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The California Dream for All Program: Exploring the Pros and Cons of This 20% Down Payment Loan for Homebuyers

Chloe Dertinger  |  April 4, 2023


The California Dream for All Program: Exploring the Pros and Cons of This 20% Down Payment Loan for Homebuyers

The California Dream for All Program proposes to give 20% down payments to eligible homebuyers, a bold move aimed at increasing access to homeownership for low and middle-income families in the state. While the proposal has received praise for its ambitious goals, it has also faced criticism for its potential drawbacks. 


Benefits for Homebuyers


The main benefit of the 20% down payment loans is obvious: they enable more people to afford homes. Many potential homebuyers in California are deterred by the large upfront costs associated with purchasing a home. By providing 20% down payment loans, the California Dream for All Program makes homeownership more accessible to those who may not have been able to afford it otherwise.

Another benefit of the 20% down payment loans is that they may enable homebuyers to secure better loan terms. Homebuyers who can put down larger down payments are typically seen as less risky to lenders, which may result in lower interest rates and lower monthly payments. This can save homebuyers money in the long run and make homeownership more sustainable over time. 


Disadvantages for Homebuyers


While the 20% down payment loans have many potential benefits for homebuyers, they also come with some potential disadvantages. One of the main disadvantages is that the loans may make it harder for some homebuyers to qualify for a mortgage. Depending on the specific requirements of the loan program, homebuyers may need to meet stricter income and credit score criteria in order to qualify for this loan. This can be a barrier for some families who may struggle to meet these requirements. You can view the eligibility criteria here.

Another potential disadvantage of this program is that this is an equity share program, meaning that once you sell your home, you will be required to share 20% of any appreciation in the value of the home plus the original 20% down payment loan. Let’s say you purchase a home for $500,000 and receive $100,000 for your down payment (20%). In the event that you refinance the loan or sell your home, you not only owe the down payment ($100,000) back, but you also are giving them 20% of the equity of the appreciation. For example, if your property appreciates $100,000, you will be paying back $100,000 for the down payment you borrowed plus $20,000. Essentially, you’re borrowing this money at a 20% interest rate. 


“It’s a gamble. The reward is that you get the down payment assistance at the time of purchasing. The risk is the payback on the appreciation of the house.” -Katie Moe (Founder & Realtor of Connect California Homes) 


Another risk of this program is that it is not competitive. As a home buyer, if you are in a multiple offer situation, it is rare that a listing agent would prefer this loan program over a buyer with a conventional mortgage offer due to the fact that your purchase would essentially be 100% financing. Therefore, home buyers who use this program would typically be narrowing their search down to homes that have been sitting on the market for a while to avoid competition with other buyers.




The California Dream for All Program’s proposal to give 20% down payment loans to eligible homebuyers has both benefits and potential drawbacks. While the loans make homeownership more accessible to low- and middle-income families, they may also make it more difficult for some homebuyers to qualify for a mortgage and save for other expenses. Ultimately, the success of the loan program will depend on how it is implemented and the response of the housing market. Homebuyers should carefully consider the pros and cons of the program with their mortgage lender before deciding whether to pursue a 20% down payment loan through the California Dream for All Program.

If you’d like more information about the California Dream for All Program, listen to this in-depth, real talk discussion between Founder & Realtor Katie Moe of Connect California Homes and Mortgage Lender Jenna Gray from Guaranteed Rate:

*please note Connect California Homes is not a licensed mortgage broker, please seek your trusted professionals for any tax, mortgage, or financial advice.

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