California will dole out $250 million more in down payment assistance to first-time homebuyers this spring while making changes to its year-old program aimed at reaching a more diverse group of borrowers across the state.
Last year, frenzied homebuyers hoovered up nearly all $300 million budgeted for the California Dream for All loan program in just 11 days. While the new program was wildly popular, some real estate agents and lenders reported that clients who received the funds were already far along in the home purchase process, fueling speculation about whether the loans were going to people who already could afford to buy homes.
The program’s next round, launching today, keeps the same “shared appreciation” lending model: The state will give first-time homebuyers money toward a down payment—up to 20% of the purchase price or $150,000, whichever is lower—then it will get paid back the loan plus a share of the home’s appreciation whenever it sells again.
This time, the California Housing Finance Agency, which administers Dream for All, hopes to head off a mad scramble for the loans by replacing its original first-come, first-served model with a lottery.
Homebuyers will have until April to find a state-approved lender and start working on an application. A lottery opens in early April, and buyers will have a month to submit their applications. Between 1,700 and 2,000 lucky lottery winners will receive vouchers that they’ll then have 60 days to spend on a home.
More Time To Prepare
The extra time to prepare should help Californians who may not be sure if they could buy a home without state assistance, said CalHFA spokesperson Eric Johnson.
The program is for people for whom homeownership “may be a dream, but they’ve got the steady income, they’ve got the decent credit score of above 660 and they’re thinking, ‘OK, wow, this could really make the difference,’” Johnson said. “This gives them time to get motivated, to find a loan officer. If they need to do a little work on their credit score or change their debt-to-income ratio, they’ve got time to work with one of our loan officers or brokers.”
The agency will set aside a number of vouchers for each region of the state based on its share of the state’s households. That’s to avoid the geographic disparities that emerged in the program’s first round, in which Sacramento County homebuyers disproportionately benefited but those in Los Angeles County, which represents 25% of the state’s population, received just 9% of loans.
California Dream for All “was initially conceived of as focusing on higher-cost parts of the state where it’s especially hard to use existing down payment programs, and that was not exactly an unequivocal success,” said Adam Briones, CEO of California Community Builders, which advocates for closing the racial wealth gap through homeownership and helped draft the research that inspired the program.
The state’s red-hot housing market means some Californians who might otherwise be able to afford mortgage payments must struggle to save enough for a down payment. About 55% of Californians own their homes, the second-lowest home ownership rate of any state, behind New York.
Who Will Benefit?
Dream for All’s backers had hoped it would especially benefit members of communities that have experienced redlining or low homeownership rates, such as Black and Latino Californians. A CalMatters analysis of Dream for All’s first round found that its beneficiaries included a higher share of people of color than exists among California’s current homeowners, but they were still whiter than the state’s overall population.
California law prohibits state-sponsored affirmative action, which poses a challenge for officials trying to design a program that tackles historical redlining without explicitly addressing race, Briones said.
California Dream for All’s new rules include a requirement that at least one homebuyer in each transaction be a first-generation homebuyer, defined as someone who has never owned a home and whose parents also did not own a home, or someone who grew up in foster care. The state also has lowered the income eligibility threshold from 150% of the area median income to 120%, a number that ranges from about $95,000 a year in Fresno County to about $215,000 in Santa Clara County.
The state plans an outreach campaign beginning in February that will focus especially on Southern California and the Central Coast to let potential homebuyers know about the program, Johnson said. It will include flyers in laundromats, text messages and advertisements on Spanish-language radio and in Black newspapers.
Colette Washington, a realtor in Oakland, said that about a quarter of her clients are first-time homebuyers and she tried to encourage them to apply for California Dream for All last year. But most were confused by the program and procrastinated, she said, and the money ran out before any of them successfully applied.
Buying a house “is probably the biggest financial commitment most average folks will make in a lifetime and so it’s intimidating,” she said. “Fear is paralyzing.”
This time around, she said, “I personally would like to see the people who really need the money get it first.”
How To Apply for Dream for All
So far, California Dream for All has survived Gov. Gavin Newsom’s budget ax, which fell on some of the state’s other housing programs last week, as the governor proposed clawbacks of unspent funds to solve a budget deficit his office projects will reach $38 billion in 2024-25.
Created in 2022, Dream for All was originally envisioned as a 10-year, $10 billion investment before lawmakers scaled it back last year.
Johnson had one other piece of advice for wannabe homeowners in the state: “Most importantly, don’t give up hope. There is a possibility of owning your own home in California.”