California Is Giving Out Money to Help First-Time Home Buyers. Here's How to Know if You Qualify

The money won't last forever.

Thinking about buying a home in the Golden State? Good news: California can help. The state is offering first-time home buyers generous loans with zero down payment. The program is called the Dream For All Shared Appreciation Loan Program, and it's an add-on to the standard "Dream For All" mortgage.

Here's a quick overview of what the program offers:

• Loans with zero down payment
• A flexible repayment plan

In return, the program takes a cut of future home appreciation. The California Housing Financial Agency (CalHFA) anticipates the program will make homes more affordable to first-time home buyers, who often struggle with down payments.

The program is much needed -- California has one of the highest costs of living in the United States! But not everyone is eligible for the loan. Here's how to know if you qualify.

Do you qualify?

Generally speaking, low- to middle-income first-time home buyers qualify for the program. They must be U.S. citizens and cannot have an income above CalHFA income limits. For example, borrowers in Los Angeles County must make $180,000 or less.

Borrowers can find more information on the CalHFA program website. Other requirements include:

• Borrowers must complete associated educational courses on homeownership.
• Borrowers must all be first-time owners and use the property as their primary residence.

Homeowners who meet eligibility requirements can dive deeper into the specifics by skimming the five-page loan handbook, which goes more in-depth.

How do you apply?

Borrowers can contact qualified loan officers who can guide them through the home-buying process, including the Dream For All Shared Appreciation Loan Program. Sadly, there's no easy application portal, so you must go through a private loan officer to snag the loan.

The program is limited to $300 million in loans. CalHFA expects that fewer than 3,000 California families will benefit. Interested borrowers are better off reaching out sooner than later.

How does a shared appreciation loan work?

Homes are often considered great investments due to their potential for price appreciation. While this appreciation typically benefits the borrower, in the case of shared appreciation loans, both the borrower and the lender share in the profits gained from the home's increased value.

The better a home does on the market, the more money the borrower owes. The borrower benefits the most from rising home prices -- they only owe the lender a fraction of appreciation -- so it's not a bad tradeoff.

How else can I borrow money for a home?

Generally speaking, the more you pay as a down payment, the less you pay over the lifetime of a loan. The new California program is special because borrowers get favorable terms, and their down payment is covered.

But funds are limited, and not everyone will qualify before the program ends. Fortunately, wannabe homeowners have other options. The best mortgage lenders for first-time buyers offer loans with low or zero down payments.