Monica Lussier Blog

Purchasing a home in Santa Cruz County is a major economic endeavor, and one that often brings discouragement regarding median prices for a home in Live Oak or Watsonville. One of the biggest misconceptions regarding these programs is that only “low” income buyers qualify for assistance; the fact is, many individuals who make well over six figures, such as educators and registered nurses, qualify simply due to the high cost of living.

A robust support network exists to bridge the gap between earnings and housing costs, offering down payment assistance and access to deed-restricted inventory designed for affordability.

If you feel priced out by rising rents, it is essential to re-examine the numbers and explore these programs, which are specifically designed to help local workers transition into homeownership despite the high sticker prices.

Understanding Homebuyer Assistance: Loans vs. Grants

Before we dive into specific agencies, we need to clarify what kind of “help” is actually on the table. It is rarely a suitcase full of cash with no strings attached. Most programs fall into a few specific financial structures, and understanding the difference is key to knowing what you are signing up for.

• Deferred-Payment Loans: This is the most common type of aid. Think of it as a “silent second” mortgage. You borrow money for your down payment, but you don’t make monthly payments on it. Instead, you repay the principal—and sometimes a share of the home’s appreciation—only when you sell the home or refinance down the road.
• Forgivable Loans: These are the golden tickets. They start as a loan, but if you live in the home for a set number of years (often 5 to 10), the lender forgives the debt. It effectively turns into a grant as long as you stay put.
• Below Market Rate (BMR) Inventory: This isn’t cash assistance; it’s access to a specific pool of homes. Programs like Measure J or Measure O allow you to buy a home for significantly less than its market value. The trade-off is that when you sell, you must sell it at a restricted price to another income-qualified buyer.
• Grants: True grants that cover closing costs do exist, but they are rarer and often have stricter income caps.

CalHFA: The First Line of Defense

For most first time home buyers in Santa Cruz, the California Housing Finance Agency (CalHFA) is the best place to start. They don’t lend you the main mortgage money directly; instead, they work with private lenders to offer “junior loans” that sit behind your main mortgage to cover the heavy lifting of entry costs.

Additionally, the California Dream For All program provides up to 20% in shared appreciation assistance, though it operates in rounds and is currently expected to reopen for voucher registration in early 2026.

Crucially, CalHFA income limits are adjusted for the local economy, making these benefits accessible to many who assume they earn too much. As of 2025/2026, the income limit for these programs in Santa Cruz County is approximately $262,000. This high threshold ensures that many dual-income households and professionals, like teachers and nurses, can still qualify for significant first-time homebuyer support.

Santa Cruz County Specific Programs

For potential home buyers in the unincorporated areas of Soquel, Live Oak, or Aptos, the program that offers more than the state program is administered by the Santa Cruz County Planning Department.

Key local programs include:

• Measure J (Affordable Housing): This inclusionary zoning ordinance forces developers to reserve a certain percentage of the new housing they build as “affordable housing.” These lots are sold to buyers who meet income qualification guidelines but are also limited by price. You can build equity in the property; however, it is deed-restricted property. You cannot resell it for market rate; you are forced to resell it to an income-qualified buyer.
• CalHome Mortgage Assistance: This program aims to bridge the “gap” between your first mortgage and the purchase price of the home through deferred-payment loans, which are often capped around $56,400. These loans are usually at 3% simple interest, with no monthly payments required, thereby making them an ideal secondary financing tool.
• ReCoverCA Homebuyer Assistance: An important resource for those affected by the 2023–2024 severe storms and flooding. Qualified buyers are allowed to receive up to $300,000 in forgivable loans to buy a home within the area. These loans boast 0% interest and full forgiveness after five years of owner-occupancy.

City-Specific Assistance: Santa Cruz & Watsonville

Depending on exactly which street you buy on, you might qualify for city-level aid.

City of Santa Cruz – Measure O Measure O is the city’s equivalent to the county’s Measure J. It focuses on creating Below Market Rate (BMR) units within the city limits. Just like Measure J, these homes come with resale restrictions to keep them affordable for the next generation of workers. These are often condos or townhomes and are managed through the City Housing Division.

