last three years) who meet the following conditions:
- Income Limits: Your household income must fall within the “moderate-income” range for your county. Check your county’s income limits on the CalHFA Income Limits page.
- Creditworthiness: You need to have a decent credit score, typically around 660 or higher for FHA loans.
- FHA Loan Requirement: You must be using an FHA loan for the purchase.
- Primary Residence: The home must be your primary residence.
Benefits of the Program
- Down Payment Assistance: The program provides the necessary funds to cover the 3.5% FHA loan down payment.
- Closing Cost Assistance: Helps cover closing costs, reducing the financial burden upfront.
- Low-Interest Loans: Assistance comes in the form of a deferred-payment, low-interest loan.
Drawbacks
- Repayment Required: The assistance is a loan, so it must be repaid when you sell or refinance the property.
- Income Caps: The income caps can be restrictive in high-cost areas. You can check your county’s income limits on CalHFA’s Income Limits page.
- FHA Loan Required: This program only works with FHA loans.
Application Process
- Find an Approved Lender: Not all lenders participate in CalHFA’s programs. You’ll need to find an FHA-approved lender who offers this assistance. You can search for lenders here.
- Get Pre-Approved: Work with the lender to get pre-approved for an FHA loan.
- Complete Homebuyer Education: All first-time homebuyers must complete a homebuyer education course. Learn more about it here.
- Submit Your Application: The lender will submit your application to CalHFA for review.
- Find Your Home: Once approved, you can begin your home search.
Where Is This Program Available?
This program is available throughout the state of California. However, income limits vary by county. Check your county’s income limit here.
Pros and Cons Summary
Pros:
- Provides help with down payments and closing costs.
- Targets moderate-income households.
- Deferred repayment.
Cons:
- Must be repaid when you sell or refinance.
- FHA loan requirement limits flexibility.
- Income limits could be restrictive in higher-cost counties.
Conclusion
The California FHA Moderate Income Purchase Assistance Program is a great opportunity for moderate-income first-time homebuyers in California who need help with the down payment and closing costs. While it’s not free money, the deferred-payment nature of the loan can make homeownership more affordable upfront. Be sure to work with a knowledgeable lender to make the most of the program.