The proposition creates a down payment loan program, totaling up to $25 billion, for middle-income families looking to buy a new home in California. The program would be run by the California Housing Finance Agency, which already oversees several homeownership assistance programs.
The state would sell bonds to fund the program. It would pay back investors using interest and loan payments from the program — not taxpayer money. The California Housing Finance Agency would administer the program, including setting interest rates for the loans.
To qualify, prospective borrowers would need to buy a newly constructed home or a home that never has sold before, such as a commercial building that was converted into condos. Borrowers wouldn’t need to be first-time homebuyers, but they would need to earn no more than 200% of the median local income; for a family of four in Los Angeles County, that amounts to no more than $216,200 a year.
There also would be limits on the sales prices of homes bought with help from this program. While the exact price would depend on the county, generally the homes would need to sell for between $1 million and $1.5 million. Homebuyers would need to put at least 3% down, and the state finance agency could provide a loan up to 17% of the sales price.
The loans would function like fixed-rate second mortgages.
According to the California Budget and Policy Center, the earnings that would qualify a family for down payment assistance could vary greatly depending on where they planned to buy a home. Per the center’s calculations, a family of four buying a home in Madera County would have to earn no more than $166,800 a year, while a family in Santa Clara County could earn up to $375,800 a year and still qualify.
Other specifics would be worked out if voters pass the measure. That includes the interest rates charged on this second mortgage, which, according to the Budget and Policy Center, likely would be higher than the current rates for conventional mortgages, which have hovered around 7% for a 30-year mortgage.
Because revenue bonds, which would be used to fund this program, are riskier than other bonds, investors might demand a higher return, translating to a higher interest rate.
