First-time homebuyer? Take advantage of the state’s down-payment assistance

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A down-payment program is offering a whopper of an opportunity for first-time homebuyers in California.

My Home Down Payment Assistance from the California Housing Finance Agency features a “deferred-payment” loan for down payment and closing costs, covering much of a buyer’s out-of-pocket funds.

The down payment assistance or DPA can be as much as 3.5% of the sales price for homes purchased throughout California.

From July 1, 2023, to June 30, 2024, the state program secured more than 6,100 DPA loans, according to Eric Johnson, spokesperson at Cal HFA. Of those, 1,785 were founded in Orange, San Bernardino, Riverside, San Diego and Los Angeles counties.

Let’s run through the typical questions about the program.

The down payment advance becomes a silent second mortgage against the home, accruing at a 1% interest rate. No payments are required. You must pay off the second lien when you refinance or sell your property. Or pay it off at the end of the 30-year term, assuming you have neither sold nor refinanced in the interim.

The closing cost assistance is called a ZIP Loan. It can be for either 2% or 3% of the loan amount. Here’s the catch: The interest rate on the first mortgage increases to pay for the ZIP Loan.

Applicants can look up details on registered lenders in order to apply for the program at the CalHFA website calhfa.ca.gov/homebuyer/programs For example, today the conforming, conventional DPA has a rate of 6.375% on a 30-year fixed. If you add the 2% ZIP loan, the first mortgage rate becomes 7.375%. If you add a 3% ZIP, the rate becomes 7.875%.

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