First-Time Home Buyer Programs In California

Buying your first home can be an exciting adventure. If you are a first-time home buyer in California, it’s helpful to get familiar with some of the resources and programs available to help you gain a foothold in the real estate market.

Keep reading to learn more about the things you should know when purchasing a house in California.

Resources For First-Time Home Buyers In California

As you navigate the home purchase process as a first-time buyer in California, being familiar with the following resources can come in handy.

• A real estate agent: A knowledgeable real estate agent can help you find and close on your first home. Plus, the right agent can point you toward the best mortgage options to suit your situation.
• California Housing Finance Agency (CalHFA): For qualified home buyers, CalHFA offers down payment assistance to help you finalize a home purchase. If you have a CalHFA-qualifying income, this can make a big difference to your home purchase dreams.
• CalVet Home Loans: This loan program is designed to help California veterans become homeowners. If you are a veteran, you can get support from this program as you seek out the best home loan option for your situation.
• HUD-approved housing counseling agencies: A HUD-approved counselor can help you navigate the home loan process. In many cases, they can also help you evaluate your financial situation to confirm you are ready for this big commitment.
• California Department of Housing and Community Development: This government agency is intended to create more affordable housing opportunities. You can lean on their resources to find a house that suits your budget.
• HUD community contacts: If you run into questions during the home buying process, you could reach out to a HUD community contact for clarification.

CalHFA Conventional Loan Program

A conventional loan – as long as it’s also “conforming” – is a traditional home loan offered through banks and credit unions. The CalHFA Conventional Loan Program works to help eligible first-time home buyers find a lender willing to accept a lower down payment for 30-year mortgages. Low-income borrowers may also be eligible for lower-than-market interest rates if they use CalHFA to obtain a conventional mortgage.

Mortgage lenders consider the following factors when determining whether you qualify for the CalHFA Conventional Loan Program.

• Credit score: Eligible low-income borrowers, who have an income of less than 80% of Fannie Mae’s Area Median Income for their area, can qualify for loans through the CalHFA Conventional Loan Program with a score as low as 660. If you earn a higher income than the maximum, you’ll need a credit score of at least 680.
• Debt-to-income ratio (DTI): Borrowers with a credit score of 680 – 699 need a DTI of 45% or lower. If you have a credit score of 700 or higher, your DTI can’t exceed 50%.
• Income limits: Your income can’t exceed California’s income limits by county. Check your county's limits to be sure your income doesn’t surpass them.
• Home buyer education: Borrowers must complete a first-time home buyer education course to qualify for this loan program. You can find recommended courses on the CalHFA website.

Beyond the qualifications above, you’ll need to meet specific lender requirements. In general, you can expect to need a down payment of at least 3% of the home’s value.

Mortgage rates for this program are usually below the market rate but typically higher than government-backed home loan program rates.

CalPLUS Conventional Loan Program

If you are a first-time buyer who needs help with closing costs, the CalPLUS conventional loan program could help. In addition to the features of a CALHFA conventional loan, the PLUS version allows you to finance your closing costs with a zero-interest loan from CalHFA’s Zero Interest Program (ZIP).

This ZIP loan has an interest rate of 0%, and payments are deferred for the lifespan of your mortgage loan. This means you won’t have to pay back the home loan until you sell the house, refinance or pay off the mortgage. But your mortgage rate will likely be a bit higher than other CalHFA borrowers’ rates.

Here’s a look at the requirements for this loan:

• Credit score: You’ll need a minimum credit score of 660 for low-income borrowers or a minimum of 680 for those who don’t meet low-income requirements.
• DTI: Your maximum debt-to-income ratio can’t exceed 45% – 50%, depending on your credit score and other factors.
• Income limits: Your income can’t exceed California’s income limits by county. Check your county’s limits to be sure your income doesn’t exceed them.
• Home buyer education: You have to complete a home buyer education course. You can find recommended courses on the CalHFA website.

