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.
What is CHDAP (click to open)
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.
Call To Discuss (learn about) All Your Options
Fortunately, there are other low down payment options for first time home buyers and second time buyers to consider, just contact me for details or call direct (951) 215-6119
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