Forgivable Equity Builder Loan|Everything You Need to Know
The Forgivable Equity Builder Loan is a unique scheme to increase homeownership in California. It is for those buyers who need extra funds to purchase a house. The California Housing Finance Agency’s Forgivable Equity Builder Loan program helps the lower-income groups to buy with only a 10% down payment. However, if the length of stay in the home is five years, then the down payment is forgivable. The program’s primary aim is to build home equity and generate wealth for those who need financial assistance.
What is a Forgivable Equity Builder Loan?
Forgivable equity builder loans are a type of home loan that allows you to build up equity with monthly payments. This type of loan is different from a standard mortgage because the lender will forgive some of the interest if you stay in your house for a certain number of years. This type of loan is designed to help people who may not be able to afford a down payment on their own. It allows them to have the opportunity to buy their first home and build up equity over time.
How Forgivable Equity Builder Loans Work and Who Can Qualify for One?
The primary motive of the Forgivable Equity Builder Loan is to assist first-time buyers who fall under the category of low-income groups. The buyers have to pay only 10% of the house’s value with zero interest. Once you stay in the place for five straight years, you become eligible for the forgivable loan. In other words, California Housing Finance Agency forgives your loan. However, if the length of stay at home is less than five years, you have to pay back the amount.
The program’s launch for Californians was that home equity is one of the most promising ways to build and transfer your wealth for generations. The Forgivable Equity Builder Loan also aims to stop the rising decline in the population as people are immigrating to other places due to a high rise in prices, especially in the housing sector. Therefore, buyers who are having a tough time getting a new home for themselves due to the soaring prices can now get relief from the Forgivable Equity Builder Loan program. However, it would be best if you satisfied the following criteria to become eligible for the program:
It would be best if you were a citizen of California.
You must be a first-time buyer.
Your household income must not be more than eighty percent of that area’s median income.
Home equity has proven to be one of the strongest ways for families to build and pass on intergenerational wealth and CalHFA is committed to improving equitable access to homeownership for all Californians. The Forgivable Equity Builder Loan gives first-time homebuyers a head start on this with immediate equity in their homes via a loan of up to 10% of the purchase price of the home. The loan is forgivable if the borrower continuously occupies the home as their primary residence for five years
The Forgivable Equity Builder Loan is a forgivable subordinate loan program that may only be used with a CalHFA first mortgage.
Program Eligibility
Review the guidelines below for both Borrower and Property Requirements to determine if you may be eligible to apply for the Forgivable Equity Builder Loan. You should also talk to one of ourPreferred Loan Officers for full details.
Occupy the property as a primary residence; non-occupant co-borrowers are not allowed.
CalHFA borrowers must complete homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.
Be a single-family, one-unit residence, including approved condominium/PUDs
Guest houses, granny units and in-law quarters may be eligible
Manufactured housing is permitted
Condominiums must meet the guidelines of the first mortgage
Potential Tax Consequences
CalHFA loan servicing will issue a 1099 to borrowers on an annual basis when the loan is partially forgiven. Borrowers should seek the advice of their tax advisor.
Interest Rate
What is the interest rate?
The Forgivable Equity Builder Loan has an interest rate of zero percent, although you may have to pay back a portion of the loan if you occupy the home for less than five years. Interest rates on the CalHFA first mortgage will vary depending on your financial circumstances, lender fees, and other factors. Interest rates can also change daily. We recommend that you check with aPreferred Loan Officer to receive an accurate rate quote for this program
Homebuyer Education Requirement
CalHFA firmly believes that homebuyer education and counseling is critical to the success and happiness of a homeowner, and requires homebuyer education and counseling for first-time homebuyers using a CalHFA program.
Who has to take this Homebuyer Education and Counseling course?
Only one occupying first-time borrower on each loan transaction.
How do I take this education and counseling course?
ONLINE:eHome's eight-hour Homebuyer Education and Counseling course is the only online course accepted by CalHFA. (fee: $99) Other online courses like Frameworks are not acceptable because they do not provide a one-hour, 1-on-1 counseling follow-up session.
Since CalHFA is not a direct lender, our mortgage products are offered through private loan officers who have been approved & trained by our Agency. These loan officers can help you find out more about CalHFA’s programs and guide you through the home buying process.
What documents should I have ready when contacting a loan officer?
When initially contacting a loan officer, you may want to have this list of documents and information available to help answer questions that they will ask you:
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