First-time Homebuyers: Loan Programs You Should Know About

There can be several barriers to homeownership in the Bay Area, especially for those who are just starting their real estate journey. Significant expenses for a down payment and closing costs, not to mention rising home prices make it difficult to make the dream of homeownership a reality. Fortunately, first-time homebuyers have a few options for keeping out-of-pocket expenses from breaking the bank. The Housing Affordability Fund and the Gap Assistance Program are two loan programs first-time homebuyers need to know.


The Housing Affordability Fund

In an effort to help median & low-income families ease the financial burdens of buying a home, the Santa Clara County and Silicon Valley Association of REALTORS applied for grant funding of $100,000 from the California Association of REALTORS’ Housing Affordability Fund. Through this fund, first-time homebuyers may be eligible for a grant up to $5,000 to help cover non-recurring closing costs. To qualify for the grant, homebuyers must meet a few eligibility requirements.

First, applicants are required to be a first-time homebuyer, which means not having owned a home as their primary residence within the last three years. Homebuyers must also be U.S. citizens or hold a valid green card to qualify, and they must be purchasing a townhome, single-family residence, or condo in Silicon Valley or the Greater Bay Area. The use of a Realtor who is a member of the California Association of REALTORS is also a requirement for the grant.

Borrowers are able to self-certify their income as part of the process, making it a bit easier to qualify. However, first-time homebuyers are evaluated for their eligibility based on gross income by household, which cannot be more than 120% of the area median income of the county where the residence is located.

Table of 120% AMI by Household Size for Santa Clara County
1 2 3 4 5 6 7 8
$95,150 $108,750 $122,350 $135,950 $146,850 $157,700 $168,600 $179,450


The benefit of receiving a grant for closing costs is that unlike a loan, these funds do not need to be repaid over time. Our mortgage advisors are well-versed in the Housing Affordability Fund program, and we help you get the grant dollars you are eligible for as part of the process of getting your mortgage through us.


Gap Assistance Program

In addition to grant funding for first-time homebuyers, there are also loan programs to help offset the monthly cost of getting into a home. The Gap Assistance Program, made available through the Housing Trust of Silicon Valley, offers qualified homebuyers a deferred second home loan of 20% of the purchase price, up to $95,000. The GAP loan has a 30-year repayment term and a fixed simple interest rate of 3% which accrues annually, but there is no payment required until the loan term expires, the home is sold, or a refinance of the first mortgage takes place. These funds can be used as a low cost contribution for a home purchase within Santa Clara County for first-time homebuyers who qualify as low-income.

Just like the Housing Affordability Fund, there are certain guidelines that must be met to be eligible. Homebuyers must plan to live in their home as their primary residence, and they must be a first-time homebuyer. An eight-hour HUD-certified homebuyer education class is also required before one can qualify. Most importantly, a down payment of at least 3% is necessary, with at least 1.5% out of pocket. The remaining 1.5% can be gifted from a family member or other individual, and in some cases, HAF grant funding may be used for this purpose.

The Gap Assistance Program is offered on a first come, first served basis, and it is intended to help lower-income households afford homeownership without having to come up with a significant down payment. Income limits are relatively low compared to the Housing Affordability Fund program, which can make eligibility more stringent.

GAP Maximum Income by Household Size
1 2 3 4 5 6 7 8
$59,400 $67,900 $76,400 $84,900 $91,650 $98,450 $105,250 $112,050

Although the Gap Assistance Program has a low threshold for income limits, homebuyers who can utilize the second mortgage for down payment requirements benefit in the long run. Unlike an FHA or another low-down payment mortgage, there is no requirement for mortgage insurance, helping homebuyers save a substantial amount on a monthly basis. For individuals who are currently renting but are growing tired of doing so, the Gap Assistance Program is an excellent choice to get into a home without a large financial burden.

Because the second mortgage is simple interest, not compounding, homeowners build more equity over time while saving money on the outstanding loan balance. For instance, a loan of $50,000 with 3% simple interest would accrue $7,500 after five years, which is added to the original amount of the loan should the home be sold or refinanced. With a compounding interest rate of the same 3% for five years would accrue $7,963 in interest. Homeowners save a significant amount with simple interest instead of compound interest, especially when the second mortgage balance is held for the full 30-year term.

If you’d like more info on these programs, we’re happy to help:


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