California voters approved Proposition 37 on November 3, with 61% voting yes, according to KQED’s election results.
The measure authorizes the California Housing Finance Agency (CalHFA) to issue up to $25 billion in revenue bonds to fund a new down payment assistance program for eligible middle-income homebuyers. It could make the upfront cost of buying a newly built home more manageable.
How the homebuyer loan program would work
California’s Proposition 37 states that eligible buyers could borrow up to 17% of a qualified home’s purchase price through a fixed-rate second mortgage, provided they put down at least 3% of their own money.
For an $800,000 home, buyers would need just $24,000 for the down payment, while the program could provide another $136,000 through a second mortgage. That would leave $640,000 to be covered by their main mortgage. Both loans must be repaid, including interest on the second loan.
The bonds would be sold to private investors, and borrowers’ loan payments would be used to repay those investors and cover program administration. The state says there would be no direct cost to state or local governments.
However, the actual interest rate matters: CalHFA must set the terms, and the L.A. Times reports that the loans will carry interest to keep the program self-funded. Rates have not yet been announced.
Who could qualify for the homebuyer loan program?
Applicants must have been California residents for at least one year, use the property as their primary residence, and earn no more than 200% of the area median income. They must also be the first purchaser of an eligible home. First-time buyers are not required, according to the Los Angeles Times’ voters guide.
The program is limited to qualified new homes: newly constructed properties or certain homes created by converting nonresidential buildings, such as offices, into housing. Existing resale homes do not qualify. Purchase-price caps vary by county, generally ranging from about $1 million to $1.5 million.
What happens next?
Approval does not mean applications are open or that $25 billion is immediately available. The Legislative Analyst’s Office says CalHFA will decide how much to borrow and when to issue the bonds. The agency must still establish the program’s terms, including interest rates and application procedures.
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