If Property Won't Appraise, Change Financing Or, at least that is what this TikTok with 300,000+ views is saying.

    We have received a ton of questions recently regarding the California Housing Finance Agency’s (CalHFA) new program that offers a 10%, forgivable, interest-free loan to first-time homebuyers. So, we want to clarify the program’s guidelines and touch on some serious tradeoffs buyers should consider.

    Here are the program requirements and restrictions:

    First-time homebuyers only – this means at least one buyer must not have had their name on title to any homes within the last year.

    Strict income limits – combined qualifying income must be 80% or less than the Area Median Income (check your city here). In most Bay Area cities, the limit is $106,800.

    Debt ratios – on top of the income limits, debt ratios are restricted to 45%, which are 5% – 10% lower than what buyers can qualify for with traditional conforming or FHA financing.

    $550,000 max purchase – Bay Area buyers employing this program will max out at about $550,000 for a single-family home, assuming no HOA dues, no debt at all, and perfect credit. This is about $50k -$100k less than what they would be able to purchase without the debt ratio restrictions.

    Loan forgiveness/No refis – The loan is forgiven after 5 years and WILL NOT SUBORDINATE. This is huge because it means that homeowners cannot refinance in the first 5 years even if rates fall (and most analysts predict they will). So, buyers using this program will have “golden handcuffs” shackling them to a higher payment, unless they can come up with the money to pay off the entire amount borrowed.

    This also means that clients cannot sell in the first 5 years without risking short sale or foreclosure, unless their equity grows exponentially.

    So, what is the ultimate impact of this program?

    1. Many buyers will not be able to find houses in the price range they will qualify for, and many others will have too much income to qualify at all. So, it is not a panacea like the TikTok dude implies.
    2. It will make housing more expensive, ironically, like all government subsidies do – simply because subsidies like this create more demand without addressing supply issues. So, this giveaway to the current crop of homebuyers will only make housing more expensive for the next. Instead of fostering more demand, CA should instead help increase supply by making it easier or cheaper for builders to build.
    3. It is still a great program, despite its limitations, for those who do qualify and can find homes in their price range. JVM is approved to offer this program and will happily assist any buyer who would like to try to qualify for it. Buyers do, however, need to move fast before the “free money” runs out.

    Jay Voorhees
    Founder/Broker | JVM Lending
    (855) 855-4491 | DRE# 1197176, NMLS# 310167

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