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A shared appreciation loan program that provides down payments for first-time homebuyers in California has proved so popular that this year, applicants will be selected through a lottery.

When it launched last year, the California Housing Finance Agency’s (CalHFA) Dream For All shared appreciation loan program burned through all $300 million originally earmarked for the program in less than two weeks.

California lawmakers have allocated an additional $220 million for the program in the 2023-24 state budget, and this week CalHFA announced a new process for applying for the loans in advance.

CalHFA has created a “pre-registration portal” to give borrowers more time to apply, and ensure equitable distribution of Dream for All (DFA) loans throughout nine geographic regions.

The pre-registration portal will open on Wednesday April 3, 2024, and CalHFA will accept applications until 5 p.m. Monday April 29th, 2024. Would-be homebuyers are advised to work with a CalFHA approved lender to get pre-approved for the program before applying.

In a March 4 lender bulletin, the agency said it “anticipates that demand for Dream For All Phase 2 will exceed available funding and will use a randomized selection process to issue vouchers for a DFA loan.”

Successful applicants will receive a voucher that gives them 90 days to shop for a home and enter into a purchase contract, and for the lender to reserve their loan through CalHFA’s Mortgage Access System (MAS).

Authorized by California lawmakers in 2021 through the passage of AB 140, the Dream for All program is a revolving loan program that’s expected to evolve over time to be self-sustaining utilizing private investments.

The Dream For All shared appreciation loan is a second mortgage that provides up to $150,000 for a down payment, which homebuyers don’t have to repay until they refinance or sell their home. Instead of paying interest on the second mortgage, borrowers repay the original balance plus a share of the appreciation in the value of their home.

To qualify, homebuyers must fall within maximum income limits for the county where they’re shopping, which range from $132,000 in many rural counties to well over $200,000 in wealthier urban counties in the San Francisco Bay Area.

Each person on the loan application must be a first-time homebuyer, and at least one applicant must also be a first-generation homebuyer — meaning they can’t have held an ownership interest in a home in the last 7 years, and that their parents aren’t homeowners.

[For more program guidelines and eligibility requirements, see the Dream For All Shared Appreciation Loan Program Handbook].

How to apply for CalHFA Dream For All program

To ensure that the program benefits residents statewide, funds will be divided up among nine regions based on the number of households in each region, and vouchers will be issued based on the funds available in each region.

Because they’re so populous, Los Angeles, Orange and San Diego counties are considered their own regions, while 25 rural counties are lumped together under one region.

The nine regions are:

  1. Bay Area: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma counties
  2. Capital: El Dorado, Placer, Sacramento, and Yolo counties
  3. Central Coast: Monterey, San Benito, San Luis Obispo, Santa Barbara, Santa Cruz and Ventura counties
  4. Central Valley: Fresno, Kern, Kings, Madera, Merced, San Joaquin, Stanislaus and Tulare Counties
  5. Inland Empire: Imperial, Riverside and San Bernardino counties
  6. Los Angeles: Los Angeles County
  7. Orange County: Orange County
  8. Rural areas: Alpine, Amador, Butte, Calaveras, Colusa, Del Norte, Glenn, Humboldt, Inyo, Lake, Lassen, Mariposa, Mendocino, Modoc, Mono, Nevada, Plumas, Shasta, Sierra, Siskiyou, Sutter, Tehama, Trinity, Tuolumne and Yuba counties
  9. San Diego: San Diego County

Homebuyers in any state can find programs that provide down-payment assistance using services like Down Payment Resource, which makes information available about programs and eligibility requirements through sites such as Zillow and Redfin, as well as through integrations with multiple listing services (MLSs), lenders and agents.

Mortgage giants Fannie Mae and Freddie Mac are helping very low-income borrowers qualify for a loan this spring by providing a $2,500 credit that they can put toward their down payment, closing costs, escrow or mortgage insurance premiums.

Freddie Mac is offering the credit to homebuyers who qualify for its Home Possible mortgage, which lets buyers put down as little as 3 percent, and through its HFA Advantage mortgage for housing finance agencies (HFAs).

The offer is available on mortgages with settlement dates from March 1, 2024, through Feb. 28, 2025, Freddie Mac said in a lender bulletin.

Fannie Mae’s credit is being offered on HomeReady mortgages — Fannie’s 3 percent down loan — on a similar time frame.

Lenders like Rocket Mortgage, United Wholesale Mortgage and Zillow are providing grants so that buyers only need to come up with a 1 percent down payment to take out a HomeReady or Home Possible loan. Rocket sweetens the deal by also picking up the cost of PMI.

LoanDepot offers second mortgages to help would-be homebuyers who can’t come up with the 3.5 percent minimum down payment required to qualify for FHA purchase mortgages.

Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

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