A lot of first-time homebuyers remain hesitant about the market. At the forefront of concern is the potential for job loss, as more companies need to downsize. Without a job, how would a new homeowner pay the mortgage? What happens when you’re laid off? California real estate agents have come up with a possible solution: Layoff Insurance.

California Realtors Unite!
The California Association of Realtors recently announced their plan for a brand-new program aimed at first-time homebuyers. The Housing Affordability Fund Mortgage Protection Program will be offered to those first-time buyers who lose their jobs, contributing up to $1500 for monthly mortgage payments. There are, however, certain qualifications that must be met upon applying to the program.

Applicants must:

  • be a first-time home buyer, having never owned a home in the last three years.
  • open escrow April 2, 2009, or later, and close on or before December. 31, 2009.
  • use a California REALTORĀ® in the transaction.
  • purchase the property in California.
  • be a W-2 employee (cannot be self-employed, a business owner, a temporary/seasonal worker, an educational employee on a scheduled break or military personnel and cannot work for their immediate family).
  • not be voluntarily unemployed.
  • not be on a leave of absence (death, pregnancy, disability).

If eligible, applicants may receive up to $1500 per month (for up to six months) to help pay their mortgage. The Association says it will spend $1 million on the program this year, and predicts that as many as 3000 families will benefit from the program this year alone.

Now the big question: How much does it cost? While the benefits may be taxable, the insurance premium is covered by the California Association of Realtors for one year. Basically, if you are unemployed for six months out of that year, and the benefits are not taxable, the first-time homebuyer could pay nothing.

The Rest of America
Other companies offer the same assistance to anyone, no matter where they currently reside in the United States. While most of the same qualifications needed to be a part of the California Realtors’ protection program are also required to participate in other plans, the big difference is that you are also eligible for unemployment benefits or if you are laid off due to disability.

Take the program offered by Paycheck Guardian: like the California Realtors, this program does not cover the first 30 days of unemployment. However, you will only be covered for four months instead of six. And unlike those who seek help from California Realtors, those who wish to use Paycheck Guardian must pay a monthly membership fee to receive the benefits.

Should every state adopt this Layoff Protection Plan? Tell us your thoughts.