One of the largest mortgage lenders in the United States, United Wholesale Mortgage, is offering a new zero down mortgage program that will allow buyers to pay 97% of the home’s value with a first mortgage and then provide the remaining 3% in the form of a second mortgage.
According to the new program, the future homeowner can receive up to $15,000 or up to 3% of the purchase price of a home, whichever is less, for a down payment assistance loan. It is a second loan, in addition to the mortgage, but has a 0% interest rate and no monthly payment.
If you are buying a home valued at $300,000, for example, you could take out a zero-interest loan of $9,000 (3%) for the down payment. To get the maximum offered by the program, $15,000, you would need to buy a $500,000 home.
The $9,000 loan (which will be used as a deposit) will only need to be repaid when the homeowner sells the property, finishes paying off the traditional mortgage, or refinances the home. The primary mortgage has interest and follows the traditional loan requirements for home purchases.
Who qualifies for the program?
The new United Wholesale Mortgage program is available to first-time homebuyers, as well as to middle-income consumers earning equal to or less than 80% of the median income in the area where they are buying. They also need to have a FICO credit score of at least 640.
The typical first-time buyer puts down 8%, according to the National Association of Realtors. In the first quarter of 2024, the typical buyer of a residential property invested $26,000, Realtor.com said in a recent report.
The UWM program comes at a time when the housing market remains stagnant due to high interest rates, which are undermining demand for homes as well as limiting the stock of properties for sale. With mortgage rates above 7%, current homeowners – many of whom have rates below 4% – have little incentive to sell their homes and enter into a bidding war for another.
Real estate activity is expected to slow down in 2024, Fannie Mae said in a forecast published in May, as mortgage rates are expected to end the year at the current average of 7%. The company expects the 30-year mortgage rate to average 6.7% in 2025. This would push existing home sales to a pace of 4.19 million, Fannie Mae said – which is considerably lower than before and during the pandemic.
Source: CNN