California program offers 4% mortgages

House on sheet of bills

A new 30-year, fixed-rate loan program for first-time home buyers in California comes with an attractive 4% interest rate and eligibility requirements that should make it easier for borrowers to qualify for mortgages.

The California Housing Finance Agency's new FHA-insured loans are geared to low- and moderate-income families.

Buyers will need a minimum credit score of 620 and a debt-to-income ratio that doesn't exceed 43%.

Household income limits, which vary by county and family size, and sales price limits also apply. And buyers must take an approved home buyer education program.

In addition, the agency's down payment assistance loan program can provide up to 3% of the purchase price of the home and be used for down payments or closing costs.

When combined with a down payment loan, the interest rate on the 30-year mortgage can drop to 3.875%.

Loans are made through approved private lenders.

"With the disruption of the credit markets over the last two years, we have been limited in our ability to help finance home purchases," Steven Spears, executive director of the California agency said in announcing the loans. "This new program offers California families another way to purchase their first home with reliable, fixed-rate financing."

Veterans who qualify under the Heroes Earnings Assistance and Relief Tax Act also are eligible for these loans.

With the California real estate market still struggling and unemployment high, the agency hopes the new loan program will help buyers obtain the loans they need at a time when homes are more affordable than they have been since the early 1990s.

Follow Interest.com on Twitter.