California Dream For All Loan Example

Our team has become well-versed with the new California Dream For All Loan program and is ready to offer it to first-generation home buyer clients when the program is released on April 3rd. Let’s unpack a common example and see how this program functions.

Assume someone buys a home for $500,000. They would obtain a traditional 30-year fixed loan at a fair market interest rate for 80% of the purchase price, making the loan $400,000. Now instead of making a $100,000 down payment, something most first-generation home buyers don’t have, they obtain a 2^nd mortgage from the state of California for the needed $100,000. No monthly payments are required and no interest accrues on this $100,000 2^nd mortgage. But it is not a grant; it is not free money. This 2^nd mortgage is a Shared Appreciation Loan, meaning that when the home buyer goes to sell the property they have to pay back the loan in full AND share in the gained equity with the state of California.

Lets see how those numbers work. Lets assume this $500,000 home appreciates over the next few years and is now worth $600,000; it has appreciated by $100,000. Most folks utilizing this program will need to pay back 20% of that appreciation to the state, in this case $20,000 dollars. So when they sell the home, they will pay $120K to the Dream For All mortgage, the outstanding balance of the 1^st mortgage that started at $400,000, leaving them with $110,000 in equity before selling costs.

So, in a nutshell, a borrower who put in nothing for a down payment ends up earning nearly $110,000 in realized equity. And to do so, they had to pay $20,000 in shared appreciation to borrow a $100,000 loan.

Here’s another example created by CalHFA worth taking in:

The Blue Waters Group Folsom Ca Dfa Example

Like any loan program, there are qualifying restrictions and there are limited funds available so a lottery system is being implemented by the CA Housing Finance Agency to award approximately 2,000 folks to utilize the program. Contact The Blue Waters Group for the full details on how first-GENERATION home buyers can take advantage of this new loan!