Important Info for First Time Buyers with No Down Payment

A lot of first time buyers have been taking advantage of government assistance for down payment programs which was giving up to about 3% to help first time buyers get into a home with very little money needed from the buyer.  The programs were great for those who have good credit, good income, a stable job, but just had a hard time saving money. Well, they just disappeared…poof!  Whether you are currently in a transaction to buy a home, looking to buy a home soon, or pre-approved for a loan and in the market now…oops! This news is really hard to those buyers that are in a transaction to buy a home and have already removed their financing contingency and are actually at risk of losing their deposit because they now do not qualify without that down payment assistance.  CalHFA is suspending the purchase of 30 year fixed, CHDAP,ECTP, and SFF due to the budget crisis.  Again, all loans are affected, even approved loans and even buyers that are in contract on a home and in escrow.  The State funds to purchase these loans has been frozen.  CalHFA does not expect to have information on if and/or when the program will be restored and/or available again until early January

At this point, a home buyer really needs about 3.25% – 3.5% of the purchase price as a down payment to buy a home and can go through FHA.  This down payment can be a gift and does not have to be the buyer’s own money.  But, either through the buyer’s own money or gift, the buyer does need that amount to buy a home at this time…well today at least.  The seller can pay up to 6% of the purchase price towards the closing costs to help the buyer get into a home to keep the costs down for the buyer, but the 6% from the seller can NOT go towards the down payment.

And, just to clarify, for those buyers who were preapproved  in the past and looked into the idea of buying a home and then put it on the back burner, the opportunity to buy with that assistance program that was offered at that time is now gone for you as well.  This information ties into what I often talk about when I tell people to buy when it is a good time to buy, not wait for the ‘perfect’ time to buy.  In this case, some buyers who were waiting for that perfect moment for prices to be the bottom as well as interest rates…the people with a crystal ball…well, those that needed this government assistance to buy a home now have no chance to buy at this time regardless of prices and/or interest rates. 

In this market, loan programs, banks, lenders, assistance programs, down payment amount needed, FHA guidelines, etc are changing all the time and what was available a month ago may not be available today. So, if a program that you need as a buyer to buy a home is good, but you are waiting and trying to forecast the future to decide the ‘perfect’ time to buy, and then the program you need to buy a home disappears, it is all a moot point and then you can not buy at all. Just some food for thought.