Federal, State, and Local Programs Offer Assistance to First-Time Homebuyers in the Bay Area

May 13, 2020 Published by

The Bay Area’s residential real estate market may be among the most expensive in the country, but there is assistance available to first-time homebuyers with moderate incomes looking to purchase a home or condo there. That assistance comes in the form of first-time homeownership programs offered by the federal government, the state of California, and even local governments.

In the following sections, we will break down the programs available to Bay Area homebuyers by looking at such factors as which homebuyers qualify the amount of money available.

Federal Programs

The federal government has long provided first-time homebuyers with assistance through such agencies as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the Department of Housing and Urban Development (HUD). Additionally, while not federal agencies, Fannie Mae and Freddie Mac are government-backed lenders that offer assistance to first-time homebuyers. The following is a list of the major federal programs available for first-time homebuyers.

FHA Mortgages

The mortgages offered by the FHA are generally considered to be a great option for a first-time homebuyer because its eligibility requirements are easy to meet. Perhaps the greatest benefit of FHA mortgages is that they allow first-time homebuyers to purchase a home using a down payment as low as 3.5% of the home’s value if the buyer’s FICO score is above 580. Most conventional mortgage lenders require a 20% down payment.

Two additional benefits to an FHA mortgage are that there is no early payment penalty and lower closing costs than those for a conventional mortgage.

For 2020 FHA loan limits range from $331,760 to $765,600, depending on where the mortgaged property is located. Since it is one of the most expensive regions in the country, the loan limits for most Bay Area communities is $765,600. For homebuyers purchasing multi-family residences, the limits are higher and can reach almost $1.5 million for a four-family dwelling.

VA Loans

VA loans are available to current members of the U.S. military, veterans, and their spouses. Some beneficiaries of those individuals also qualify. There is no down payment requirement for a VA loan, and a homebuyer can finance the entire cost of a home.

While it is called a “loan,” the VA does not actually lend homebuyers money. Instead, the VA insures an outside lender’s loan in return for a fee. To qualify for a VA loan, a borrower must have a FICO score of at least 620.

The is no cap on the amount a home buyer can borrow under a VA loan, but there is a maximum amount that the VA will pay the outside lender in the event of a default. For most Bay Area communities, the VA will guarantee 25% of the loan amount for home loans of up to $764,600.


Now downpayment is required for a USDA loan and loans are often available to homebuyers without good credit. However, the program is only available to low- to mid-income individuals seeking to buy a home in a federally designated rural or semi-rural area. While very little of the Bay Area qualifies as rural, homes in some nearby communities do.

Another downside to the loan is that buyers who qualify for a conventional mortgage are not eligible to participate. A USDA loan can finance up to 100% of a home’s price, but the buyer cannot earn more than 115% of the median income for the area.

Good Neighbor Next Door Program

As part of HUD’s efforts to improve communities across the country, it created its Good Neighbor Next Door program to help some public employees purchase homes in designated revitalization areas. The program offers a 50% discount on the price of a home and is available to police officers, firefighters, teachers, and emergency medical technicians. Unfortunately, there are currently no eligible revitalization areas in the Bay Area or nearby communities.

Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac are lenders with the backing of the federal government that were created to address several homebuying issues in the United States, including those faced by first-time homebuyers. Neither Fannie Mae nor Freddie Mac issue mortgages directly to borrowers. Instead, they buy mortgages from banks, credit unions and other financial institutions.

Both programs only call for a 3% down payment along with mortgage insurance, but in some cases, come with higher interest rates than conventional mortgages. Loans from Fannie Mae and Freddie Mac for most properties in the Bay Area are capped at $765,600 for 2020. For properties not located in high-cost areas, the loan limit is $510,400.

Fannie Mae and Freddie Mac require a minimum FICO score of 620 to qualify. Eligibility is also determined by the borrower’s debt to income ratio. That ratio is calculated by dividing the borrower’s monthly debt payment by monthly income. Current guidelines allow debt-to-income ratios of up to 45%.

California Programs

Like most states, California also offers programs to assist first-time homebuyers. Individuals who have not owned or occupied their own home in the previous three years are considered first-time homebuyers in the state.

