Abig step toward owning a home is saving for a down payment, which often takes a big chunk out of a buyer’s savings and, as a result, can take a great deal of time to achieve.
But now, a new program in San Jose, CA, wants to help first-time homebuyers move one step closer to the property ladder by loaning them $200,000 that can be put toward their down payment.
The goal of the program is to help low-income earners buy a first home, a milestone that is made all the more difficult in California, where home prices “far exceed the rest of the country,” according to a report by the California Legislative Analyst’s Office.
That’s where the Home Access Program comes in, having been started by the Housing Trust Silicon Valley to help reduce the barriers to homeownership among Californians.
The program outlines the loan requirements:
- Buyers can borrow up to 40% of the purchase price, with a maximum loan amount of $200,000.
- It is a 30-year deferred loan. That means is carries a simple interest rate and will accrue annually. Interest will accumulate on the principal loan amount until the principal is paid off.
Homebuyer responsibilities
An eligible applicant is expected to also put money down toward the down payment. A minimum of 3% of the home’s purchase price toward the down payment is required.
There will not be any monthly principal or interest payments, but there is a catch. People who are approved will need to repay the loan, including principal and any accrued interest. That money will be due at the end of the 30-year term.
The program says it should give homebuyers the “flexibility to manage” finances.
If someone decides to sell their home before the end of the 30-year term, the approved applicant must repay the loan at that time.
A person is allowed to buy a single-family home, townhome, or condominium located in Alameda or Contra Costa counties.
The home must be occupied as a primary residence.
Borrowers must have a minimum middle FICO score of 620.
How to apply
An applicant’s combined gross household income, including all adult household members, must not exceed 80% of the area median income for the county where the property is located.
In Alameda and Contra Costa counties, the maximum household income for 80% area median income for a household of two is $96,650.
Anyone interested in applying needs to be prequalified by filling out an online form. A Housing Trust employee will contact an applicant within three business days to start the prequalifying process.
All borrowers and spouses must attend an eight-hour HUD-certified Homebuyer Education Class through an in-person or online class.
Buyers who meet pre-qualification requirements will then be referred to a lender participating in the program.
Once the lender gives the OK for pre-approval, a Housing Trust employee will set up an application review and submission meeting.
The application and supporting documents will be uploaded for review. Once a person receives a program eligibility approval letter, the applicant can work with a real estate agent to find a property.
Eligible buyers will also meet with the Housing Trust for one-on-one counseling.
At the title company, the homebuyer will be required to sign loan documents from the Housing Trust and the loan lender.