California’s new $300 million down payment assistance program was halted after less than two weeks from its launch, due to fully allocating the nine-figure sum for home purchases.
The program was designed to help first-time homebuyers put a down payment on a house, with qualified applicants receiving interest-free loans to be used to make up to a 20 percent down payment on a house or to cover closing costs.
Driving the news: The program’s funding has already been exhausted, with applicants required to lock in their Dream for All loans by April 12.
- The program will provide an estimated 2,300 low- and moderate-income Californians with a 20 percent down payment loan free of interest, but the down payment assistance loan must eventually be repaid to the state.
The backstory: The Dream for All loan is a “shared appreciation loan,” meaning that borrowers must also pay back a percentage of the home’s growth in value when they pay back the amount that the state lent them.
- The percentage is between 15 and 20 percent depending on the borrower’s income level and how much they initially borrowed.
- The California Housing Finance Agency initially viewed the program as being able to largely fund itself, and the proceeds made through home appreciation percentages will be used to help future California homebuyers get a house of their own.
- Due to the high cost of housing in California, many residents of the state may be able to afford a monthly mortgage payment but unable to save up a 20 percent down payment to get through the door.
- The Dream for All program aimed to provide a solution to this issue, but its swift allocation of funds raises questions on how many were able to take advantage of the program so quickly.
What they’re saying: Despite the self-financing hope, CalHFA officials are now expressing skepticism at when it will be able to issue another round of loans to homebuyers.
- “[W]e cannot predict whether that will be in the coming months with an additional allocation [from the state budget], or in the coming years as repayments of these original loans come back to be recycled to help additional households,” agency spokeswoman Kathy Phillips told the LA Times.