Best Resources for Down Payment Assistance in Santa Clara County

When considering a first-time home purchase in Santa Clara County, understanding the available resources for down payment assistance can significantly ease the financial burden. Given the high property prices, leveraging these resources becomes crucial.

Property Market Overview

As of today, there are 1,854 active listings in Santa Clara County, with 151 listings priced below $705,000. This price point is the maximum for down payment and closing cost assistance from the California Housing Finance Agency (CalHFA).

CalHFA's Assistance Programs

CalHFA offers several programs designed to help first-time homebuyers in California:

First Mortgage

CalHFA's first mortgage offering 95% of the purchase price up to $705,000, which is a significant advantage. However, it comes with a 5.625 interest rate and 2.5 discount points. For a $669,750 purchase, this equates to a rate of 5.625 with a 2.5% discount point fee.

Second Mortgage

The second mortgage provides $35,000 with a 2.5% interest rate and no monthly payments.

Third Mortgage

The third mortgage offers $40,000 with a 0% interest rate and no monthly payments.

Realities of Home Buying

Home buying in Santa Clara County involves several financial realities that potential buyers should be aware of:

Closing Costs

Closing costs can be quite substantial, often ranging from 1.5% to 2.5% of the purchase price. For a home priced at $705,000, this could amount to around $12,000, which can be comparable to or even exceed the down payment.

Seller and Buyer Agreements on Closing Costs

With the flexibility to negotiate, buyers can sometimes have the seller absorb the closing costs in exchange for a higher purchase price, or get a lender rebate with a slightly higher rate.

Initial Outlays

Beyond closing costs, there are other initial outlays such as:

Deposit: An earnest money deposit is required to show the seller that your offer is serious. Depending on the property, this can range from $5,000 to $10,000. Appraisal: Costs for an appraisal can range from $500 to $750. Home Inspection: A typical home inspection costs between $500 and $700. Rooftop Inspection: This can cost between $125 and $150.

Advice for First-Time Home Buyers

Considering the above information, here’s the best advice for first-time home buyers:

Assemble a Minimum Down Payment: Aim to save at least $25,000, which could cover the down payment on a home priced at $705,000 with an FHA loan. Explore Other Financial Options: If you have a retirement account, consider borrowing from it. Gift funds from a compassionate relative can also be beneficial. Cut Expenses: To qualify for even modest down payment assistance in Santa Clara County, you may need to document an annual income of over $120,000. Reducing unnecessary expenses can help accelerate your savings.

Alternative Areas to Consider

Given the high cost of living, you might also consider other areas within commuting distance of your workplace that offer lower property prices. These areas still offer viable options for homebuying while maintaining a reasonable standard of living.

Conclusion

While the process of buying a home in Santa Clara County can be daunting, leveraging available resources can make a significant difference. It’s important to be well-informed about the financial realities involved to plan accordingly and make the best decision for your future.

Good luck on your home buying journey!