Forgivable Equity Builder Loan Program

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Are you a United States citizen or a permanent resident looking to score your first home with a free loan? Well, you just got lucky! The Forgivable Equity Builder Loan program is an initiative by the California Housing Finance Agency (CalHFA) to help first-time home buyers get up to 10% off their First Mortgage free.

How the CalFHA Forgivable Equity Builder Loan Works

The California Forgivable Equity Builder Loan is not available to borrowers as a standalone loan. Instead, it is a subordinate loan given to borrowers who have borrowed any type of CalFHA First Mortgage program to purchase their home. It gives an advantage that is worth up to 10% of the sales price or appraised value of your home. Provided you and other co-borrowers will occupy the home as a primary residence for at least five years. This loan can then either be used as a down payment for your home or to close the deal.

Forgivable Equity Builder Loan Income Limits

Generally, in order to qualify for the California Forgivable Equity Builder Loan, you must meet the income limits. The income limit for the CA forgivable loan is that borrower’s income ≤ 80 AMI. AMI refers to the Area Median Income, and as the name goes, it varies by area. It refers to the average income the working population makes in an area. Subsequently, the 80 % AMI is referred to as the HomeReady Income Limit.

To calculate your income limits for the CalFHA equity builder loan, you can use the Fannie Mae Lookup Tool. Make sure you have your area’s Federal Information Processing Standards (FIPS) code at hand, or just input your address. Alternatively, you can check if your area’s 80% AMI is in the image below.

CalHFA Forgivable Equity Builder Loan Income Limits
CalHFA Forgivable Equity Builder Loan Income Limits

Eligibility Requirements for Forgivable Down Payment Assistance for First-Time Homebuyers

To qualify for the CalFHA forgivable down payment assistance, you must meet the following requirements:

  • you must be a citizen of the United States but not necessarily a Californian
  • you must have a great credit score
  • you must be a first-time homebuyer. This means that you have not bought a home or lived with or married a homeowner in the past 3 years
  • you must meet the Homebuyer Education Requirement by attending an 8-hour home counseling from eHome for $99
  • you must have requested a CalHFA FHA First Mortgage
  • you must meet the requirements for the First Mortage
  • your First Mortage must qualify for having Ca Forgivable down payment assistance for first-time homebuyers as a subordinate loan
  • you must meet the Forgivable Equity Builder Loan Income Limits
  • if you have co-borrowers, they must live with you as primary residents
  • you must submit the Forgivable Downpayment Assitance Note and Subordinate Deed of Trust.

Terms of the Loan

Generally, the CalHFA forgivable equity builder loan is not subject to repayment and has zero interest rate. However, that is only possible or valid if a borrower does not breach the terms of the loan. Here are some things to know:

  • the forgivable down payment assistance loan is interest-free and you do not have to repay it
  • if the borrower decides to sell the house within 5 years of closing, they will pay back a part of the loan; compulsorily
  • you cannot use it to service another loan like a payday loan. It must be used for only the purpose of buying a home
  • CalHFA does not lend money to you directly. They will only connect you with recognized lenders


The CalHFA equity loan does not need any calculator since is capped at 10% of the home’s sale price or appraised value; whichever is less. The appraised value is how much the lender’s appraiser values the property. On the other hand, the sales price is how much you are buying it.

Married Couple

Married couples are eligible for the Forgivable Equity Builder Loan, provided that both parties are first-time homebuyers. And they have not lived in a home owned by a previous spouse in the last three years.

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Samod Kareem
Samod Kareem

Samod is a web designer, digital marketer, and freelance writer. He loves to write on topics he finds interesting but mostly loves money, and technology matters. He aims to share his knowledge from research with everyone out there looking for an answer.

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