FIRST-TIME HOME BUYERS IN CALIFORNIA

First-time home buyers need to consider three factors when financing the purchase of their first home: down payment, credit and income. It’s important to understand each of these aspects so that you can  prepare to qualify for your first home purchase.

Here, you’ll find information and resources to help you purchase your first home in California – whether it’s a single- or multi-family residence, a townhome, a condo or an apartment.

Down Payment Assistance

It’s a myth that a 20 percent down payment is required to qualify for a home loan. Although having a 20 percent down payment is good to have, it’s not a requirement. Nowadays, there are plenty of different types of loans that one can qualify for without first having to save 20 percent.

    • FHA Loans – If you do not have 20 percent to put down on a home loan, an FHA loan is an option that you first time home buyers may want to consider.
    • FHA loans require a down payment of only 3.5 percent of the home’s purchase price.
    • VA Loans – VA loans are available in California, as well as nationwide. They are guaranteed by the U.S. Department of Veteran Affairs and are designed to provide assistance in purchasing a home for service members, veterans, reservists, National Guard members and certain surviving spouses. These loans offer zero down payment options.
    • Gifts from Relatives – Like many potential home buyers in California, coming up with a 20 percent down payment to lock in a property purchase can be a challenge. Parents, or other relatives, can help with funds for a down payment by giving loans and  or gifts.
    • CalHFA Loans – CalHFA loans are available to California residents and this option also provides for little to no down payment as well. Potential home buyers can review the programs CalHFA offers or speak with a trusted lender to see if a service member qualifies for a CalHFA loans.
What it is:
The CalPLUS FHA program is a first mortgage loan insured by the Federal Housing Administration. The interest rate on the CalPLUS FHA is fixed throughout the 30-year term. The CalPLUS FHA must be combined with a CalHFA Zero Interest Program (ZIP), which is a deferred-payment junior loan of 3.5% of the first mortgage loan amount, for down payment assistance. cal-plus-fha-loan-program-for-california-mortgages

How it helps home buyers:
With this loan, home buyers can apply and be qualified for loans that include lower down payment amounts. These programs are designed with lower income, first-time home buyers in mind; most programs make it easy to qualify.

Who is eligible?:

  • Must occupy the property as a primary residence; non-occupant co-borrowers are not allowed.
  • CalHFA borrowers must complete homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.
  • Meet CalHFA income limits for this program.
  • Sales Price cannot exceed CalHFA sales price limits for the county.
  • Credit Score must be 640 or above

Qualification:
If you believe that you may qualify for the CalPLUS FHA loan program, and are interested in speaking with an approved lender, please contact Plaza Loans today. Note: CalHFA does not accept applications directly. Plaza Loans is a qualified CalHFA lender and will work with you to submit an application on your behalf.

What it is:
The CalHFA FHA program is an FHA-insured loan featuring a CalHFA fixed interest rate first mortgage. This loan is fully amortized for a thirty (30) year fixed term and can be combined with either the MyHome Assistance Program (MyHome), Extra Credit Teacher Purchase Program (ECTP), or MCC Tax Credit programs available in certain counties. The CalHFA FHA loan is not subject to Recapture Tax.

How it helps home buyers:
A 20% down payment can seem overwhelming and even impossible, especially in California, where housing prices are higher than other parts of the country.

With this loan, home buyers can apply and be qualified for loans that include lower to zero down payment amounts. These programs are designed with lower income, first-time home buyers in mind; most programs make it easy to qualify.

Who is eligible?:
This program is available for both first-time and not-first-time homebuyers, and:

  • Must be a U.S. citizen, permanent resident or qualified alien.
  • Meet credit, income and loan requirements.
  • Max DTI is 45%
  • Credit Score must be 660 or above
  • Complete an approved Homebuyer Education Course

Qualification:
If you believe that you may qualify for the CalHFA FHA loan program, and are interested in speaking with an approved lender, please contact Plaza Loans today. Note: CalHFA does not accept applications directly. Plaza Loans is a qualified CalHFA lender and will work with you to submit an application on your behalf.

What it is:
The ECTP is a deferred-payment junior loan that can only be used for down payment assistance for eligible teachers, administrators, classified employees and staff members working in county/continuation or high priority schools in California.

How it helps home buyers:
Provides junior loans that range from $7,500 to $15,000 – depending on the area where the home is being purchased. This loan can only be combined with an eligible CalHFA first mortgage loan. ECTP subordinate loans can only be used for down payment assistance.

Who is eligible?:
Borrower must be a first time home buyer, occupy the property as a primary residence, complete home buyer education counseling, meet CalHFA income limits for this program, be currently employed in a County/Continuation or High Priority school. A High Priority school is defined as a public or charter school that has an Academic Performance Index (API) ranking of 1 through 5. Hold an appropriate credential for a teacher, administrator or staff member — or be employed as a Classified Employee and intend to work for three years continuously from the date of the loan in a County/Continuation or High Priority school.

Qualification:
If you believe that you may qualify for this Extra Credit Teacher Home Purchase Program, and would like to speak with an approved lender, please contact Plaza Loans today. Applications are not accepted directly from individuals. Plaza Loans is a qualified CalHFA lender and will work with you to submit an application on your behalf.

