There is a little know State of California government subsidized loan program available in Orange County, CA. called the CalHFA loan (CalHFA stands for California Housing Finance Agency), and is even called the CHFA loan for short.  This exciting loan program allows a buyer to purchase a home with Zero down payment, with a FICO score of around 630, and offers below market  fixed interest rate financing (today's rate is just 5.75% and is subject to change), which is fully amortized over 30 years...  There are some limitations though that we will get into in just a moment... but first a segue regarding Zero down loans.

Lately, there has been a lot of bad press (deservedly so) regarding certain types of Zero Down loan programs here in Orange County... The problem has been primarily due to the lax underwriting standards in which buyers were able to get Zero down financing with FICO scores less then 620, and the borrower did not have to proof their income (this is called a Stated Income loan... essentially, you could just make up a figure).  To make matters worse, some of these loans offered adjustable rate mortgages, or worse yet, negative amortization loans, in which the loan balance would increase every month.  These issues are not a concern with the CalHFA loan as explained below.

Here are the basic qualifications and limitations of this fantastic loan program:

1.) First Time Home Buyer:  The State of California created this program to assist first time home buyers, therefore the prospective Home Buyer cannot have owned a home in the past 3 years.  The good news is, if you owned a home 4 years ago and sold it,  then you are eligible, as long as you have never used the CHFA loan before. 

2.) Income Limits:  Since this program is geared to assist first time homebuyers, the State has placed maximum income limits for CalHFA home buyers.  It varies by which county in California that the home is located in.  For Orange County, CA. the income limits for Moderate Income home buyers are as follows:   $103,920 for a 1 to 2 person family.  $121,240 for a 3 or more person family.  

3.) Credit Requirements:  The home buyer must be able prove their income with either W-2 forms from the employer or if self employed, one must produce 2 years of Tax Returns or 12 months of bank statement.  Secondly, the CHFA program only offers fixed interest rate loans, so one need not worry about rate increases down the road, nor negative amortization. The FICO score requirement varies, but typically a 630 or better FICO is sufficient.

4.) Sales Price Limits:  Again this program is designated for first time home buyers in Orange County, Ca. therefore the State of California does not intend to make this loan available for buyers who want to buy a $750K home.  The maximum price home that one can buy in Orange County using this CHFA loan is $571,278 for existing re-sale homes and condos, and $591,272 for new construction.

In addition, the CalHFA allows the Seller to grant the home buyer a credit through escrow that helps to pay for some of the Buyers closing costs.  Last year, we negotiated a purchase of a home for one of our clients using this CalHFA loan, and that buyers total home acquisition costs were just $767 !

CHFA does not loan money directly to consumers, but works through and uses approved mortgage lending institutions to qualify potential borrowers and to make the mortgage loans. The fee's that these mortgage lenders may charge can vary from lender to lender, but the program is highly regulated by the State so the variation in fee's are kept to a minimum.   There is some flexibility with regard to the FICO score.  If someone has a FICO score below about 620, it may still be possible to qualify for this loan depending upon the reasons for the lower FICO score. 

There is a Conventional CalHFA loan and a FHA based CalHFA loan.  Each have their advantages and disadvantages. There are other details and pertinent information regarding the CHFA loan, such as the potential of a Recapture Tax, Lower Interest Rates for Low Income buyers versus Moderate Income Buyers, High Cost versus Non High Cost Areas, special Lower Interest Rates for School Teachers in Target areas, and more.  But these topics are bit beyond the scope of this blog article.  There is also another little known government subsidized below market loan program, that is similar to CalHFA, and it is called the Acorn Loan program.

Fore more information about the CHFA loan here in Orange County, CA., or for a referral to several trusted Orange County CalHFA mortgage lenders, please feel free to call us at:  949-388-3396 or email us at:  Info@SearchOCHomes.com