If you’re buying a home for the first time in California, then you have every reason to feel overwhelmed with the purchasing process. There are ways for you to potentially alleviate the sometimes staggering costs, though it won’t be simple in this state during this time. Considering prices have climbed and continue to rise, Movoto wants you to know what types of programs incentives and grants are available for the first time home buyer California.
What’s the Overall Attitude?
Before we jump into grants and programs that could be the difference between renting and owning, you need to understand how people view the current housing market in California. In 2013, it was found that fewer than a third of people buying homes here were first time home buyers. The market is exceptionally hot right now, with some areas seeing as much as 33 percent in gains from 2014 to 2015.  Developers, investors and flippers have been closing in on property quickly and offering to pay more than asking. The general feeling is that there’s no need to give help to those who might need it based on the current demand. The other side of this though is that you can be a part of the profits too! This will obviously change from neighborhood to neighborhood and from year to year, but it’s good to have a clear head before you even browse the real estate section.
How Much Help Do You Need?
You’ll really want to sit down with your bank, a real estate agent or a broker and go over your finances before you do anything else. It’s about $400,000 for the average home price in California, and the standard down payment is meant to be around 20 percent. Except, most people do not have $80,000 sitting around that they can spend on their home. You can get away with as little as 5 percent with most conventional lenders, but that’s still $20,000. If you’re looking to do an FHA (Federal Housing Administration) loan, then you can put down 3.5 percent with a lower credit score. Even then, you’ll still be forking over $14,000. Now add in closing costs, homeowners insurance, mortgage insurance realtor fees, property taxes etc, and you can see the mounting concerns. When you put down less than 20 percent, you need to pay insurance every month— up to a third of your entire mortgage payment. It’s easy to see why certain neighborhoods see more than 50 percent of its residents are renters.
What Are the Actual Programs?
As with most fees, it’s the government that can give you the better deals. There is help out there in the form of junior loans that can help cover the initial costs, and they’ll generally give the best deals to first time home buyers. The first place you might want to look and apply will be the California Housing Finance Agency, where you can find low interest loans and help for your down payment. If you qualify (depending on your income level and price of the house), you’ll receive up to 3 percent of the home price toward your down payment and closing costs. There are also development corporations in California that may be able to offer no interest loans of up to 30 percent of the purchase price of the home.
You can also look for silent second loans which stipulate you won’t have to make a payment for at least 40 years. Or call one of the offices of the Federal Home Loan Bank to inquire about the IDEA or WISH programs which offer a matching grant of $3 for every $1 on your down payment. If you save $1,000, then this program kicks in $3,000. To quality, you’ll need to make 80 percent or less of the standard median income in the area. Some cities give special assistance to those who work in the school systems or for senior citizens. Environmentally friendly homeowners should check out the FHA Energy-Efficient Mortgage, which may cover the cost of upgrades to your home. Again, this is all dependent on your area, and an experienced, honest person in the industry can give you the right places to apply.
So You Understand the Limits in California?
An FHA loan in California sets a cap at anything above $625,500 for the expensive areas like Orange County, Los Angeles and San Francisco. You’ll also need a credit score of at least 580. Conventional lenders will want to see you with a credit score of more than 700. While an FHA loan combined with a junior loan may sound appealing, you need to remember that you’ll pay more in premiums over time. All of the programs are subject to a variety of factors — not simply whether or not this is your first home. As with anything in life, the more effort you give, the more likely it is you’ll find something that helps you finance the cost of the home.
Are There Any Other Perks?
Generally when you buy a home, you start getting coupons and samples from all kinds of companies hoping you’ll make them your new go-to brand. It may sound silly, but a 20 percent off coupon at Lowe’s for a new home buyer can be quite helpful. Considering how many purchases you’ll need to make your house a home, that free sample of dishwashing detergent may not go to waste in those first few weeks.
2 Point Highlight
If you qualify (depending on your income level and price of the house), you’ll receive up to 3 percent of the home price toward your down payment and closing cost.
You may be able to find silent second loans which mean you won’t have to make a payment for at least 40 years.
