Home buyer down payment assistance loan programs such as CalHFA’s CHDAP, GSFA Platinum Grant, and the GSFA ACCESS program are three of the most popular first time home buyer assistance programs in California.
The CHDAP, Platinum, and ACCESS program all provide 3% to 5% assistance that can be applied towards meeting FHA’s 3.5% minimum down payment requirement. (Platinum offers a 5% grant option but the rate is higher)
Sounds great, right? But which one is better? I’m sure you would like to avoid the unintended consequences of choosing the wrong assistance program.
Understanding the cost of the assistance or grant and intricate differences between CalHFA’s CHDAP assistance, the Platinum Grant, and the ACCESS assistance program will help you make better home financing decision that impact you long after you move into the home.
Borrower Smart ==> Find the best down payment assistance program available
|Assistance Amount||3% – sales price||5% – loan amount||3% – sale price|
|3% Assistance||Silent 2nd Loan||Grant||Loan Repaid|
|Qualifying Area||All California||All California||All California|
Mandatory Origination fee?
Credit to pay closing costs?
|Up to 2%||No||Very Limited|
|DTI Ratio Max Limit||45%||45-50%||43% – 45%|
|Minimum Credit Score||640||620-640||580|
|First Time Buyer Only?||Yes||No||No|
|Income Caps? (county)||Yes||Yes||Yes|
|Income that Qualifies||Borrower||Borrower||Borrower|
|Max Loan Amount||County Specific||County Specific||County Specific|
|90 Day Flips Allowed||Yes||VA only||VA only|
|Max Seller Contribution?||3%||6%||6%|
|Gift Funds Allowed?||Yes||Yes||Yes|
|Down Payment Needed||.5% = $1,250||$0||.5% = $1,250|
Est. % Rate /apr (call for actual current rate)
|3.875 / 4.962||4.5 / 5.413||4.5 / 5.183|
|Rate on 2nd lien||3.25% (deferred)||NA||8.25%|
|Mtg P&I Payments + MI||$1,405||$1,494||$1,567|
|Cost of Assistance Over 15 years||$3,656||$19,638||$21,616|
|Cost of Assistance Over 30 years||$7,312||$35,656||$37,636|
Interest Rate: The interest rate comparison is for a 30 year fixed, 660 FICO score, from a time when CHF published their Platinum rate of 4.5%. Rates can vary, but for the most part, the Platinum and ACCESS mortgage rate is .5% to .625% higher than a regular FHA loan. This is not a rate quote….just comparing differences.
CalHFA CHDAP Down Payment Assistance Program
As you can see, the CalHFA CHDAP home buyer assistance program typically offers you a much lower interest rate, payment, and is the least expensive option between the three assistance programs. Some people say the CalHFA’s CHDAP is the BEST down payment assistance program in all of California.
Also, we may also be able to get you a lender credit of up to 2% that can be used for paying your closing costs when using the CHDAP program. Do you know what a lender credit is? Not all lenders can or will offer you a lender credit as we do.
GSFA Platinum Down Payment Assistance Program
The Platinum program seems like it should be the better program because the 5% grant never has to be repaid, right? What most lenders don’t disclose is that CHF Platinum charges an additonal 1.5% up front fee, which increases your closing costs significantly. So your ‘5% grant’ only covers the down payment for an FHA loan. They give you 5% and charge 1.5%, for a net of 3.5%
One down side is the Platinum program does not allow borrowers to receive a lender credit to pay your closing costs.
ACCESS Down Payment Assistance Program
The ACCESS program is the most costly program, offers the highest interest rate, reduces how much you can qualify for but does cater to borrowers with lower credit scores. However, since the assistance in the form of a 2nd loan (15 yr fxd) that is actually a fully amortizing payment, you’re paying that 3% loan off and building equity faster……so kudos there.
My Lender Said I Can Refinance Out of My Higher Rate ACCESS Loan in the future.
Lenders often tell buyers this when steering them towards the higher rate ACCESS down payment assistance to make them feel better about accepting a higher rate / higher cost loan. While this may technically be possible, it’s not probable.
To qualify for an FHA streamline refinance, FHA has a 5% net tangible benefit requirement test. This usually requires a reduction in mortgage rate of about 1.125% or more. Lenders are famous for saying you can do something in the future that likely will not happen. I think we all know mortgage rates will eventually go up in the future, making refinancing prohibitive.
In 7-10 years, after having built enough equity, you may be able to refinance out of this this FHA assistance loan and into a conventional loan, but what will rates be like in 7-10 years? My guess is they will be much higher than today’s rate.
The Platinum and ACCESS Assistance Programs Do Serve a Purpose
The Platinum and ACCESS down payment assistance programs are geared for people who are unable to save enough money on their own, have lower credit scores (but not always), and may feel the only way to purchase is to accept a higher rate and fee home buyer assistance program.
If you can’t get your credit score to 640, or make more than the CHDAP program income cap, you don’t have many options. That’s when Platinum and ACCESS fill a void.
But DON’T choose the ACCESS or Platinum assistance program because you think it’s better or think it’s the only assistance program your lender offers.
In My Opinion, you would probably be better off accessing 401k money (penalty free) or finding/receiving a gift for a down payment from a family member before using the Platinum or ACCESS program to purchase your home….or consider using the California No Down Payment USDA Purchase Loan.
Ask yourself this. Are you willing to pay significantly more for a home by using a down payment assistance program that has a higher interest rate and costs more than other options?
Credit Repair. If you need help repairing or rebuilding your credit score in order to qualify for the 3% CHDAP down payment assistance program, call me….it isn’t that difficult.