Buying your first home in California is one of the most exciting, and stressful, financial milestones you will ever reach. Between navigating the competitive market and understanding the complex world of financing, it’s easy to feel overwhelmed. One of the biggest questions we get at Maya Team Inc. is: "Should I use a CalHFA program or just stick with a standard Conventional loan?"
Both options have significant advantages, but they serve different types of buyers. Choosing the wrong one could mean leaving thousands of dollars on the table or missing out on a home because your financing wasn't competitive enough.
The Short Answer: Which One Wins?
If you have a credit score above 700 and enough savings for a 3% down payment plus closing costs, a Standard Conventional Loan usually offers the lowest long-term cost and a faster closing process. However, if you have the income to afford monthly payments but lack the cash for a down payment, the CalHFA Conventional program (with its MyHome and ZIP assistance) is a game-changer that can get you into a home with nearly zero out-of-pocket costs.
What Is a CalHFA Conventional Loan?
The California Housing Finance Agency (CalHFA) doesn't actually lend you the money directly. Instead, they partner with lenders like us to provide specialized mortgage products designed for low-to-moderate-income first-time buyers.
A CalHFA Conventional loan is essentially a Fannie Mae or Freddie Mac loan that is "wrapped" in CalHFA’s specific rules. The magic happens when you pair the first mortgage with CalHFA’s subordinate (second and third) loans:
- MyHome Assistance: A deferred-payment junior loan that provides up to 3% of the purchase price to help with your down payment.
- ZIP (Zero Interest Program): A zero-interest second or third loan that covers 2% to 3% of your loan amount for closing costs.
By combining these, many buyers find they only need to bring a few thousand dollars to the closing table, rather than the tens of thousands usually required in California.
What Is a Standard Conventional Loan?
A Standard Conventional loan is a mortgage that is not insured or guaranteed by the federal government (unlike FHA or VA loans). For first-time buyers, Fannie Mae and Freddie Mac offer programs (like HomeReady or HomePossible) that allow for as little as 3% down payment.
These loans are the "gold standard" of the industry. They are straightforward, highly flexible, and generally viewed more favorably by sellers because they have fewer regulatory "hoops" to jump through than state-sponsored programs.
The Deep Dive: How Do They Compare?
To help you decide, let's break down the technical requirements and long-term implications of each path.
1. Down Payment and Cash to Close
- CalHFA: This is where CalHFA shines. While the base loan requires 3% down, the MyHome Assistance can cover that entire 3%. If you add the ZIP program, your closing costs are also largely covered. This makes homeownership accessible for those who haven't spent years saving a massive "nest egg."
- Conventional: You still only need 3% down as a first-time buyer. However, that 3% must come from your own savings or a gift from a family member. You are also responsible for all closing costs (typically 2% to 3% of the purchase price), unless you negotiate a seller credit.
2. Credit Score Requirements (The FICO Factor)
- CalHFA: Typically requires a minimum FICO score of 660. CalHFA is strict about this; if you are at a 640, you likely won't qualify for their conventional product.
- Conventional: Lenders can sometimes go as low as 620, though the "pricing" (the interest rate and cost of private mortgage insurance) becomes very expensive at that level. To get a better rate than CalHFA, you usually want a score of 720 or higher.
3. Income Limits and DTI
- CalHFA: There are strict Income Limits based on the county where you are buying. If you and your spouse make a high combined salary, you might "make too much money" to qualify for CalHFA. They also typically cap your Debt-to-Income (DTI) ratio at 43% to 45%.
- Conventional: There are generally no income limits for standard conventional loans. However, if you want the "3% down" version, there are often income caps based on the area's median income. Conventional loans are often more flexible with DTI, sometimes allowing up to 49.9% with strong compensating factors.
4. Interest Rates and Monthly Payments
- CalHFA: The interest rates are set by the state and are updated daily. Because you are getting "free" (or deferred) money for the down payment, the interest rate on the first mortgage is often slightly higher than the best market rates.
- Conventional: Rates are driven purely by the market and your credit profile. If you have a 760 credit score, your rate on a conventional loan will almost certainly be lower than the CalHFA rate.
5. Private Mortgage Insurance (PMI)
One of the best things about both of these options is that the PMI can eventually be removed. Unlike FHA loans, where mortgage insurance often lasts for the life of the loan, both CalHFA Conventional and Standard Conventional allow you to request PMI cancellation once you reach 20% equity in the home.
When to Choose Which?
You should choose CalHFA if:
- You have a stable job but very little in your savings account.
- You are a first-time homebuyer (meaning you haven't owned a home in the last three years).
- You plan to stay in the home for at least 5-10 years (this allows the home to appreciate so you can pay back the assistance loans when you eventually sell or refinance).
- Your credit score is 660 or higher.
You should choose Conventional if:
- You have saved up at least 5% to 7% of the purchase price (to cover the 3% down plus closing costs).
- Your credit score is excellent (740+).
- You want the lowest possible monthly payment.
- You are buying in a highly competitive market where sellers might be wary of the extra time required for CalHFA's secondary review process.
Checklist: Are You Ready to Apply?
Before you reach out to a Mortgage Loan Originator (MLO), run through this checklist to see where you stand:
- Check Your Credit: Is your FICO score at least 620 for Conventional or 660 for CalHFA?
- Verify First-Time Status: Have you owned a home in the last three years? (If yes, CalHFA is likely off the table).
- Review Income: Does your total household income fall under your county’s limit for CalHFA?
- Gather Documents: Do you have your last two years of W2s, last 30 days of pay stubs, and last two months of bank statements?
- Calculate Your Savings: Do you have enough for "reserves"? Even with 100% financing, most lenders want to see that you have a few months of mortgage payments left in the bank after closing.
The "Hidden" Reality of Assistance Programs
It is important to remember that CalHFA’s assistance programs (MyHome and ZIP) are loans, not grants. They are "deferred," meaning you don't make monthly payments on them, but you do have to pay them back. Usually, this happens when you sell the house, refinance the mortgage, or pay the loan off in full.
If you plan to sell the house in two years, you might find that after paying back the first mortgage AND the CalHFA assistance loans, you don't have much profit left. This is why we always advise our clients to look at homeownership as a long-term investment.
How Maya Team Inc. Helps You Decide
As both a Real Estate Agency and a Mortgage Brokerage, we look at the whole picture. Yaxkin Rony Velasquez, our Mortgage Loan Originator and Broker, can run a side-by-side "Total Cost Analysis" for you. This shows you exactly how much cash you need and what your payment will be for both CalHFA and Conventional.
Meanwhile, Mona Bottros, our Realtor® and Office Manager, works to ensure that whichever loan you choose, your offer is presented to the seller in the strongest possible light. We understand the nuances of the California market because we’ve closed over 3,000 transactions.
Ready to find out which path is right for you?
Stop wondering and start planning. Whether you need the down payment assistance of CalHFA or the streamlined power of a Conventional loan, we are here to guide you through every step of the underwriting and home-searching process.
Contact us today to start your pre-approval!
- Phone: Call or Text Rony at Maya Team Inc.
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Yaxkin Rony Velasquez
Real Estate and Mortgage Broker
Realtor® and Mortgage Loan Originator (MLO)
Mona Bottros
Realtor® and Office Manager
