Buying a Home

California Prop 37 Passed: How the $25 Billion Homebuyer Loan Program Works

California voters approved Prop 37, a state-run second mortgage covering up to 17% of a new home's price. Here's who qualifies and the catches.

By Shivam Kaushik · Updated November 7, 2026 · 5 min read

Row of new homes under construction, California Prop 37 new-home loans

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Quick answers

California voters approved Proposition 37 on November 3, 2026, according to the Associated Press. It was winning with about 61% of the vote.
It lets the California Housing Finance Agency (CalHFA) borrow up to $25 billion from private bond investors to make down payment loans.
The loan can cover up to 17% of the price of a newly built home. Buyers put down at least 3%.
It’s a loan you repay, not a grant, and it isn’t open yet. CalHFA has until about late 2027 to launch it.

California has some of the most expensive homes in the country. The California Association of Realtors put the state’s median single-family price at about $894,630 in the third quarter. Saving 20% of that is close to $180,000. For a lot of middle-income families, the down payment is the wall.

On election night, California voters said yes to a new idea for getting over that wall: a state-run second mortgage. Here’s how Prop 37 works, who can use it, and the catches nobody should skip.

How Prop 37 works

You still get a normal first mortgage from a bank, credit union or broker. Then the state offers a second loan that covers most of the down payment. Put the two together and you can reach 20% equity on day one, which usually means no private mortgage insurance (PMI).

Feature	What voters approved
Total program size	Up to $25 billion in revenue bonds
Loan size	Up to 17% of the purchase price
Your minimum down payment	3%
Eligible homes	Newly built homes or condos only
Income limit	Up to 200% of area median income
Price cap	125% of the local conforming loan limit (roughly $1.04 million in most counties and about $1.56 million in the priciest)
Other rules	California resident, owner-occupied

Because the money comes from private investors and is paid back by borrowers, supporters and most outside experts agree it isn’t expected to cost state taxpayers. No official argument against Prop 37 was filed in the voter guide.

What it could look like in dollars

Example

A newly built $700,000 home, using this week’s Freddie Mac average of 7.18% for the first mortgage (30-year, principal and interest only):

You put down 3%: $21,000
Prop 37 loan covers 17%: $119,000
First mortgage covers 80%: $560,000, about $3,794/month

The second loan’s rate hasn’t been set. If it were 6%, that’s about $713/month; at 7%, about $792; at 8%, about $873 (assuming a 30-year term, which also isn’t set yet). Compare that with borrowing $679,000 on one loan at 7.18%: about $4,600/month plus PMI.

So the big win is the smaller cash needed up front, not a smaller monthly bill. Run your own scenario with the mortgage calculator and check the debt side with the DTI calculator.

The catches

The interest rate is the big unknown. Investors take on risk, and CalMatters reported that critics worry the loans may not be cheap enough to help the people who need them most. Supporters say foundations or other investors could buy the bonds at lower rates, but none had been named.
Two payments, not one. A second mortgage adds a monthly bill, which affects your debt-to-income ratio. Lenders will look at both. See our guide to debt-to-income ratio.
New homes only. Resale homes don’t qualify. That narrows choices, though supporters say it should encourage more building.
It isn’t available yet. The law takes effect after the results are certified (due December 11). Then CalHFA needs to write rules, sign up lenders and sell bonds. Expect late 2027.

Myth buster“Prop 37 gives buyers free down payment money.” No. It’s a loan that you repay monthly. It’s different from programs that defer repayment until you sell or refinance.

Prop 1 also passed

Voters also approved Proposition 1, an $11.25 billion general obligation housing bond. Nearly two-thirds goes to apartment buildings for low-income Californians, including people facing homelessness. The rest is split among programs including low-cost home loans for low-income buyers and veterans, plus farmworker, student and tribal housing. Supporters estimate it could fund close to 40,000 affordable units.

Fun factProp 37 uses revenue bonds, which are paid back by the borrowers. Most California bond measures, including Prop 1, use general obligation bonds, which the state repays from its general fund.

What California buyers can do now

Prop 37 won’t help if you’re buying in the next year. Look at programs open today. Our guide to down payment assistance explains the main types.
Learn how piggyback (80/10/10) loans work. Prop 37 is a state-run cousin of the same idea, using a second mortgage to avoid PMI.
Compare costs of the two-loan route vs. one loan with PMI. Our PMI guide covers how PMI can be removed later.

What to watch next

December 11: California certifies the election results.
2027: CalHFA rulemaking, lender sign-ups and the first bond sales. The interest rate and loan term will be the details to watch.
Late November: FHFA usually announces next year’s conforming loan limits, which affect Prop 37’s price cap.

FAQ

Did California Prop 37 pass?

Yes. The Associated Press projected it passed on election night, November 3, 2026, with about 61% of the vote in early counts.

When can I apply for a Prop 37 loan?

Not yet. CalHFA must first create the program, and that’s expected to take until about late 2027.

Does Prop 37 work for older homes?

No. It only covers qualifying newly built homes and condos.

Do I have to repay the Prop 37 loan?

Yes. It’s a second mortgage with monthly payments, not a grant.

Sources: California Secretary of State Official Voter Information Guide (Proposition 37); CalMatters (November 2026); CBS News San Francisco (November 3, 2026); Patch, citing the Associated Press (November 5, 2026); FHFA 2026 conforming loan limits; Freddie Mac Primary Mortgage Market Survey (November 5, 2026). Results are unofficial until certified. Payment examples are principal and interest only. This article is general education, not financial advice. Keys & Coffee is not a lender.

Written by

Shivam Kaushik· IMSHIVA

Founder & Director, QuibbleTech Solutions Pvt Ltd · Editor, Keys & Coffee

Shivam Kaushik is the founder of QuibbleTech Solutions Pvt Ltd and the editor of Keys & Coffee. He is not a licensed loan officer or financial adviser. Every guide here is written in plain English and checked against official sources such as the CFPB, HUD, Fannie Mae, Freddie Mac and the Federal Reserve. For advice on your own loan, talk to a licensed lender.

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Keys & Coffee is an independent education site. We are not a lender or mortgage broker, we do not take loan applications or payments, and nothing here is financial advice. This site is not affiliated with Axia Home Loans, Axia Financial, LLC, or Planet Home Lending. Rates and rules change often — always confirm details with a licensed loan officer and check any lender on the NMLS Consumer Access site.