First-time buyers often find it especially difficult to come up with the money for closing costs and a down payment on their home. Fortunately, buyers can take advantage of several excellent programs that provide grants or loans that may be used for closing costs and a down payment.
Many first time buyers can qualify for these programs, including buyers who are not low-income.
The following is an overview of some examples of the most popular first time buyer programs in California. Please request more information from a MortgageBoon Loan Specialist in your State. They can provide you with a list of State programs you may qualify for. This list is not all inclusive; however, so you may find additional programs by checking with a local nonprofit housing organization, or your city's housing finance agency. Be sure to check the requirements for each program as well.
Extra Credit Teacher Home Purchase Program (ECTP)
This junior loan program provides between $7,500 and $15,000 (depending on the area) in down payment assistance. This program may only be used with an eligible CalHFA first mortgage, and it is available to teachers, school administrators, classified employees and staff members of a county or high priority school in the state. A high priority school is either a charter or public school with an Academic Performance Index of 1 through 5. To be eligible, you must intend to work for 3 years at the school from the date of the loan.
Mortgage Credit Certificate (MCC) Tax Credit Program
An MCC Tax Credit is a federal tax credit that reduces federal income tax liability. It also adds additional net income borrowers may use toward their mortgage payments. By taking advantage of the MCC program, you can turn a percentage of your annual mortgage interest paid into a dollar-for-dollar tax credit every year.
The MCC Tax Credit program is available to first time home buyers, buyers who purchase a home in a federally designated target area, or qualified veterans.
Not all counties in California are eligible for the MCC program. In Los Angeles County, for example, unincorporated areas like Alhambra, West Hollywood, Baldwin Bark and Montebello are eligible. In San Diego County, the city of San Diego, Oceanside, Del Mar and other cities are excluded.
If you qualify, this program has the potential to save you thousands every year.
Individual Development Accounts
If you want to save up for a down payment on your first home, you may consider an Individual Development Account (IDA), which is a special savings account designed for low-income borrowers. Several banks and nonprofit organizations throughout California offer IDAs, which match contributions. Some organizations offer a 3:1 savings match, which means you receive an additional $3,000 for every $1,000 you save, with a limit.
If you are interested in an IDA, be sure to check for organizations in your area to learn more about their qualifications and savings match. For example, the Community Financial Resource Center in Los Angeles offers an IDA program with a 1- or 2-year commitment to deposit at least $84 per month into the account. Participants receive a $2.50 match for every $1 deposited, only on the first $1,000 saved. The California Coalition for Rural Housing, meanwhile, does not directly offer an IDA program but helps first time buyers find an IDA program with match rates that range from 1:1 to 1:8.
The Federal Home Loan Bank also offers two separate down payment assistance programs: the WISH program and the IDEA program. Both offer first time buyers a matching grant of $3 for every $1 contributed, up to $15,000, which may be used toward closing costs or a down payment.
FHA Access Loan Program
The FHA Access Loan Program allows you to get a mortgage for 103% of the home's sale price. This program combines an FHA first mortgage (which requires a 3% down payment) and an Access 2000 loan, which offers a second mortgage for 6% of the sales price of the home.
National Homebuyers Fund - CHF Platinum Grant
The CHF Platinum program helps low- and moderate-income buyers purchase a home with down payment and closing cost assistance in the form of a grant. This program is not limited to first time buyers. The grant is available on the purchase of a single-family, primary residence with income limits up to 140% of median income in your area. It provides up to 5% of the purchase price in closing cost or down payment assistance.