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California launched a program for first-time homebuyers with a 0 percent interest rate to tackle the state's housing affordability crisis head-on. 

The California Housing Finance Agency (CalHFA) introduced the Forgivable Equity Builder loan last month, which helps homebuyers with a loan of up to 10 percent of the purchase price. If the homebuyer stays in the home for five years, they do not have to repay the junior loan, making homeownership more attainable. 

According to officials, borrowers may have to pay back a portion of the loan if they stay in the home for less than five years. The loan can be used for down payment or closing costs, including rate buydowns.

“We have to use every tool in our toolbox to tackle the housing affordability crisis head-on," said Governor Gavin Newsom. "We're helping new homebuyers and ensuring that current homeowners can keep their homes in good repair, while also building the affordable housing our state needs."

The loan is available to Californians whose income is less than 80 percent of the Area Median Income in the county where the property is located. According to CalHFA, people in San Diego County would need to make no more than $76,080 to qualify. 

According to the Tiena Johnson Hall, CalHFA's Executive Director, the Forgivable Equity Builder Loan, which gives first-time homebuyers a head start with immediate equity in their homes, will help California families build and pass on that wealth with a secure, stable home loan. 

"Home equity has proven to be one of the strongest ways for families to build and pass on intergenerational wealth and CalHFA is committed to improving equitable access to homeownership for all Californians," Hall said. 

​​The California Association of Realtors said that “the housing affordability outlook was diminished”, in their first quarter 2022 housing affordability report

"The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in the first-quarter 2022 ticked down to 24 percent from 25 percent in the fourth quarter of 2021 and was down from 27 percent in the first quarter of 2021, according to C.A.R.’s Traditional Housing Affordability Index (HAI)," reads the report. 

The first-quarter 2022 figure is less than half of the affordability index peak of 56 percent in the first quarter of 2012.

CalHFA issued the following program eligibility guidelines for the Forgivable Equity Builder Loan: 

Borrower Requirements

  • Be a first-time homebuyer.
  • Occupy the property as a primary residence; non-occupant co-borrowers are not allowed.
  • CalHFA borrowers must complete homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.
  • Meet county income limits set by Fannie Mae
    • Zoom into the area where you want to purchase.
    • Click on that area, and use the "80% Area Median Income (LI)" as your income limit.
    • Contact one of our Preferred Loan Officers for more details.

Property Requirements

  • Be a single-family, one-unit residence, including approved condominium/PUDs
    • Guesthouses, granny units, and in-law quarters may be eligible
  • Manufactured housing is permitted
  • Condominiums must meet the guidelines of the first mortgage. 

Visit CalHFA for more information about the Forgivable Equity Builder Program. 

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