No down payment loans available in Calif. – but at a price

By JEFF LAZERSON / CONTRIBUTING COLUMNIST

This might be your lucky day if you have been looking to buy a place for yourself, you have a decent paying job, a middle credit score of at least 640 but you don’t have the down payment or the closing costs.

The California Housing Finance Agency, or CalHFA, offers either a Federal Housing Administration first trust deed named CalPLUS FHA that requires 3.5 percent down or a conventional first trust deed named CalPLUS Conventional that requires 3 percent down.

The residential property must be a single-unit, owner-occupied home, and the maximum sales price allowed for Orange County is $600,000. Previous or current property ownership is allowed as long as you can prove that you have not resided in any property that you have owned forthe past three years.

A “silent second” loan called My Home Assistance covers the down payment. (The second is considered silent because it’s a recorded second trust deed requiring no payment, accruing at a 2.5 percent simple interst rate.)

A silent third trust deed called ZIP 3rd (with no payment and no interest) covers most or all of your closing costs.

Separate income caps for FHA and conventional financing are in play to qualify. You can find them at calhfa.ca.gov.

One example: FHA’s Orange County income cap for a family of four is $117,700. That said, this FHA program allows non-occupant co-signors to help you to qualify, but those co-signors don’t count against the income cap. Only the incomes of the loan applicants (who do not have to be married or related) count against the income cap.

In the last two years, just 139 of these loans have been funded in Orange County, compared to 805 in Los Angeles County, 834 in Riverside County and 779 in San Bernardino County, said Eric Peterson, CalFHA’s spokesman.

The CalHFA Zip 3 interest rate of 4.375 percent is roughly 0.50 percent higher than comparable and commonly available Orange County FHA interest rates.

This program could see a lot more volume if it reduced its interest rate. And, more importantly, borrowers have to pay the FHA or conventional mortgage insurance. So, is this interest rate markup fair and affordable, even considering it’s a zero down loan?

If you have questions or comments, please contact Jeff Lazerson by clicking here.