A FEW YEARS AGO, EDWARD MONCRIEF, EXECUTIVE director of Neighborhood Housing Services of Silicon Valley—a nonprofit organization that promotes homeownership in lower-income neighborhoods—worried that the resources he relied on to provide pathways to homeownership for low- and moderate-income residents around San Jose, Calif., were drying up. “We were getting desperate to find money to continue,” Moncrief recalls.

Then, in November 2002, voters passed Proposition 46, a $2.1 billion statewide housing bond designed to fund affordable rental housing, emergency shelters, and homeless facilities, and to provide down payment assistance to first-time home buyers.

The ballot faced little opposition. Within months, money began flowing to the California Housing Finance Agency (CalHFA) and the California Department of Housing and Community Development (HCD). CalHFA received $318 million to bolster and expand its down payment assistance programs, and the HCD coordinates most of the Prop. 46 funds—those set aside for the multifamily and homeless programs.

Moncrief saw Prop. 46 as an opportunity to add to the services that his organization was already providing. He moved quickly to make Neighborhood Housing Services of Silicon Valley (NHSSV) a CalHFA mortgage broker—the agency partners with banks but does not loan to home buyers directly—and applied to participate in the Prop. 46–funded Homeownership in Revitalization Areas program.

Almost $12 million is available for the program, which provides lower-income, first-time home buyers with a loan at a 3 percent interest rate (of as much as 6 percent of the house price) for their down payments. CalHFA runs the program in conjunction with qualified nonprofits, which must provide counseling to prospective buyers.

Seven nonprofit organizations have been accepted into the program. It was an easy fit for Moncrief's group, which already offered home buyer counseling and had worked to rehabilitate neighborhoods since 1995.

The counseling is central to the Homeownership in Revitalization Areas program. At NHSSV, prospective buyers must complete at least 10 hours of free education. So far, so good: Moncrief's organization closed the first loan through the program and has a handful of others on the books and in the pipeline.

Moncrief and his staff work to link Cal-HFA with other assistance programs, most of which require a potential buyer's income to fall below low and moderate levels set by the state. Prospective buyers can only buy homes with prices that do not exceed a given amount (the price levels vary according to locality; see “Hitting the Mark,” left). If buyers meet the criteria, they're eligible to pair low-rate, 30-year fixed CalHFA mortgages with a multitude of other loans covering closing costs and down payments. Combining loans from localities and CalHFA can be expensive, adding up to as much as $100,000 for down payments and closing costs alone, says Evan Gerberding, a CalHFA marketing specialist.

Many new homeowners are benefiting from the School Facilities Fee program, another Prop. 46 program that requires no payback. It returns the school facility fee paid by a new home's builder to the homeowner if the house is in one of 10 “economically distressed” counties, falls beneath the home price limit, and the owner intends to live there for five years. CalHFA returned $4.4 million of the fees to buyers last year, with the average rebate around $3,200, Gerberding says.

Prop. 46's programs are praised, but when the money runs out—scheduled to happen between 2005 and 2007—they'll disappear. Some hope for another housing bond, but Robert Rivinius, CEO of the California BIA, which backed Prop. 46, doubts that will happen in the near term. “The state's finances are still in dire shape,” he says. “We have a lot of needs for the money.”