After opening to the public less than two weeks ago, the California Housing Finance Agency announced that its new $300 million down payment assistance program will be paused, and all funds will be fully allocated to participating homebuyers as early as Monday.
“CalHFA anticipates that all funds currently available for the Dream for All Shared Appreciation Loan could be fully committed as soon as April 10, 2023,” an April 6 press release from the California Housing Finance Agency said.
The California Dream for All Shared Appreciation Loan, introduced to help first-time homebuyers put a down payment on a house, went live on March 27. Qualified applicants who are accepted to the program in time will receive interest-free loans to be used to make up to a 20% down payment on a house. The funds can also be used to cover closing costs.
But the program’s funding appears to have already been hoovered up in a mad dash to capitalize on the offer. The state’s Housing Finance Agency said that interested applicants hoping to get in on the program must lock in their Dream for All loans by April 12 at 3 p.m.
The California Housing Finance Agency could not be reached for comment.
A Reddit thread posted to the subreddit r/orangecounty captured the breakneck speed at which the program’s funding was exhausted. Some in the thread expressed exasperation, noting that they began searching for a home as soon as they heard about California Dream for All. One commenter wondered how so many were able to take advantage of the program so quickly.
“How did people move so fast?” the Reddit user asked. “How did they get pre-approved, do all the counseling, find a house, and get into escrow within less than 2 weeks?”
In addition to meeting the income requirements, one stipulation of the program was that applicants needed to take a homebuyer education course and secure a certificate of completion before being approved—to say nothing of the actual homebuying process, which is time- and research-intensive.
While the Dream for All program will provide an estimated 2,300 low- and moderate-income Californians with a 20% down payment loan free of interest, it is not without a catch.
The down payment assistance loan—which most applicants would use on top of a primary bank loan—must eventually be repaid to the state.
And the Dream for All loan is a “shared appreciation loan,” which means that at the time borrowers pay back the amount that the state lent them, they must also pay back a percentage of the home’s growth in value—between 15%-20% depending on the borrower’s income level and how much they initially borrowed.
Here’s a simple example: A moderate-income borrower receives a 20% Dream for All loan on a home that costs $100,000. The loan from the state would be $20,000, and their primary loan would be $80,000. When that borrower pays off the full $80,000 of their primary loan, their home has appreciated in value and is worth $200,000. At that time, the borrower would be required to pay back $20,000 to the state, plus 20% of the appreciated value. Since the home is now worth $100,000 more than what they paid for it, they would be required to pay an additional $20,000 on top of the $20,000 loan amount—for a total of $40,000.
The California Housing Finance Agency has proposed that this program will be able to largely fund itself, and the proceeds made through home appreciation percentages will be used to help future California homebuyers get a house of their own.
Due to the high cost of housing in California—especially in areas such as the Bay Area and Southern California—many residents of the state may be able to afford a monthly mortgage payment but unable to save up a 20% down payment to get through the door.