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FHA Down Payment Assistance Programs in California

What if you could buy a home with an FHA loan and not have to save 3.5% on your own? That’s exactly what Down Payment Assistance (DPA) programs make possible. Here’s how they work.

What Is Down Payment Assistance?

DPA programs provide funds — either as grants or second mortgages — that can cover your required FHA down payment and sometimes closing costs. These programs are funded by state agencies, non-profit organizations, and government-sponsored entities.

For FHA loans, the most common structures are:

  • Forgivable grant: You receive funds and don’t repay them as long as you meet conditions (usually staying in the home)
  • Second mortgage: A subordinate loan with deferred or low monthly payments, repaid when you sell or refinance

CalHFA — California’s State DPA Program

The California Housing Finance Agency (CalHFA) offers the MyHome Assistance Program for FHA borrowers:

  • Provides 3.5% of the purchase price or appraised value (whichever is lower) as a deferred second mortgage
  • No monthly payment on the second mortgage — deferred for the life of the first loan
  • 1% simple interest accrues but is not paid monthly
  • Due when you sell, refinance, or pay off the first loan
  • Up to 105% CLTV allowed when combined with an FHA first mortgage
Income limits apply — borrowers must not exceed CalHFA’s published income limits, which vary by county across California.

National DPA Programs

Multiple national programs are also available:

  • National Homebuyer’s Fund (NHF): Up to 3.5% (forgivable) or up to 5% of the purchase price. The forgivable option requires no repayment. Available on FHA 30-year fixed loans with a minimum first lien LTV of 95%.
  • Other national DPA programs: Similar structure — 3.5% or 5% as a second mortgage applied toward down payment, closing costs, or prepaids.

How DPA Affects Your Rate

DPA programs typically carry a slightly higher interest rate on the first mortgage compared to a standard FHA loan without DPA. The net benefit of DPA often outweighs the rate premium — especially when factoring in how long it would take to save the down payment independently.

Questions to ask about any assistance program

Assistance programs differ in ways that matter long after closing. Before you reserve funds, get clear answers to these:

  • Is it a grant, a forgivable second, or a deferred second, and what triggers repayment: sale, refinance, or payoff of the first loan?
  • Does interest accrue, and is it simple or compounding?
  • Which income limit applies in your county, and how is household income counted?
  • Is there a homebuyer education course, a residency condition, or a limit on property type?
  • Does using the program change the interest rate on the first mortgage?

A worked example (illustrative example, not a quote)

Assume a $600,000 purchase using an FHA first mortgage plus a deferred second like the CalHFA structure described above. The FHA first mortgage at 96.5% is $579,000. A second equal to 3.5% of the price is $21,000. Together that is $600,000, or 100% combined loan-to-value, within the up to 105% CLTV the page mentions. With 1% simple interest, the second accrues about $210 a year ($21,000 x 1%), so after ten years the payoff would be roughly $23,100. Closing costs and prepaid items are still due on top of this unless a seller credit or other assistance covers them. Program terms change, so confirm current details before relying on any of these figures.

Documents to gather early

  • Recent pay stubs and last year’s tax return, since income limits are tested against them
  • Names and incomes of everyone who will live in the home
  • Recent bank statements showing the funds you do bring
  • Your homebuyer education certificate, if the program requires one

Frequently asked questions

Can I combine assistance with gift funds?

Sometimes, but each program sets its own rules on stacking and on how much must come from your own money. Tell us about any gift before you commit so it is documented correctly.

What happens if I sell after only a few years?

A deferred second is repaid from the sale proceeds along with any accrued interest, so you should see the payoff on your estimated settlement statement. A forgivable structure may have a minimum time in the home before the balance is forgiven.

Is assistance available for condos or duplexes?

It can be, but property type rules vary by program. Ask before you write an offer so the home you choose fits both the FHA rules and the assistance program.

Related guides

Practical Takeaways

  • CalHFA’s MyHome provides 3.5% as a deferred second — no monthly payment
  • National DPA programs offer grants (forgivable) or second mortgages up to 5%
  • Rates may be slightly higher with DPA, but cash-at-close savings are often significant
  • Income limits apply — many California buyers qualify
  • Compare what triggers repayment, whether interest accrues, and which income limit applies before reserving funds.
  • A deferred second can bring combined financing to 100% of the price, so closing costs still need a separate plan.