California puts another $200M into shared appreciation loans

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California lawmakers have passed a 2023-24 budget that provides another $200 million for a popular shared appreciation loan program that provides down payments for first-time homebuyers.

The California Housing Finance Agency (CalHFA) launched the Dream For All Shared Appreciation Loan Program in March, but the program proved to be so popular that it burned through all $300 million originally earmarked for the program in less than two weeks.

The Dream For All program could be tweaked before it’s relaunched, CalHFA said, promising “an update this fall that will include a timeline for applications.”

“CalHFA will continue working with partners in state government and stakeholders to calibrate the program, which may include changes to the program processes, guidelines, and systems,” the agency said in a bulletin Tuesday.

In the meantime, CalHFA is promoting its MyHome program, which provides down-payment assistance of up to 3.5 percent of the purchase price for first-time homebuyers.

Homebuyers in any state can find programs that provide down-payment assistance using services like Down Payment Resource, which makes information about programs and eligibility requirements available through sites, such as Zillow and Redfin, as well as through integrations with multiple listing services (MLSs), lenders and agents.

CalHFA’s Dream for All shared appreciation loan program provides loans for down payments that homebuyers don’t have to repay until they refinance or sell their homes. Instead of paying interest on the second mortgage, borrowers repay the original balance plus a share of the appreciation in the value of their homes.

How CalHFA’s Dream for All works

Example of shared appreciation loan. Source: CalHFA presentation 

When the Dream for All fund provides a loan for 20 percent of the home purchase price, for example, the homeowner pays back the original loan plus 20 percent of any appreciation in the home’s value. That makes the effective interest rate on a shared appreciation loan equal to the average annual appreciation in the home’s value.

Authorized by California lawmakers in 2021 through the passage of AB 140, the initial $300 million in funding for the Dream for All program was expected to help more than 2,300 low- and moderate-income Californians purchase their first homes. The revolving loan program is expected to evolve over time to be self-sustaining utilizing private investments.

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