Buying your first home can be a real challenge, especially in a state like California where prices are often sky-high. Luckily, the state has a variety of first-time home buyer loans and grants to help those who need an extra hand. Here’s how to get started.
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The average home purchase price in California is considerably higher than in most states. So eligible first-time buyers really stand to benefit from the homeownership programs described below.
Down payment amounts are based on the state's most recently available average home sale price. "Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.
If you're eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.
If you’re a California first-time home buyer with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).
Of course, few first-time buyers have saved a 20% down payment. Doing so could be especially challenging in California, where 20% of the average sales price is over $150,000.
But the good news is, you don’t need 20% down. Not by a long shot.
California home buyers can often get into a new home with as little as 3% or even 0% down using one of these mortgage programs:
Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.
These programs even let you use gifted money or down payment assistance to cover the down payment and closing costs.
If you’re not sure which program to choose for your first mortgage, your loan officer can help you find the right match based on your finances and home buying goals.
If you’re looking for help with the home buying process, here’s where to turn.
For a California first-time home buyer, a good place to start looking for assistance is the California Housing Finance Agency (CalHFA).
This agency offers a wide range of first-time home buyer loan programs at its own special interest rates, including:
CalHFA also has an eight-hour online homebuyer education course for $99. Participation is mandatory if you want to be eligible for financial help from the agency (more below).
And, it facilitates one-on-one counseling sessions for home buyers, which can be face-to-face or virtual. But fees vary, depending on the service you choose.
The agency has income limits and purchase price limits if you want financial help. And you’ll need a good credit score of 660-680 or higher, depending on some other factors. To see if you’re eligible, use the wizard on the CalHFA website.
The CalVet program is open only to veterans, service members, and those in closely associated groups. It says its website “is designed to help you understand the steps to homeownership and discover just how easy and stress-free purchasing a home and securing a CalVet home loan can be.”
The agency provides special VA loan options that can help veterans who wish to buy homes in the Golden State. You can call CalVet loan originators to check your eligibility at (866) 653-2510 (Monday-Friday, 8 a.m.-5 p.m.).
The Golden State has countless down payment assistance programs (DPAs) that can provide financial help toward your down payment and often closing costs.
Some of those are local and serve specific counties or cities. But here are the details of the main statewide program:
Qualifying home buyers could borrow up to $11,000 toward their down payment and closing costs under the CalHFA MyHome Assistance Program.
To qualify for the MyHome down payment assistance program, homeowners must:
Note, the $11,000 DPA cap doesn’t apply to “school employees and fire department employees, or those purchasing new construction homes, manufactured homes, or homes with ADUs.” An ADU is an accessory dwelling unit, which is a home or apartment that’s part of a larger home.
Regardless of whether that $11,000 cap applies, you can't borrow more than:
These are loans (second mortgages, aka junior loans) rather than grants.
However, they’re deferred-payment loans. That means you don’t have to make monthly payments. Instead, you pay back the whole amount (plus interest) when you move, sell, refinance, or otherwise change the ownership of your home.
The Forgivable Equity Builder Loan is a newer California home buyer program that aims to help first-time homeowners buy property more affordably. Via this program, buyers can get a loan of up to 10% of the purchase price which is forgivable after five years, provided they continue to live in the property full-time during that period.
To qualify for the Forgivable Equity Builder Loan, you must:
To find out if you qualify for the Forgivable Equity Builder loan program, find a loan officer in your area who is approved by CalHFA and work with them to apply.
California’s big cities are some of the most costly in the nation. So home buyers in these areas will want to know what to expect.
The median home listing price in Los Angeles was $1,019,000 in April 2022, according to Redfin. That was up by 12.5% year-over-year.
If you want to buy a home at that median price, your down payment options might fall between:
The City of Los Angeles Housing and Community Investment Department (HCIDLA) has a couple of programs that can help first-time buyers. These are the Low Income Purchase Assistance (LIPA) program and the Mortgage Credit Certificate (MCC).
The former can provide deferred payment loans of up to $90,000 to low-income borrowers. These loans have no monthly payments and are repayable when you move or refinance.
There are similar programs for those buying outside the LA city limits run by the Los Angeles County Development Authority.
The median home listing price in San Diego was $925,000 in April 2022, according to Redfin. That was up by 24.8% year-over-year.
If you want to buy a home at that median price, your down payment options might include:
The San Diego Housing Commission (SDHC) First-Time Homebuyer Program offers several types of help, including deferred loans, homeownership grants, and down payment and closing cost assistance.
Via the San Diego Housing Commission (SDHC), San Diego first-time home buyers might be eligible for down payment or closing cost assistance up to $10,000 or 4% of the purchase price, whichever is less. The city even offers a deferred-payment assistance loan up to 22% of the purchase price. You can learn more about these options on SDHC’s website.
The median home listing price in San Jose was an eye-watering $1.5 million in April 2022, according to Redfin. That was up by 23.5% year-over-year.
If you want to buy a home at that median price, your down payment options could range between:
Housing Trust Silicon Valley has a program called Empower Homebuyers SCC, which can lend you up to 17% of your next home’s appraised value (with strings).
This is another deferred loan, meaning you make no monthly payments but have to pay the whole amount back “when the loan matures, you decide to sell or you refinance your mortgage” … plus. The plus here is a share of the amount by which your home has appreciated over the years.
The website explains:
“You will share your appreciation in equal proportion to the amount you borrowed. This means if your loan was 17% of the purchase price, you will share 17% of the appreciation and the rest of the equity that builds up on your home over time is yours.”
“For instance, if you buy a house for $600,000 and use Empower to borrow 17% ($102,000) for the down payment, and the home is later sold for $800,000, you would owe a total of $136,000 (the original loan amount of $102,000, plus $34,000/17% of the $200,000 appreciation).”
Of course, you have to have 3% of the purchase price saved to benefit. But then you can put down 20%, which should get you a low mortgage rate and save you from paying any form of mortgage insurance.
If your income is too high for that program, the Homebuyer Empowerment Loan Program (HELP) is an alternative, also run by Housing Trust Silicon Valley.
All the organizations we’ve listed above should provide advice freely to any first-time home buyer in the state of California.
In addition to our selection, the US Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources:
Statewide and regional CA home buying programs
CA home buying programs by city and county
You can see today’s live mortgage rates in California here.
When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.
Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.
1 Source: Redfin
2 Source: Experian 2022 study of 2021 and 2020 data
3 Based on a review of the state's available DPA grants at the time this was written
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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