California Helps Homebuyers With up to $150,000 To Buy Houses

California is helping prospective buyers make their first home purchases this year with a loan program that can provide grants of up to $150,000.

The California Dream for All Shared Appreciation Loan Program opens on April 3 and qualifying borrowers can score up to 20 percent of a property's value for a down payment. Applications are accepted until May, with successful applicants then drawn in a lottery system.

Borrowers can apply as long as they have never owned a home, or owned a home three or more years ago and sold it. Applicants also cannot be investment property owners and must instead plan to live in the house they are purchasing.

Applicants also have to meet the income requirements for their specific counties, which are typically 120 percent or less of the area median income. One of the homebuyers must also be a first-generation homebuyer.

Launched last year, the plan quickly drew attention and in just 11 days all of the $300 million available to first-time homebuyers was distributed. The California Dream For All program helped 2,182 homebuyers, and 55 percent of the group were from communities of color, the program said.

There are some further stipulations to the program, though. As it is a shared appreciation loan, if a homeowner ends up selling their house, they will need to share a percentage of their profits. If the home did not grow in value, the borrower would still be on the line to pay back the initial 20 percent.

Sammy Lyon, a Los Angeles-based broker at Dow Capital, said the rapid exhaustion of funds in the program last year was frustrating for many of the prospective buyers his company works with.

"We had many buyers for whom this program would have been a major life gamechanger, and they missed the funds by just a few hours," Lyon told Newsweek.

Lyon also said due to the first come, first serve nature of the program last year, buyers could add on additional down payment funds from their own pocket, meaning many people who earned the payout didn't necessarily need the money.

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"For many of our buyers, the Dream program was the difference between homeownership and renting," Lyon said, adding that many needy homebuyers do not necessarily meet the first-generation requirement but are still unable to make a purchase in today's housing market.

According to Redfin, the median California home sale price was $785,600 and had increased 11.4 percent over the last year.

"I understand the sentiment behind it, though for many buyers today facing the major wage to home price gap, if their parents had bought a home years ago it does not necessarily mean they can help their kids with purchasing," Lyon said. "Some of our clients actually helped their immigrant parents purchase by co-signing for them, and now that they want to buy, they would be disqualified from this program."

The few buyers Lyon worked with under the Dream program had already submitted a full loan application and could convert it into a program loan immediately.

"These were buyers who were already out looking at houses consistently, and comfortable making offers quickly on something that they liked," Lyon said. "Anyone who had just reached out when it went live did not have enough time to prequalify, look at houses and get an offer accepted before the funds ran out."

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Lyon expects the lottery system this year to promote more fairness in who ends up receiving the funds.

"What was amazing was that the Dream program opened up the imaginative possibility of homeownership for so many folks," Lyon said.

Many residents in gentrified Los Angeles neighborhoods are only able to stay in their homes through homeownership since rents can quickly skyrocket and price out a multigenerational Los Angeles family, Lyon added.

"The ability to own in an expensive city is a huge benefit in terms of being able to stay in your home long term," Lyon said. "And the generational wealth that is built through homeownership is worth the trade of shared appreciation, if it's the only way to get into a first home."

Update 4/3/24 7:45 a.m. ET: The headline was changed.