If Newsom signs the bill, qualified applicants would be eligible regardless of their immigration status. The program, called California Dream for All, took effect last year to help first-generation home buyers get interest-free loans of as much as 20% of a home's value in one of the country's priciest states for real estate.

The bill, which the state legislature passed late Wednesday, will potentially put Newsom in the spotlight as controversy swirls over immigration in this year's presidential race. Former President Donald Trump slammed Vice President Kamala Harris on illegal border crossings earlier this month. Harris, who like Newsom is a California Democrat, has vowed to bring back an overhaul of US immigration law backed by many conservative lawmakers in Congress.

Newsom, a close ally of President Joe Biden, has until Sept. 30 to sign or veto the California bill. Brandon Richards, a spokesperson for the governor, said Newsom doesn't typically comment on pending legislation and "will evaluate the bill on its merits." 

In California, first-time buyers are eligible to tap the state program, with loan amounts for the 20% of a home's value capped at $150,000. If they sell the home, they must repay the original loan amount plus 15% to 20% of the home-value appreciation, depending on their income. 

In June, Newsom said 1,700 families were conditionally approved to participate in the second round of Dream for All, putting them in line for $255 million in funding.

The program is funded through taxpayer dollars and money generated by mortgage loans issued by the California Housing Finance Agency. But the program didn't get any new funds for next year because of a budget shortfall, according to the state finance department. 

While the bill approved by lawmakers wouldn't exclude undocumented immigrants, applicants would need to meet qualifications required by the Federal National Mortgage Association to be eligible for the state program, such as having a taxpayer identification number or Social Security number.

The bill's author, Assemblymember Joaquin Arambula, has said that his goal in expanding the program is to help provide additional support to low- and middle-income Californians.

The measure "is about providing an opportunity to hard-working, responsible people who dream of owning a home and passing that legacy to their children – a dream that we all have for all our families in California," he said in a statement. "And that includes undocumented immigrants who have lived here for decades and pay their taxes."