California has relaunched an affordable home loan program for first-time buyers, after a two year hiatus. But this time, aspiring home owners must enter a lottery for a chance to qualify.
The revamped “Dream for All” program will make $1.5 billion available in 30-year home loans, with zero interest for the first 5 years. Qualified buyers can receive up to $150,000 towards a down payment on their first home.
New Lottery Application Process
Previously, the program operated on a first come, first served basis which overwhelmed the application system. Now, hopeful applicants must enter a lottery for one of 3,000 slots to even begin the full qualification process.
Winners will be selected at random regardless of ethnicity, income, or geography across the state. However, the state Housing Finance Agency says it has designed the lottery to promote equitable access.
- 35% of slots are reserved for low to moderate income households
- 10% reserved for essential services personnel like teachers and healthcare workers
- 10% for agricultural workers
- Remaining 45% is open to all first-time buyer households
The first application period runs from January 13th through February 3rd. Applicants who are not selected will be rolled over into subsequent lotteries without needing to re-apply.
Mixed Reactions from Housing Advocates
Affordable housing advocates welcome the return of the Dream for All assistance after the previous version ended in controversy two years ago. But some are concerned the lottery approach risks excluding the neediest potential homebuyers.
“A lottery is better than nothing, but it’s not an equitable system for distributing these loans,” said Tom Franco of the California Housing Consortium. “Hard working families on tight budgets may not have the time or resources to go through such an uncertain process.”
| Dream for All Program Key Facts |
|---|
| $1.5 billion in 30 year loans |
| Zero interest for 5 years |
| Up to $150,000 towards downpayment |
| 3,000 lottery winners eligible to apply |
The state housing agency defends the lottery method as the only logistically feasible way to handle overwhelming interest from first-time buyers. Officials point out that everyone has an equal random chance to be selected. Plus, non-winning applicants will rollover automatically to subsequent lotteries.
“We learned important lessons from the difficulties faced during the previous launch,” said Tina Smith, deputy director of the state Housing Finance Agency.
“The lottery allows us to pace the application flow rather than get overloaded all at once. And multiple drawings will help more people over time.”
Financial Requirements Still Apply
Importantly, the lottery simply allows winners the opportunity to apply and begin the full eligibility verification process. They are not guaranteed a loan.
All applicants must still meet certain financial criteria, like being able to make monthly mortgage payments and having a middle credit score over 620. Total household income cannot exceed a regionally adjusted limit, typically around $105,000 statewide.
First time buyer status means no one in the household can have owned and occupied any property in the last 3 years.
There are also home purchase price limits tied to the FHA mortgage loan limits in the county, typically between $500,000 to $900,000. Homes must be owner-occupied as well.
Future Outlook
Over 10,000 buyers were previously approved under the old Dream for All program before funding was exhausted. Many had their mortgage approvals expire during the two year gap since it ended.
They represent pent up demand that has only intensified over 24 months of rapid home price growth across California. Housing analysts expect huge interest in the lottery drawings from both new and returning potential applicants.
While 3,000 initial loan reservations may pale relative to total housing needs across the state, the program provides a lifeline for thousands of middle income residents facing fast rising rents and home prices.
At the very least, California’s Dream for All reboot delivers hope to more families still striving to achieve affordable home ownership.
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