What it is:
The CalHFA Energy Efficient Mortgage (Cal-EEM + Grant) loan program combines an HFA-insured first mortgage (Cal-EEM) loan with an additional grant (EEM Grant), allowing energy efficient improvements over and above the HFA maximum allowable EEM loan amount.

The EEM Grant is only available with the Cal-EEM first mortgage. The Grant is for up to 4% of the first mortgage total loan amount, including Up Front Mortgage Insurance Premium (UFMIP). The Grant can be used towards the HERS Report neutrality rating and may allow more borrowers to use the HFA EEM program without additional funds out of their pocket.

How it helps home buyers:
Helps qualified individuals to make energy efficient improvements over and above the HFA maximum allowable EEM loan amount.

Who is eligible?: 

  • Must occupy the property as a primary residence; non-occupant co-borrowers are not allowed.
  • Must complete homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.                                                                                                           
  • Meet CalHFA income limits for this program.
  • Credit Score must be 660 or above.

Qualification:
If you believe that you may qualify for the Cal-EEE + Grant Prrogram, and are interested in speaking with an approved lender, please contact Plaza Loans today. Note: CalHFA does not accept applications directly. Plaza Loans is a qualified CalHFA lender and will work with you to submit an application on your behalf.

 

What it is:
This energy-efficient first mortgage helps home buyers include the costs of energy-efficient home improvements in their mortgage. It’s an additional 4% grant so that home owners can make improvements to create a home green.

How it helps home buyers:
The interest rate on the Cal-EEM + Grant Program is fixed throughout the 30-year term. This program can be combined
with the MyHome down payment assistance program, which is a deferred payment junior loan of up to 5% of the purchase price for down payment and/or closing costs. It can also be combined with the Mortgage Credit Certificate Program (MCC) – a federal income tax credit that may lower your taxes and increase disposable income. It can also be combined with the Extra Credit Teacher Program (ECTP) – up to $15,000 in a deferred payment loan for teachers and staff serving high priority schools.

Who is eligible?:

  • Must occupy the property as a primary residence; non-occupant co-borrowers are not allowed.
  • Must complete homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.
  • Meet CalHFA income limits for this program.
  • Credit Score must be 660 or above.

Qualification:
If you believe that you may qualify for the Cal-EEE + Grant Prrogram, and are interested in speaking with an approved lender, please contact Plaza Loans today. Note: CalHFA does not accept applications directly. Plaza Loans is a qualified CalHFA lender and will work with you to submit an application on your behalf.

What it is:
MyHome provides a deferred-payment junior loan – up to 5% of the purchase price, or appraised value of the home, whichever is less — to be used for a down payment and/or closing costs. This program must be combined with a CalHFA first mortgage loan.

How it helps home buyers:
MyHome helps home buyers by providing a junior loan that can be used toward a home loan down payment or closing costs, giving a first-time home buyer more purchasing power and the possibility of a lower monthly mortgage.

Who is eligible?:
This program must be combined with a CalHFA first mortgage loan, and borrowers must:

Qualification:
If you believe that you may qualify for the CalHFA MyHome down payment assistance program and would like to speak with an approved lender, please contact Plaza Loans today by clicking on the button below. CalHFA does not accept applications directly. Plaza Loans is a qualified CalHFA lender and will work with you to submit an application on your behalf.

Improve Your Credit

If you’re in the market to buy a home, there are a few things you should know about the type of credit score that’s needed to qualify for a home loan. The exact FICO score number that’s needed varies, depending on the type of loan that you’d like to qualify for. Since the requirements around FICO scores are all different, this is a conversation that is good to have with a trusted lender that can work with you to determine what is right in your unique situation.
Keep in mind that regardless of what your credit score looks like now, it can be improved upon relatively quickly by making some adjustments.

If you’re not sure what your credit looks like right now, or even if you are, and you would like to get started on the path to home ownership, this is a perfect opportunity to get a complimentary copy of your credit report and then to speak with a trusted lending expert. When you meet with a trusted lending expert, he can share strategies that can potentially improve your current FICO score if needed in order to prepare for home-buying.

debt-to-income ratio are more likely to run into trouble making monthly payments. Because of this, there are requirements for the amount of income that you need related to your monthly debt obligations, in order to qualify for a home loan.

To calculate your debt-to-income ratio, you simply add up all your monthly auto, installment and revolving debt payments (you do not need to include groceries, electric, phone etc.) and divide them by your gross monthly income. Your gross monthly income is generally the amount of money you have earned before your taxes and other deductions are taken out.

For example, if you pay $1500 a month for your mortgage and another $100 a month for an auto loan and $400 a month for the rest of your debts, your monthly debt payments are $2000. If your gross monthly income is $6000, then your debt-to-income ratio is 33 percent, since $2000 is 33 percent of $6000.

Additionally, your income must be stable and verified for at least two years in the same job or line of work.

Ready to Buy Your First Home?

If you’re thinking about, or believe that you may be ready to purchase your first home, this is an exciting time for you! There’s no better time to explore your options with a lending professional that has the tools, know-how and information that can put you on a path to home-buying. If you’d like to speak with a lending professional about loans that are right for your financial situation, please feel free to contact us.

Plaza Loans helps first-time buyers to make home purchases in competitive Northern California

We’ll work with you every step of the way to help you get you pre-qualified, including discussions about credit scores, down payment assistance programs and how to find the right loan for your situation & financial goals.

We have 5 Northern California locations and have many loan options availablefor first-time buyers.

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