September 8, 2010

California Housing Finance Agency Launches New Loan Program

The California Housing Finance Agency has launched the CalHFA FHA Loan Program, offering FHA-insured, 30-year fixed rate first-mortgages for first-time homebuyers (defined as not having owned and occupied a home for the past three years).

Rates are below market but mortgage amounts are limited to $417,000 and both income and purchase price limits apply.

And while San Francisco County didn’t qualify for the CalHFA Community Stabilization Home Loan Program in 2008 (when below market rate 30-year loans were at 5.5%), there aren’t any exclusions for San Francisco this time around.

CalHFA FHA Loan Program []
For A Select Few First-Time Buyers Willing To Cross The Bay [SocketSite]

First Published: September 8, 2010 8:45 AM

Comments from "Plugged In" Readers

seems pretty cool. but of course, TICs are not eligible:

"Property Eligibility: Existing single family, one-unit residence, including condominium/PUDs."

Posted by: aidan at September 8, 2010 5:31 PM

Seems ridiculous that Cal FHA limits are $417k. Most first time homebuyers don't have the 20% down to afford this. This would benefit those living in the Central Valley, but not too many of us in the larger population centers of the state.

Posted by: SFhighrise at September 9, 2010 9:40 AM

"Seems ridiculous that Cal FHA limits are $417k."

Yes, it does seem ridiculous. Both the federal FHA limit and the California FHA limit should be a lot lower if the rationale of the program is to help lower income people buy houses.

As an example, a 417K loan at a more normal interest rate of 7% has a payment of $2774. If you use normal 28%/36% guidelines for traditional prime loans, then the income required for this loan is almost $120K. Nationally, $120K is far into the top 20% of household income, and does absolutely nothing to help lower income people afford housing. Even in San Francisco County, the median household income is $73K.

$729K as a limit is a joke and really is meant to re-inflate the bubble, rather than achieve any legitimate ends.

Posted by: sfrenegade at September 9, 2010 10:53 AM

The goal of the program is explicitly to help lower-mid income folk (teachers, for example) to buy a starter home under the stated pretense that these people are an essential element of a healthy community. Homeownership is assumed to be a basic building block of personal investment in a community. Understanding the political science being conducted makes comprehension of the vast rule set much easier.

TICs are excluded because -- outside of "real SF" -- there is no community that cares about them.

Buyers are definitely NOT expected to come up with 20% down. This loan is virtually always coupled with other programs (down payment assistance, mortgage credit certificate, local community second loan, etc) to create a "package" that allows someone to buy into the community. The $417K loan limit is merely for this single element of a larger package. Note that the purchase price limit varies according to the cost of living in each community. Not generous for SF, but definitely do-able.

Specific occupations (like teachers and firefighters) are even allowed additional incentives to further reduce their buy-in amount.
Typical personal investment is actually in the 2.5% range.

These are always full-doc loans with an extra dose of bureaucratic red tape, not specifically to avoid making bad loans but at least partially to filter out applications from people who won't invest themselves in the process (ie. show a pretense of being willing to invest in the community).

For example: a "public servant" family making $80,000 is at 28% DTI on a $400K loan at 4%. They might have $8000 in savings, get a $5000 grant for their occupation, get a community second (payments deferred for 30 years) for $60,000, have a downpayment assistance loan for $15,000, and get a tax credit for another $8000.
Can you get a decent condo in SF for $496,000? Sure.

Posted by: Average Joe at September 9, 2010 1:31 PM

Homeownership is assumed to be a basic building block of personal investment in a community.

At 2.5% personal investement, you don't OWN a property, you basically RENT it from the bank. even after 15 years you are still 75% a renter.

If a price collapse put you underwater, your chances of dropping off are high. Higher than if you were happily renting. So much for community building. 100s of 1000s of dried lawns across the US made this theory bite the dust (pun intended).

Posted by: lol at September 9, 2010 1:53 PM

lol wrote:

If a price collapse put you underwater, your chances of dropping off are high. Higher than if you were happily renting. So much for community building.

The people most likely to walk away from their mortgage (which I assume is what is being referred to here as "dropping off") due to a price collapse are the rich, not working class people buying a home for less than $500,000 all told.

Posted by: Brahma (incensed renter) at September 9, 2010 3:25 PM

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