California to relaunch loan program for 1st time home buyers next month

OAKLAND, Calif. - Next month, California will relaunch a popular program that gives affordable loans to first-time home buyers, but this time the state is tightening the requirements for applicants. 

The California Housing Finance Agency's California Dream for All program rolled out last spring on a first-come, first serve basis and there was huge demand. In less than two weeks, the program used up its entire $300 million budget. 

Just over 2,000 applicants received no-interest, no-monthly payment loans to help with a down payment. 

To explain the new changes to the program, we had Eric Johnson, a spokesperson for the California Housing Finance Agency on KTVU's The Four. 

For starters, the state will choose applicants by lottery. 

Not only do applicants need to be first-time home buyers, but they must also have parents who are not currently homeowners. This was implemented at the suggestion of the legislature. From a fair and equity standpoint, Johnson said at least one person on the loan cannot have owned their own home in the past seven years. 

Johnson explained the reasoning behind these new requirements, saying they wanted to ensure the funds are distributed fairly and equitably. "We're asking people to work with one of our approved lenders, get your credit score, get your debts all squared away. And you've got a month and a half to apply to the program. Anywhere between April 3 and April 29 you can submit your voucher application."

Johnson explained that so much of the inequity in California is caused by inequities in home ownership. "Being able to own that home and pass on that generational wealth to the next generation is really foundation of making it so that a family is able to accumulate wealth."

Are there changes in income limits?

Johnson said income limits this time around are slightly lower but are still pretty generous. He said in Alameda County the income limit is $234,000. In Sonoma County it's $202,000. For the Bay Area, he said it's still very doable. 

California's Dream for All Loan Program

• $150K for financing or 20% of the purchase price
• Interest Free
• No repayment until home is re-sold or refinanced 

So what happens when a Dream for All Loan eventually comes due? 

Johnson said this is a unique-shared appreciation program that has never been tried at this scale in the U.S. "When you sell or refinance the house, in addition to paying back the amount of the initial loan, you also pay back a share of the appreciation of the home's value, up to 20% of that. And then we use that money to fund the next round of home buyers."

As an example, Johnson said you could buy a home for $500,000 and sell it for $600,000. You'd get a loan of 20% of that $500,000 and then you'd have to pay back that $100,000 plus 20% of the appreciation of the home. So you'd end up paying back $120,000. That's instead of charging interest on the loan or having monthly payments on that second loan. However, you would still have monthly payments on the first mortgage of the home. 

California Dream for All Shared Appreciation Loan