If you're a first-time buyer purchasing in a designated high-cost census tract and your income is at or below 120% of the area median, the GSEs (Fannie Mae or Freddie Mac) can issue price credits toward buying down your interest rate. The credits are not a loan, not a grant, and not taxable — and they don't have to be paid back.
What is the High Cost Area Purchase Program?
It's a conventional purchase program that delivers agency price credits — essentially a waiver of certain loan-level price adjustments (LLPAs) — that can be applied toward an interest rate buydown. The goal is to expand access to affordable, sustainable homeownership in the parts of the country where home prices are highest. California has the most designated high-cost areas in the nation, which makes this program especially relevant across the Bay Area.
The program traces back to the Federal Housing Finance Agency (FHFA). On October 24, 2022, the FHFA announced targeted changes to the GSEs' purchase-mortgage pricing framework, eliminating loan-level price adjustments for certain borrowers and affordable products. Fannie Mae's Lender Letter LL-2022-05 (originally published November 5, 2022) implemented those changes through a set of new programs, including the High Cost Area Purchase Program. Each year the FHFA publishes a dataset of every U.S. census tract — including its high-cost designation and area median income (AMI) limits — that lenders use to determine eligibility.
How the agency credits work
When you and the property qualify, the agency provides a price credit on your rate lock. Your loan officer uses that credit to buy down your interest rate, which lowers your monthly payment for the life of the loan. The exact credit depends on factors like the census tract, your loan amount, loan-to-value ratio, credit score, and property type — so the dollar figure is specific to each scenario, not a flat amount.
On a condo listed at $799,000 in a high-cost tract in South San Francisco, a qualified first-time buyer could receive up to $24,619 in agency credits (up to roughly 3.625 points) toward a rate buydown — based on example assumptions of $16,810 monthly income, a 639 credit score, and 85% loan-to-value. Your numbers will differ. The fastest way to get a real figure is to run your scenario with me.
Program requirements
Standard conventional underwriting guidelines apply, plus two additional requirements unique to this program:
| Requirement | Detail |
|---|---|
| First-time homebuyer | At least one borrower with no ownership interest in a primary residence in the past 3 years |
| Income limit | Total qualifying income at or below 120% of Area Median Income (AMI) |
| Occupancy | Owner-occupied primary residence |
| Location | Property in an FHFA-designated high-cost census tract |
| Loan purpose | Purchase |
Where the high-cost areas are
California has the most high-cost areas and the highest AMI limits in the country, with Washington second. In the Bay Area, that includes tracts across cities like San Francisco, Oakland, Fremont, Hayward, Berkeley, Concord, San Leandro, Daly City, and beyond. Designations are set tract-by-tract and updated annually, so two homes on the same street can have different eligibility. Before you fall in love with a listing, it's worth a quick check — I can confirm a specific address in minutes.
Why this matters for Bay Area buyers
In a market where every basis point on your rate translates to real monthly dollars, a meaningful price credit toward a buydown can be the difference between qualifying and not. Because the credit lowers your rate rather than just your closing costs, the benefit compounds over the years you hold the loan. And since there's no education course requirement and underwriting is standard conventional, eligible buyers can move quickly in a competitive market.
Frequently asked questions
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I'll verify the census tract, confirm the income limit, and tell you exactly what agency credit you could put toward your rate — with your real numbers, no guesswork.
