With home prices seemingly always on the rise, first-time home buyers in California are struggling to save for the initial costs of buying a home. Thankfully, there are several California first-time home buyer programs available to help close this gap. Let’s dive in to see how to find the best first-time home buyer programs California has to offer.

Who offers California first-time home buyer programs?

One of the primary sources for first-time home buyers in California to access housing-assistance programs is CalHFA, California’s housing finance agency. This state-chartered organization has striven since 1975 to bring low- and moderate-income home buyers access to affordable mortgage loans and valuable closing cost and down payment assistance.

"Our overall proposition is that there are some people who have good credit scores, steady jobs, so a good source of income, but they haven’t been able to save up the down payment that is necessary," CalHFA spokesperson Eric Johnson said. "So we are filling a hole in the market."

Local government agencies at the city level and county level may also have first-time home buyer programs you can benefit from.

Dig deeper: How to buy a house

Types of California first-time home buyer programs

First mortgage loans

CalHFA offers several first mortgage loan programs for both conventional and government-backed loans. If first-time home buyers qualify, they can receive 30-year fixed-rate mortgages with interest rates set by CalHFA at competitive market prices.

However, according to Johnson, the real benefit to these first mortgage loan programs is the access they give to CalHFA’s closing cost and down payment assistance programs.

Closing cost and down payment assistance

Depending on the CalHFA first mortgage loan you choose, you may have several programs to choose from to receive assistance for the upfront costs of buying a home. These down payment and closing cost assistance programs, which are exclusive to first-time home buyers, offer up to 20% of your home’s sales price in assistance. Given how expensive real estate is in California, CalHFA programs could provide first-time home buyers with tens of thousands of dollars in assistance.

Below, we will cover the details of the down payment and closing costs assistance programs that can lift you over the financial hurdles keeping you from home ownership.

Read more: Closing on a house: What to expect and how to prepare

California down payment and closing cost assistance programs

The down payment and closing cost assistance programs offer the most direct benefits to first-time home buyers, so we will cover them first.

However, it is essential to remember that these programs can only be used with CalHFA first mortgage loan programs described further below. All first-time home buyers must also attend an 8-hour home buyer education course to qualify.

My Home Assistance Program

The My Home Assistance Program provides up to 3.5% of the home’s appraised value or sales price for CalHFA FHA loans, and 3% for CalHFA VA, USDA, and conventional loans. The assistance comes in the form of a deferred-payment second mortgage that you do not have to pay off until the first mortgage is paid off or transferred. You can use the money on your down payment or closing costs.

Zero Interest Program

The Zero Interest Program (ZIP) offers first-time home buyers an interest-free, deferred payment second mortgage worth up to 3% of the first mortgage amount. Unlike the My Home program that can be used for both down payment and closing costs, ZIP funds can only be used on closing costs. Buyers can only use ZIP with the CalPLUS first mortgage program described below.

Dream For All Shared Appreciation Loan

The Dream for All program is a special type of loan that comes with a unique structure, extra eligibility requirements and extra savings. This program, reserved for those with the Dream For All Conventional Loan, provides up to 20% of the sales price or appraised value of the home up to $150,000. These eye-popping numbers make this the largest loan that CalHFA offers by far. When you sell, refinance or transfer the loan in another way, you must pay back the loan amount in full plus a share of the appreciation in your home. Homeowners below 80% of the area’s median income must pay back a smaller share of the appreciation. For an in-depth look at how this system works, check out the CalHFA’s website or the Dream For All Program handbook.

Another unique feature of the Dream For All loan is that it is reserved for “first-generation” home buyers, not just first-time home buyers. CalHFA defines first-generation home buyers as:

• Those who have not owned a home in the last 7 years, and;

• Whose parents do not currently own a home or did not own a home at the time of their deaths, or;

• Has lived in foster care or institutional care at any time.

Other eligibility requirements include that you must attend the standard CalHFA home buyer education course and an additional CalHFA course specifically covering shared appreciation.

While you may be ready to jump on these savings today, you’ll have to wait until April 2024, when the program launches.

Dig deeper: Should you buy a house? How to know if you're ready.

California first mortgage programs

While the down payment and closing costs assistance programs provide you with immediate upfront savings, you can’t access these benefits without the first mortgage programs below.

CalHFA FHA Loan Program

The CalHFA FHA Loan Program provides a 30-year fixed-rate FHA loan. You can save even more with an FHA loan through CalHFA because you have access to the My Home assistance program that can cover the entire 3.5% down payment or closing costs.

CalHFA VA Loan Program

The CalHFA VA Loan Program provides a 30-year fixed-rate VA loan to eligible service members, veterans, and surviving spouses. Standard VA loans do not require a down payment, but that doesn’t have to stop you from getting a head start on building your equity. With CalHFA’s MyHome assistance program, you can get up to 3% of the appraised value or sales price of your home (whichever is less) to go toward the down payment or closing costs.

CalHFA USDA Loan Program

The CalHFA USDA Loan Program provides a 30-year fixed-rate reserved for low- and moderate income home buyers in eligible rural areas. Similar to VA loans, CalHFA USDA loans do not require down payments, but you can use the My Home Assistance program to contribute up to 3% of the appraised value or sales price of your home (whichever is less) to go toward the down payment or closing costs.

CalHFA Conventional and Dream For All Loan Programs

The CalHFA conventional loan program provides a 30-year fixed-rate mortgage loan. When combined with the My Home Assistance program, you may not have to provide a down payment at all. The Dream For All program also has its own conventional loan program that must be used to participate in the Dream For All Shared Appreciation Loan Program.

CalPLUS FHA and CalPLUS Conventional Loan Programs

With the CalPLUS program, first-time home buyers looking to use a conventional or FHA loan can access the ZIP program to save on their closing costs. However, with these savings, they will have to pay a slightly higher interest rate on their mortgage.

Do I qualify for California first-time home buyer programs?

The eligibility requirements vary for each CalHFA program based on several factors. First and foremost, your income must be below the limit for the county you’d like to buy the home. Other key measurements include:

• Credit score: The minimum credit score required for a calHFA program is 640. However, some programs require a higher score (up to 700) based on your debt-to-income ratio.

• Debt-to-income ratio: This measurement, showing how much of your monthly income you spend on monthly debt payments, is an important factor in determining your eligibility. The lowest limit is 43%, but some programs allow as high as 50% DTI.

• Loan-to-value (LTV) ratio: Some CalHFA loans allow 100% LTV ratios, meaning they don’t require you to put any money down. However, other programs require as low as 95% LTV. Programs also consider combined-LTV (CLTV), which takes into account all loans on a home. The Dream for All program has a 95% CLTV requirement, but all other programs require 100% or 105%.

• Sales price: CalHFA has no sales price limits for any of their loan programs.

• Occupancy: All CalHFA programs require the home buyers to use the home as their primary residence within 60 days of closing on the home.

How to apply for CalHFA first-time home buyer programs

CalHFA does not directly administer their loans, they offer them through private loan officers that they train and approve. So the first step to apply for a CalHFA loan is to find a loan officer to walk you through the loan process. The exact information you are required to provide may differ depending on the loan officer you choose, but CalHFA recommends that you have your pay stubs, bank statements, employment history, and previous tax returns available when you reach out.