So CA rolled out a new First Time Homebuyer Program (FTHB) yesterday.
It is a shared equity program. They will give you 20% down for your conventional loan as long as you use their 30yr mortgage for the loan.
At some point in the future when you refinance or sell your home you pay back the 20% PLUS 20% of any appreciation in the home. You can never pay back more than 2.5 times the amount of the original loan.
So if you buy a home for $500K they give you $100K and you use their $400K loan at 6.375% for 1.5 points.
In the future, you want to refinance because rates have improved and the home is worth $700K.
You must repay the $100K plus $40K of the $200K appreciation. You would have to wait until it was worth enough to stay at 80% LTV.
The question is is it worth $40,000 of future funds to access the $100K now?
If you do not refinance and 30 years go by and you pay off the loan you still owe the State $250,000.
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