The Los Angeles housing market is not a hospitable one for first-time buyers.
Only 25 percent of allLA residents can afford a median-priced home, according theCalifornia Association of Realtors. It can be even harder for first-time buyers, who don’t have a property they can sell to cover the cost of a down payment.
But some programs at the local, state, and federal level can help buyers purchase their first homes—and many of them provide borrowers with help to make those costly down payments.
Home shoppers are probably already aware of resources like the U.S. Department of Housing and Urban Development’sFHA loans program, or theVA loansavailable to U.S. service members and veterans.
But those aren’t the only options. Below are six options available to buyers in the LA area.
To take advantage these programs, buyers must also obtain loans from private lenders, so credit limits or other financial restrictions will likely come into play. But it’s worth investigating these options if homeownership seems just out of reach.
The California Housing Finance Agency’s first-time mortgage program is available to most first-time buyers in California who meet theincome limitswhere they live. In Los Angeles County, borrowers must make under$144,700 to qualify.
Through theCalPlusandMyHomeprograms, which are generally paired, buyers who receive conventional home loans fromqualified private lenderscan then obtain smaller loans from the state agency. These are available to cover closing costs and up to 3.5 percent of a home’s price in down payment assistance.
The smaller loans aren’t factored into monthly mortgage payments; instead, buyers repay them in a lump sum when selling or refinancing their home—or after paying off the entire mortgage.
The maximum price for properties purchased using these loans is $765,000.
This program is somewhat similar to those offered by the state’s Housing Finance Agency in that borrowers can get financial assistance that goes toward the cost of a down payment and closing costs.
It’s available to buyers in incorporated and unincorporated LA County with one major exception: the entire city of Los Angeles. That’s bound frustrate many prospective buyers, but there are plenty of nice areas to explore outside the city limits.
To qualify for the program, participants must earn under $125,280 for a one, two, or three-person household.Purchases are also capped at $653,883, except intargeted areaswhere at least 70 percent of residents are considered low-income earners by statewide standards. In these areas, buyers can pay up to $799,190
The first-time buyer requirement is also lifted in targeted areas, meaning that homeowners in those regions could take advantage of the program to trade up for a larger or more amenity-rich property.
Program participants work withparticipating lendersto obtain a home loan, which comes with a grant that can be used for down payment and closing costs. The grant, which buyers do not have to pay back, can be up to 4 percent of the total value of the loan.
This program also provides financial assistance for down payment and closing costs, but the money comes out of a pool of grant funding from the federal government. That means there’s a limit to how many people can participate in the program. The county is accepting just 20 applications between now and March 2020.
Participants, who must earn under $66,800 per year (for a two-person household), can obtain loans up to $75,000 through the program. Interest isn’t charged on those loans and they don’t need to be repaid until after the buyer sells the home or pays off the mortgage.
This program also excludes the city of Los Angeles, though some other large cities, such as Culver City, West Hollywood, and Hermosa Beach are included. A list of places where participating homebuyers should focus their searches can be foundhere.
The city of Los Angeles has two very similar programs for first-time buyers. One is forlow-income buyersmaking under $66,800 per year (for a two-person household). The other is formoderate-income buyersearning $62,001 to $130,800 (also for a two-person household).
The low-income program offers loans up to $90,000 that can be used to cover down payment and closing costs. The low-income loans can only be used on purchases up to $745,750 for single-family homes and $513,000 for condos.
In the moderate-income program, buyers can borrow up to $35,000 or $60,000, depending on how much they earn. There isn't a maximum purchase price for the moderate-income program.
The loans don’t have to be paid off until buyers sell the home or pay off the mortgage, at which time the city will also collect a percentage of the home’s appreciated value, which varies depending on the size of the loan (if the loan amounts to 10 percent of the purchase price, you’ll have to pay back 10 percent of the home’s appreciated value).
The bad news is that loans are only being offered right now to low-income buyers, as the moderate-income program is out of funds.
Neighborhood Housing Services of Los Angeles County has partnered with Wells Fargo and NeighborWorks America to offer grants of up to $25,000 for down payment assistance to qualifying buyers. Properties must be located inLos Angeles Countyand buyers must earn less than $104,400 (for a two-person household). The income requirements are lower for buyers using FHA loans.
What to know about condos
Most loan programs for first-time buyers can be used when purchasing condos, as well as single-family homes. But units in buildings that haven’t been approved by the Federal Housing Administration are typically off-limits.
That means you may have to do a bit more research when trying to use these loan programs to buy a condo. Use thisdatabase to check whether a complex has FHA approval.