City of Watsonville – Down Payment Assistance Watsonville has one of the most generous programs in the region. The city offers a surprisingly large loan—up to $60,000—to first-time buyers. The terms are fantastic: it is a deferred loan with just 1% interest.

The catch? You generally need to already live or work within the Watsonville city limits to get the full amount. If you are coming from outside the area, the assistance drops significantly (often to $10,000). Buyers are usually required to contribute at least 3% of the purchase price from their own funds, but the city helps bridge the rest.

Non-Profit and Private Lender Options

Sometimes government programs have boxes you just don’t fit into. In that case, non-profits and private lenders can be excellent alternatives.

Habitat for Humanity: Monterey Bay Habitat is active in Santa Cruz and offers a unique model. Instead of a traditional down payment, you invest “sweat equity”—usually 500 hours of building your home or others. In exchange, you get a 0% interest mortgage. This is typically targeted at households earning between 50% and 80% of the Area Median Income.

Local Credit Unions: Don’t overlook local institutions like Bay Federal Credit Union. While not a government subsidy, local credit unions often have proprietary “first-time buyer” loan products. These might feature low down payments (around 3%) and wave the requirement for Private Mortgage Insurance (PMI), which can save you hundreds of dollars a month compared to a standard commercial loan.

Do You Qualify? Income Limits Explained

The terminology here can be confusing. When a program says it targets “Moderate Income” households, they are using a specific definition based on the Area Median Income (AMI).

Because living in Santa Cruz County is expensive, the AMI is very high.

• Low Income (80% AMI): For a household of four, this limit can be around $145,300.
• Moderate Income (120% AMI): For that same household, the limit can push well over $170,000.

It is also important to distinguish between Qualifying Income and Program Limits. Your lender looks at your qualifying income to ensure you can pay the mortgage. The assistance program looks at your total household income to ensure you don’t exceed their cap.

Being in that “goldilocks” zone—earning enough to pay the mortgage but not so much that you disqualify for aid—is the sweet spot.

Steps to Apply for Assistance in Santa Cruz

If you are ready to move from research to action, here is how the process usually flows. You cannot simply find a house and then ask for a grant later; the financing has to be built from the ground up.

1. Step 1: Get Educated Almost every program listed above requires you to complete a HUD-approved homebuyer counseling class. These are often available online or through local organizations like NeighborWorks. Get the certificate early; it’s good for a year.
2. Step 2: Work with an Expert Team Finding a specialized lender is only half the battle; you also need to partner with the best real estate agent in Santa Cruz who understands the nuances of local assistance. Not every professional knows how to layer a CalHFA loan with a Measure J purchase or navigate the city’s BMR lotteries. Ask your team upfront: “Have you successfully closed a Measure O or CalHFA transaction in the last six months?”
3. Step 3: Get Pre-Approved Before you fall in love with a property, get your mortgage pre-approval checklist sorted. You need to know exactly what your budget looks like with the assistance factored in.
4. Step 4: Application Once you have an accepted offer (or when applying for the Measure J lottery), your lender or the County Housing Division will handle the specific program application.

FAQs

What is the income limit for first-time homebuyers in Santa Cruz?

The limit depends entirely on the program. For County-run Measure J homes, the limit for a moderate-income family might be around $170,000, whereas CalHFA loan programs can have limits as high as $262,000. It is best to check the current year’s stats rather than assuming you earn too much.

Can I rent out my home if I buy it with the Measure J program?

No, you generally cannot turn a Measure J or Measure O home into a rental property. These programs are designed to create stability for owner-occupiers. If you move out, you usually have to sell the home to another qualified buyer or the county.

How much down payment do I need for a house in Santa Cruz?

Even with assistance, most buyers need to contribute at least 3% to 3.5% of the purchase price from their own funds. Assistance programs are great for covering the gap if you don’t have the full 20%, but having some “skin in the game” is almost always required.

Does Santa Cruz have grants for teachers or fire fighters?

Yes, specific occupations often get extra help. The CalHFA programs often have provisions for public school employees and fire/police personnel, and there are federal “Good Neighbor Next Door” options that may apply to specific properties.