CalHFA FHA Loan Program

The CalHFA FHA Loan Program is backed by the U.S. Federal Housing Administration (FHA).

The goal of the program is to help home buyers benefit from lower interest rates. When compared to conventional loans, FHA loans are safer for lenders because they’re insured by the federal government. As a result, these loans often have lower interest rates than conventional loans. FHA loans also allow qualifying borrowers to put down as little as 3.5%.

Below is a look at the requirements for this loan:

• Credit score: You’ll need a minimum credit score of 640 – 700 to qualify in most cases. Your minimum credit score may depend on your DTI, property type and other factors.
• DTI: Manual underwriting is allowed if you have a DTI of 43% or lower. Otherwise, your maximum DTI can’t exceed 45% – 50%, depending on factors like your credit score.
• Income limits: Your income can’t exceed California’s maximum income limits by county. Check your county’s limits to be sure your income doesn’t exceed them.
• Home buyer education: You’re required to complete a home buyer’s education course in most instances. You can find recommended courses on the CalHFA website.
• Additional requirements: The FHA has certain income and property requirements that you’ll need to meet to be eligible for this loan program.

CalPLUS FHA Loan Program

If you are interested in a CalHFA FHA loan and need help with closing costs, the CalPLUS FHA loan program might be able to help. In addition to the features of the CalHFA FHA loan program, the PLUS option offers a zero-interest loan to cover your closing costs. But your mortgage interest rate will be a tad higher.

This loan might amount to 2% – 3% of your loan amount. You don’t need to repay the loan for the life of your loan.

Here’s a look at the requirements:

• Credit score: You’ll need a minimum credit score of 640 to qualify in most cases.
• DTI: Manual underwriting is allowed if your DTI doesn’t exceed 43%. Depending on your credit score, you may also qualify for the CalPLUS FHA Loan Program if you have a DTI of 45% – 50%. 
• Income limits: Your income can’t exceed California’s income limits by county. Check your county’s limits to be sure your income doesn’t exceed them.
• Home buyer education: You’ll need to complete a home buyer’s education course. You can find recommended courses on the CalHFA website.
• Additional requirements: Just like with the CalHFA FHA Loan Program, you’ll need to meet the FHA’s income and property requirements to qualify for the CalPLUS FHA Loan Program.

CalHFA VA Loan Program

If you qualify for a Department of Veterans Affairs (VA) loan based on your military service and are a first-time home buyer, the CalHFA VA loan program can help you achieve homeownership. Since this loan is backed by the VA, you’ll usually find lower interest rates.

CalHFA can help you find the best lender for your home purchase.

Here’s a look at the requirements for this program:

• Credit score: You’ll need a minimum credit score of 640.
• DTI: You must have a DTI that doesn’t exceed 45% – 50%. The maximum ratio is dependent on your credit score and other factors.
• Income limits: Your income can’t exceed California’s income limits by county. Check your county’s limits to be sure your income doesn’t exceed them.
• Home buyer status: You must be a qualifying veteran, qualifying active duty military member or eligible surviving spouse. You can learn more about eligibility on the VA website. Additionally, you must be a first-time home buyer.
• Home buyer education: You must complete a home buyer’s education course in most cases. You can find recommended courses on the CalHFA website.
• Additional requirements: Most VA loan borrowers have to pay a funding fee, which is a small percentage of the loan amount. However, you can use the MyHome program to help cover this cost and other closing costs.

CalHFA USDA Loan Program

If you want to pursue a U.S. Department of Agriculture (USDA) loan, you’ll need to purchase in an area that’s sufficiently rural. Depending on your situation, you might qualify for 100% financing options with no down payment requirement.

CalHFA can help you find the best lender for your unique situation as you pursue this loan.