CalHFA First-Time Buyers Program

CalHFA offers first-time buyers both fixed-rate conventional and government-insured loan programs for properties valued at $765,000, or less. Instead of offering loans directly to consumers, CalHFA works with approved lenders to qualify buyers for loans.

To qualify for the CalHFA program, the property must be located in California and serve as the borrower’s primary residence until it is refinanced or sold. The loan must be for a single-family home, but some condos and manufactured homes are allowed.

To qualify, a buyer must have a minimum FICO score of 660 for the low-income rate and 680 for the conventional rate. Additionally, borrowers must meet CalHFA’S income limits, which are currently $221,100 for Alameda County and $228,300 for San Francisco County. The borrower’s debt-to-income ratio cannot exceed 45 percent for automated underwriting and 43 percent for manual underwriting.

CalHFA borrowers must attend a homebuying counseling course and present a certificate of completion to be eligible. Finally, borrowers must meet any additional loan requirements put into place by a CalHFA lender or mortgage insurer.

MyHome Assistance Program

The MyHome Assistance Program offered by CalHFA gives first-time homebuyers a deferred-payment junior loan of up to 3.5% of a home’s purchase price to assist homebuyers with down payments or closing costs. The loan payments are deferred until the home is sold, paid off, or refinanced. The loan amount is capped at $10,000.

The program is only offered for the purchase of single-family homes and is only available to borrowers that already have a CalHFA loan.

School Teacher and Employee Assistance Program

The School Teacher and Employee Assistance program can be combined with first-time homebuyers mortgages offered by CalHFA. The program helps buyers pay their down payment and closing costs. The loan may be for as much as 4% of a home’s purchase price. No payments need be made until the home is sold, refinanced, or paid off.

As the name implies, the program is only available to the teachers, administrators, and employees of K-12 public schools in California.

Local Assistance Programs in the Bay Area

In an effort to ensure that middle-class residents of the Bay Area are not priced out of homeownership, several counties and cities have implemented programs to assist first-time buyers.

Alameda County

Alameda County has allocated funds from its A1 bond issue to promote homeownership in the county through its AC Boost downpayment assistance program. It offers households with a combined income that is equal or less than the county’s median income a $150,000 shared appreciation downpayment assistance loan. Households with up to 120% of the median income are eligible for a $100,000 loan.

Under a shared appreciation loan, the lender agrees to receive some or all of its loan repayment from its share of the property’s appreciation. No payments are made until the home is sold or the borrower dies.

The assistance is distributed through a lottery. The first application period closed in April 2019, but the county expects to hold additional lotteries in the future.

Oakland City

The City of Oakland offers its own mortgage assistance program for low- to moderate-income first-time homebuyers in that city. Borrowers make no monthly payments, but 3% interest is charged on the loan. Payment on the loan is due in 30 years or when the borrower sells, transfers, or refinances the property. Payment is also due if the borrower converts it into a rental property.

The borrower’s income cannot exceed 120% of the area’s median income and the borrower must contribute 3% of the purchase price to help with closing costs. At least one adult member of the household must be a current Oakland resident or a former resident who has been displaced. Additionally, Oakland workers and students are eligible.

Under Oakland’s mortgage assistance program, borrowers may purchase a home, condo, manufactured home, or live-work unit for a purchase price of up to $860,000. The mortgage assistance loan is intended to fill the gap between what a household can afford and the home’s purchase price; therefore, the loan amount is capped at 30% of the purchase price up to $75,000. If a borrower has an income exceeding 80% of the area’s median income, only 20% of the purchase price up to $50,000 may be borrowed.

San Francisco

The city of San Francisco offers below market rate (BMR) ownership programs for low- to middle-income first-time homebuyers. The homes are usually condominium units.

Under the city’s BMR program when a housing developer in San Francisco proposes a residential project that has 10 or more units the developer must do one of the following:

  • Reserve a set percentage of the units to be sold below market rates or to be used as rentals:
  • Reserve a set percentage of units in another building to be sold at below market rates or used as rentals;
  • Pay a fee;
  • Dedicate land to affordable housing; or
  • Some combination of the above-listed options.

San Francisco also offers a limited equity program where units are sold at prices below market rates. Finally, under the city’s condo conversion program, units in market rate buildings are sold below market rates.

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This post was written by Sean Allaband

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