CalHFA Forgivable Equity Builder Loan
Let’s talk about the CalHFA Forgivable Equity Builder Loan – a fantastic program designed to help first-time home buyers in California get a head start on building equity right from day one! If you’re feeling overwhelmed by the rising costs of homeownership and the hefty down payment often required, this program might just be the helping hand you need.
What is the CalHFA Forgivable Equity Builder Loan?
The California Housing Finance Agency (CalHFA) created this program to offer a forgivable loan that helps first-time buyers cover their down payment or closing costs. It’s like getting an advance on your home equity! The loan provides up to 10% of the purchase price of your home, and here’s the best part: if you stay in the home for five years, the loan is completely forgiven! That means you don’t have to repay a dime, as long as you don’t sell, refinance, or rent out the property before that five-year mark.
How Does It Work?
The program offers a second loan that works alongside a primary mortgage from CalHFA. The amount you borrow is calculated based on 10% of the home’s purchase price. This loan is at 0% interest, so you’re not accruing additional debt while you live in the home. After living in the home for five years, the loan is automatically forgiven.
Who’s Eligible?
- First-time home buyer: You must not have owned or co-owned a home in the past three years.
- Income limits: Your household income must be within the CalHFA income limits, which vary by county.
- California residency: You must purchase a home in California.
- Creditworthiness: You’ll need a credit score of at least 660.
- Homebuyer education: You’ll need to complete a homebuyer education course approved by CalHFA.
Benefits of the Program
- Forgivable loan: If you meet the conditions and stay in the home for five years, you won’t need to repay the loan.
- Helps with down payment: Many first-time home buyers struggle with saving for a down payment, and this loan can cover up to 10% of the purchase price.
- Zero-interest loan: No interest accrues on the loan, so you won’t have any extra costs to worry about.
- Flexible income limits: CalHFA income limits are relatively generous, so a wide range of Californians may be eligible.
- Equity boost: This program allows you to start building equity from the moment you purchase your home, putting you in a stronger financial position for the future.
Are There Any Drawbacks?
- Residency requirement: You must remain in the home for at least five years to have the loan forgiven. If you sell, refinance, or rent out the home before then, you’ll have to repay the loan.
- Income limits: While the limits are flexible, they still cap eligibility, meaning some higher-income households may not qualify.
- Availability: The program is only available for properties in California.
How to Apply
- Complete homebuyer education: Make sure to take the required CalHFA-approved homebuyer education course.
- Find a CalHFA-approved lender: You’ll need to work with a lender who’s approved by CalHFA to process your mortgage application along with this forgivable loan.
- Submit your application: Your lender will help guide you through the application process, ensuring you meet all the necessary requirements.
- Purchase your home: After securing your mortgage and forgivable loan, it’s time to close on your home!