First-Time Buyers Get Help with CA Foreclosure Purchase

First-time homebuyers in California are getting help in purchasing their piece of the American Dream thanks to a public-private partnership and $200 million in bond funds allocated to the California Housing Finance Agency (CalFHA).

Gov. Arnold Schwartzenegger announced Monday that CalFHA’s Community Stabilization Home Loan Program will dole out the money, expected to help as many as 1,000 Californians obtain their piece of homeownership.

But there is a catch!

The catch is buyers have to be willing to buy their dream home in one of the designated areas approved by CalFHA — such as Alameda, Contra Costa and Riverside counties — and the foreclosure property must be specifically set aside for the program and owned by one of the participating lenders — including Wells Fargo, HomeEq, CitiMortgage and Fannie Mae.

The reward for participating in this program is actually pretty sweet, however. The lenders (and hopefully more will come forward as the program gets going) have all agreed to price the properties at 12 percent below market value.

Also, the program will offer financing at a fixed 5.5 percent interest rate for 30 years and without a down payment! However, there is the normal catch here too in that the consequence for no down payment is that borrowers will be required to pay for PMI (private mortgage insurance).They will have to meet CalHFA’s income limits as well.

Will this help slow down the onslaught of foreclosure activity in the state? No! But it could help potential homebuyers looking to RealtyTrac for bargain properties to realize their dream of homeownership if it is the right house in the right place, as determined by CalHFA and its partners.