California "Dream for All" shared appreciation down payment assistance is insane.

[Chris Mason]

Offered through many different lenders, nothing exclusive here. 

Live this week. 

It's a 2nd mortgage for up to 20% of the sales price. 80/20, partying like it's 1999.

No payments on the 2nd, no interest rate. If they invest 20%, they get 20% of any upside appreciation when you sell or refinance, to fund the program. So if you buy a $1m house and take $200k of assistance for the down payment (because now that's a thing, ha), and it sells in the future for $1.1m, you will have to pay back $220k -- the $200k you borrowed, plus 20% of the $100k of appreciation. You don't have to take the full 20% of assistance, and if you take less, the shared appreciation is less. 

The income limits are very generous. $282k in Alameda / Oakland, $211k in San Diego, $223k in Sonoma, $202k in Sacramento... and they hate Hollywood, because in Los Angeles borrower income is capped at $180k.

The reason it edges into real estate investing territory is that it only has your standard 12 month occupancy promise. Most DPAs make you pay them off (sell/refi) the moment you move out, this one does not, just that standard first 12 months that you must personally owner occupy. After that, you can rent, STR it, whatever you want. SFR/condo only. First time homebuyers only, among other things.

Rate on the 1st mortgage has been pre-negotiated by CalHFA to be perfectly average (today a tad below, but just a teeny tiny bit) -- which is actually really good, most DPA have vastly higher than average rates (to fund the program, but this program is funded by the shared appreciation). 

Income limits: https://www.calhfa.ca.gov/home... 

Who can offer: I'm guessing just about every loan officer in California will have this in their tool box within about 2.541 seconds, so work with whom you like. :) It's not going to be the best option for everyone, but if someone is eligible and didn't request a side-by-side with 'vanilla' financing, they'd be doing themselves a disservice. 

[Joshua J Cawthorn]

Almost all the lenders/loan officers in this thread (especially the ones with years of experience) are rolling their eyes at this program. And I get it, I feel similarly. This program is a quick-fix for a massive underlying problem: the asset prices are too rapidly rising in comparison to wages. The State's program will help FTHBs, sure. But this is still adding more debt onto an already-constrained group. It just feels like we're removing liquidity from the market, adding more partners/players, and ultimately making the real estate market even more competitive. 

A band-aid on top of a geyser.