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New Program Enables Californians to Buy a Home with Zero Down

Californians don’t need a down payment to buy a home. Sound too good to be true? A new program called ZeroDownCA now makes this option possible for anyone buying a residence in the Golden State.

“A lot of Californians face immense challenges in securing affordable housing,” says Matt Lucido, CEO of ZeroDownCA. “We want to present an accessible solution by removing the hurdle of saving up for the down payment.” 

A new way to raise a down payment without incurring debt

ZeroDownCA provides the capital for up to 15% of a property’s purchase price, eliminating the need to save for a down payment. This capital is not a loan — it’s debt-free. Meanwhile, homeowners’ mortgages also decrease by that same percentage.

In this way, ZeroDownCA is similar to the State of California’s “Dream for All” loan program, which gave out $300 million in loans for home purchases last year. “The demand was so huge, that the funds were claimed in only 11 days,” Lucido says.

ZeroDownCA offers some major advantages over Dream for All, however. First, participating in the Dream for All program requires aspiring homeowners to get lucky and win a lottery, but there’s no limit to the number of people who can take advantage of ZeroDownCA’s offer. 

Second, the Dream for All program requires homeowners to pay back their loan plus 20% of the home’s appreciation when they sell it. Conversely, the money from ZeroDownCA isn’t a loan and never needs to be repaid.

So, how can a company offer so much without getting something back?

How ZeroDownCA works

In return for giving you a ready-made down payment and reducing your mortgage, ZeroDownCA asks for some of the empty land in the backyard. “Many homes have a large lot that can be divided in two,” Lucido explains. “We build new housing on the new lot, either a single-family home or a duplex, and ensure this new construction has its own accessway. A nice privacy fence goes up and a new neighbor goes in, but the ultimate result is that buyers across the state can buy homes with zero money down.”

The California HOME Act, also known as SB 9, makes this brilliant solution possible. This legislation empowers homeowners either to develop their unused land themselves or else to sell it, turning it into major infusions of capital — the kind of capital that can serve as a down payment. Through ZeroDownCA, homeownership is possible for a much broader group of would-be buyers with a small trade-off: a smaller backyard.

ZeroDownCA keeps more money in your pocket

ZeroDownCA also offers financial advantages over Dream for All. “Let’s say a homeowner — let’s call her Sara — wants to buy a house for $1 million in Los Angeles,” Lucido begins. “She gets super lucky and is selected, so she buys a house for a million dollars, and Dream for All chips in $150,000 toward her down payment. To raise the rest of her down payment and closing costs, she is left paying $50,000 out of pocket. Her monthly principal and interest (P&I) payments, assuming a 7% loan, are $5,322 plus taxes and insurance.

“In 10 years, she sells her home for $1,500,000,” Lucido continues. “About $675,000 remains on her $800,000 loan. She owes the State $150,000 for its down payment plus 20% of the property’s appreciation, which is $100,000, so she has to pay $250,000. This means she nets $575,000 before taxes and commissions, which isn’t bad, considering she put in only $50,000 of her own money.”

Sara’s numbers would look even better if she used ZeroDownCA instead. “Now let’s say Sara buys a $1 million house, and ZeroDownCA covers 100% of her down payment, which is $200,000 in this case,” Lucido says. “ZeroDownCA gives her another $5,000 toward her closing costs. She pays nothing out of pocket other than perhaps some residual closing costs. Her monthly P&I payment is the same as it would be with Dream for All. ZeroDownCA uses SB 9 to subdivide her lot, which makes her yard smaller, but she doesn’t have to pay back any of that down payment or closing-cost money. After selling the land, her home now appraises for about $900,000, and she only owes $800,000, so she immediately has $100,000 of equity!

“In 10 years, Sara sells her home for $1,400,000,” Lucido adds. “She still has about $675,000 remaining on her mortgage, just like she would with Dream for All. But she doesn’t owe anything back to ZeroDownCA. As a result, she nets $725,000 before taxes and commissions. That’s $150,000 more than with the Dream for All program. Since she didn’t even have to put $50,000 down out of pocket, she’s $200,000 wealthier than she would have been.”

Looking to buy a home? Consider ZeroDownCA

ZeroDownCA makes buying a new home not only affordable, but also easy. “All new homebuyers need to do is pre-sell their excess land to us and start enjoying their new home,” Lucido says. 

Even people who have already saved up a down payment should consider ZeroDownCA. “You could either invest that capital somewhere else or put it into the property, further driving down your monthly P&I payment,” Lucido points out.

For this reason, every potential buyer should run the numbers for themselves and see what ZeroDownCA could do for them.

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