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Reminder: ZIP Loans Can Only be Used for Closing Costs and Never for Down Payment Assistance
  
CalHFA would like to remind all lenders that CalHFA's Zero Interest Program (ZIP) subordinate loan is to be used only for closing costs and cannot be used for down payment assistance or debt reduction.

  • CalHFA will not purchase any ZIP loan or any other associated CalHFA subordinate loan when a lender applies ZIP funds to down payment. This may also result in a repurchase of the first loan from CalHFA's master servicer.
  • In cases where a CalHFA first loan closes at a lower or higher loan amount than is reflected on the CalHFA Notice of Commitment, CalHFA will not purchase the associated subordinate loan(s). This may also result in a repurchase of the first loan from CalHFA's master servicer.
  • In cases where, prior to loan closing, there are excess ZIP funds, lenders are to lower the ZIP loan amount and re-submit to CalHFA for re-approval. In cases where the loan has closed and there are excess ZIP funds, those funds must be applied as a principal reduction. Borrower may not receive cash back which exceeds the amount of their earnest money deposit. 

TIP: Prior to obtaining your company's in-house approval for a CalHFA conventional loan where the ZIP funds and seller consessions result in funds exceeding the total closing cost, consider using these funds for a single or split-premium on the Mortgage Insurance, which may lower or eliminate your borrower's monthly MI payment.

Thank you for your continued partnership with CalHFA.
 
 
Visit our website at:  www.calhfa.ca.gov
 
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