The California Housing Finance Agency (CalHFA) significantly revised their guidelines to reduce how much a first time homebuyer can qualify for when using their 3% California Homebuyer’s Downpayment Assistance Program (CHDAP).
UPDATE: CalHFA DISCONTINUED this CHDAP program and replaced it with the MyHome Assistance Program. ==> Read details about MyHome Assistance program.
3/21/2014 CalHFA NEWS UPDATE: CalHFA just announced a reversal and now set the new maximum DTI ratio at 45%!
CalHFA Program Bulletin #2013-06 announces that effective July 1st, 2013, CalHFA is reducing the maximum allowable debt-to-income ratio (DTI) to 43% when using the CHDAP first time homebuyer assistance program, and for all future CalHFA single family lending programs.
CalHFA CHDAP Revised Guidelines:
- Maximum total Debt-To-Income (DTI) ratio of
- Maximum Combined Loan-To-Value (CLTV) of 103%
- Mortgage Credit Certificate (MCC) cannot be used for income qualifying purposes
- Minimum borrower contribution will be based on the qualifying credit score:
- 640 to 679 = $1,500
- 680+ FICO = $1,000
- Minimum investment can be from a gift if the first mortgage guidelines allow for it
Is Reducing the CHDAP Max DTI Ratio to 43% a Big Deal?
Currently, the CHDAP guidelines have no DTI ratio restrictions for qualification. It simply accepts whatever DTI limit the first mortgage allows.
Before Example: I recently funded a $356,000 FHA purchase loan using the 3% CHDAP program where the borrower had a 54% DTI ratio. (FYI- they only needed .5% = $1,780 for a down payment)
After Example: Under the new CHDAP 43% DTI ratio limit, that same borrower will now only qualify for a maximum purchase price of $284,000!!
That’s a 20% reduction in qualifying amount! So yes, this is a big deal and a good indicator of what our friendly government regulators have planned for our future. How do you feel about that?
Why did CALHFA Reduce the Max DTI Ratio to 43%?
Because they are mean people…..just kidding:-) They are actually very nice and helpful. CalHFA hinted they may be rolling out a new first lien mortgage program that may need to conform to the soon coming QRM rule that could limit 90% of all mortgage loans to comply with a maximum allowable 43% DTI ratio limit.
So this revision will help ‘streamline’ the approval process and make it less confusing later on.