The California Dream for All Down Payment Assistance Program Is Back

Buying a home in California can seem like a pipe dream due to high real estate costs. But down payment assistance programs for first-time homebuyers can help. One of these state government programs is the California Dream for All Shared Appreciation Loan, which is relaunching following a popular run last year.

What Is the Dream for All Shared Appreciation Loan?

The Dream for All Shared Appreciation Loan is a relatively new program — revised somewhat from last year — that helps first-generation and first-time homebuyers by providing up to 20% of a home’s value (the lesser of the purchase price or appraisal value) as a loan to cover down payments and/or closing costs. The maximum loan limit is $150,000.

In the California housing market, it can be tough for anyone to afford a down payment and closing costs, and if you’re a first time home buyer, it can be even harder. As a first time home buyer, you might not have the money saved up to afford these home purchase costs, whereas someone buying their second home might have equity that they can roll over. So, this loan program can give first-time buyers the leg up they’re looking for.

No Interest or Monthly Payments

This shared appreciation loan does not accrue traditional interest or require a monthly payment. Instead, it can be deferred for the whole duration of the first mortgage, until an event like selling the home occurs. At that point, the shared appreciation part kicks in, where the homeowner would be responsible for paying back the base value of the loan, plus up to 20% of the appreciated value if the home’s value has gone up, depending on income limits.

Sharing Upside

Paying back up to 20% of the appreciated value (or 15% for lower-income borrowers) might sound like a lot, but when you look at the numbers, it’s clear that homebuyers can benefit greatly from this program. Think of it as sharing in the upside of potentially rising real estate costs, perhaps even to the point where your equity share outweighs the whole loan amount.

Suppose you bought a home for $500,000 and received $100,000 from a California Dream for All Shared Appreciation Loan to cover the down payment. That would mean you owe $400,000 on the first mortgage, which must be a California Dream for All Conventional first mortgage to be eligible for this California down payment assistance program.

Then, suppose you end up selling the home several years later for $700,000.

Of that $200,000 difference, you’d pay back $40,000 (20% of the appreciation), plus the original $100,000 loaned to you through the California Dream for All program, while essentially keeping the remaining $160,000 equity share for yourself.

While costs like seller fees might eat into some of that equity, it still can leave you with a solid share. In this example, the appreciation you keep outweighs the entire amount you have to pay back. Plus, you’d likely be paying off some of the mortgage principal during your time of homeownership, netting you even more equity.

Of course, not all homes will appreciate in value this much, but even when you gain smaller amounts, the advantage is that you don’t have to come up with the money for a down payment right away.

Instead, you can buy a home with the help of the California Dream for All program, and ideally, you can build enough equity through price appreciation and mortgage payments to cover the full amount of the interest-free loan over time, all while enjoying the benefits of homeownership.

Who’s Eligible for the California Dream for All Shared Appreciation Loan?

To be eligible for the California Dream for All Shared Appreciation Loan, you need to meet certain requirements, such as:

CalHFA approved lender

The shared appreciation loan must come from a California Housing Finance Agency (CalHFA) approved lender and needs to be paired with a Dream for All Conventional first mortgage.

First-Generation Homebuyer

One of the borrowers applying for the loan has to be a first-generation homebuyer.

First-Time Homebuyer

Both borrowers (e.g., when a couple buys a home together) have to be first-time homebuyers.

California Residency

One of the borrowers must be a California resident.

Income Limits and Credit Score

Borrowers’ income can not exceed 120% of the Area Median Income (AMI) for the county they’re purchasing in. You also need a credit score of at least 660 or 680, depending on your income. Some examples of CalHFA Dream for All income limits in different counties include:

Los Angeles County

$155,000

Sacramento County

$180,000

San Diego County

$185,000

San Francisco County

$277,000

How to Apply for the California Dream for All Shared Appreciation Loan

To apply for the Dream for All Shared Appreciation Loan, you need to work with a CalHFA approved lender. Your loan officer can help you complete and submit your application, along with steps like getting a pre-approval letter. 

The application portal is not open yet but is expected to be open in April 2024 and stay open for around 25-30 days.

Last year, the program ran out of funds within 11 days. This year, the program will run as a lottery system, as opposed to a first-come, first-serve basis.

However, the budget provided by the state government, signed into law by Gov. Gavin Newsom, is a bit smaller this year. In all, around 1,700-2,000 prospective homebuyers are expected to win this lottery and will then have 90 days to buy a home. Last year, 2,182 homeowners participated in the Dream for All program.

Find the Homebuyer Assistance Programs You’re Eligible For

Want help finding an approved lender and making sure you qualify for the Dream for All program?

Get in touch with us at Stairs Financial, and we’ll make it easy to get the homebuyer assistance you’re eligible for, which could include other homebuyer assistance programs beyond Dream for All.