Conventional 1% Down
Many Homebuyers will now qualify for the 1% down program!
With a weakened economy, and inflation at historical highs, many potential homebuyers are finding themselves short when it comes to liquid capital. Having savings built up to cover 6-10% of the purchase price for a down payment and closing costs has proven to be an obstacle for many borrowers. To counter that, many lenders have incorporated programs that will pay as much as 2% of the borrowers down payment.
How it works
There are some qualifications that have to be met that will be discussed later in this article. The basic idea is that a grant is added to the application for up to 2% of the purchase price, ultimately lowering the down payment requirement for the HomeReady and HomePossible programs. These programs typically allow 97% Loan to Value (LTV). By applying the lender-paid grant, the borrower still maintains the 97% LTV, while only paying as little as 1% down!
Income Requirements
When a loan originator quotes you an interest rate, it is based on the market at the time that they are quoting you the rate. That rate can rise or fall during the process of document collTo qualify for the 1% Down program, the borrower(s) need to qualify for HomeReady or HomePossible. One of the largest qualifications for these programs is income. Both FannieMae and FreddieMac (the owner of the HomeReady and HomePossible programs, respectively) use what is called Area Median Income (AMI) as a tool for income qualification. You can lookup your area here.
The AMI is a preset limit, that demonstrates the average household income for each county. To qualify, borrowers income must fall at or below 80% AMI for thier area. Both FannieMae and FreddieMac have recently adjusted the AMI nationwide to raise the levels by 9% on average, making qualification more attainable.
Some other requirements
In addition to the income requirement, borrowers must also meet these requirements:
- Debt-to-Income (DTI), which is a ratio of income to debt that appears on your credit report, must fall within 43%.
- 2% grant will not exceed $4,000. If the purchase price of the house exceeds $200,000, the borrower must pay the difference to bring the LTV to 97%.
- Must attend Homebuyer education course.
- Some restrictions apply to manufactured homes.
The 1% Down Program is Helping Homebuyers Obtain Homeownership
Even if you do not have a hefty amount in your bank account, you may still qualify for a home mortgage loan. In addition to the 1% Down Program, we also have Down Payment Assistance (DPA) that could help get you in to your own home. Reach out to us to discuss your situation and have one of our loan experts go over your options or fill out our online application to get started.