The highly anticipated California Dream for All Shared Appreciation Loan Program is about to start again, with details released on 1/18 on the California Housing Finance Agency's website. Due to last year's overwhelming response, the $300 million budget was exhausted in less than two weeks, prompting criticism of unfair resource allocation and doubts about loan distribution fairness. Consequently, the government has made significant changes this year while retaining its "shared appreciation" loan model. Hence, this article will focus on the differences between this year's plan and last year's. If you are unfamiliar with the California Dream Grant Program, you may click the link to watch the video I previously released.
Firstly, let's talk about the budget. The 2024 budget has decreased from $300 million to $250 million compared to last year, raising questions about whether the program can continue next year depending on the government's budget allocation. The subsidy amount this time can still reach up to 20% of the purchase price, but unlike last year, there's now a maximum limit of $150,000. This amount does not accrue any interest or monthly payments. Repayment is only required when the property is sold in the future, returning the grant money to the California government along with a portion of the home's appreciated value. Last year's requirement was income below 150% of the median income in the home-buying area, has been lowered to 120% this year. If income falls below 80% of the median, the government's appreciated portion remains at 15%, as it did last year.
The following chart shows a slight increase in selling prices compared to last year's samples, and apart from that, other aspects are the same. The chart explains buyers receive a 20% subsidy when buying a house, and when selling, they must repay the initial $100,000 received plus an additional $28,000 from the appreciated portion (140000 x 20% = 28000).
The next chart shows that if the borrower's income is below 80% of the local median income, the appreciation portion when selling the house is reduced from 20% to 15%, which is $21,000 (140000 x 15% = 21000).
The most significant change in this year's DFA program is the lottery system instead of the previous first-come, first-served application model. I believe this approach serves several purposes. First, it aims to reduce the chaos, avoiding excessive loan applications after the program starts. Second, it allows for the allocation of lottery wins based on factors such as region, population, and ethnicity, with the government primarily aiming to provide more assistance to communities with lower homeownership rates. Due to this change, this year's homebuyers must find a government-approved lending institution and obtain pre-approval by April. With pre-approval, applicants can participate in the lottery event starting at 8:00 am on April 3rd. After the event begins, buyers will have nearly a month to submit applications, with the application window closing at 5:00 pm on April 29th. Approximately 1,700 to 2,000 lucky winners will be selected, with 90 days to purchase a home after receiving notification.
There's also a new requirement regarding applicant qualifications this year, requiring at least one person in each group of applicants to be a first-generation homebuyer. It means someone has never owned a home before, and neither have their parents in the United States, or someone who grew up in a foster care center. This new qualification is significantly stricter than last year's, primarily because the state government hopes to allocate limited funds to those most in need.
In California, especially in Silicon Valley, housing prices are soaring, making homeownership an unachievable American dream for many first-time buyers. The Cal DFA program does provide an opportunity for those unable to afford a hefty down payment to find a home; however, only a few lucky individuals will win the lottery and benefit from this incentive. Therefore, it's better to explore alternative options besides participating in DFA. The DW Homes team can assist you in preparing for the DFA program and have other solutions to help you achieve your goal of homeownership. With the housing market expected to see a slow improvement this year, I recommend that prospective homebuyers do not hesitate and find their dream home before the Fed starts reducing interest rates to avoid potential bidding wars that could arise once mortgage interest rates begin to decline. Feel free to contact us for questions about loans or the housing market.
Reference
California Housing Finance Agency website https://www.calhfa.ca.gov/dream/
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