Here’s a look at the requirements:

• Credit score: You’ll need a minimum credit score of 640 – 700 to qualify in most cases.
• DTI: You must have a DTI that doesn’t exceed 45% – 50%. The maximum ratio is dependent on your credit score and other factors.
• Income limits: Your income can’t exceed the USDA income limits by county. USDA income limits differ from California’s, so it’s important to make sure you make less than the maximum for your area.
• Home buyer education: You must complete a home buyer’s education course. You can find recommended courses on the CalHFA website.
• Additional requirements: The property must be in a rural location. Check with CalFHA to determine whether a certain location where you want to buy qualifies.

First-Time Home Buyer California Requirements

If you want to pursue a loan with the help of CalHFA, you’ll likely need to take an education course. As of writing, you can complete this educational requirement through CalHFA’s online home buyer course, which costs $99. If you want a free option or a low-cost option, you might find a course available in person at your local housing authority.

Down Payment Assistance For First-Time Home Buyers In California

When it comes to buying a home, saving up for a down payment can be one of the biggest hurdles. If you are struggling to save for a down payment, down payment assistance can help. Essentially, these programs provide a funding method to cover your down payment without pulling the money out of your own savings account.

Below is a closer look at California’s two down payment assistance programs.

California Dream For All Shared Appreciation Loan

The California Dream For All Shared Appreciation loan offers up to 20% for a down payment or closing costs, up to $150,000. In order to qualify, you must be a first-generation home buyer and a first-time home buyer. Additionally, your income must be below certain limits, which vary from county to county.

If you want to apply, you must register for a voucher. The vouchers are given out through a randomized drawing. If you receive this loan, you’ll repay the down payment when your home is sold or transferred, plus a share in the appreciation value of your home.

MyHome Assistance Program

The MyHome Assistance Program provides a deferred loan for up to 3.5% of the purchase price or appraised value of the home. In addition to meeting income limits and being a first-time home buyer, you must plan to use the property as a primary residence.

If you take out this loan, it will take the second-lien position, which means your mortgage lender will be paid back first if the property is foreclosed on due to missed payments. But you won’t have to start making payments on your MyHome Assistance loan right away, which can give your budget necessary breathing room.

Grants For First-Time Home Buyers In California

Grants offer funding for specific home-related costs. Unlike a loan, you don’t have to repay a grant at any time. But in most cases, you’ll need to prove your financial need before receiving a grant.

If you are interested in a homeownership grant, consider the following opportunities.

Accessory Dwelling Units (ADUs) Grant Program

An ADU is a housing alternative built on a property with an existing home. For example, building a studio apartment in your backyard might qualify as an ADU. California’s ADU grant program is designed to help homeowners cover some of the upfront costs of building an ADU. The goal is to increase the housing supply in the Golden State.

After buying a home, you might decide to build an ADU to create an income-generating unit. If you need help covering the building costs, this grant program could be a great option.

Pathway To Homeownership Closing Cost Assistance Grant Program

The California Association of REALTORS® offers grants of up to $10,000 to first-time home buyers with a low-to-moderate income. Beyond these requirements, the buyer must be part of an unserved community, which includes:

• People of color, as defined by HUD
• LGBTQIA+ individuals
• Persons with disabilities

If you qualify, this could present a great opportunity to cover some of your upfront housing costs.

Forgivable Equity Builder Loan

The Forgivable Equity Builder Loan is designed to help first-time home buyers cover down payment and closing costs. You’ll need to meet income limits and credit requirements set by the lender. Plus, you’ll need to take a homeownership education course.

If you qualify, you can borrow up to 10% of your home’s purchase price with a zero-interest loan. You’ll use the funds to pay for some of your upfront closing costs or down payment. After living in the house as a primary residence for 5 years, the loan can be forgiven.

The Bottom Line

When it comes to buying a house in California as a first-time buyer, you might be surprised by the ample resources and potential support designed to help you hit your goal. If you aren’t sure where to get started, seek out a real estate agent who has knowledge about all of your loan options and assistance opportunities.