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Lower Down Payments Make Homeownership More Accessible

Although DownPayment Resource is reporting in their Down Payment Report for June that homeownership is struggling—63.9 percent of the population and falling—newer “super low down” loans are starting to become more popular with millennials to get their foot in the home-ownership door.

The standard 20 percent down payment is becoming less likely to be possible for first-time homebuyers. DownPayment Resource estimates that, on average, it takes nearly a decade to save for a traditional downpayment. In some places, such as Los Angeles and San Jose, California, it can take up to 24 years to save for a downpayment. Young people aren’t interested in waiting that long.

There are a number of “super low down” loans that allows buyers to own a home at a fraction of the cost. Quicken Loans, Guild Mortgage, Guaranteed Rate, LoanDepot, United Wholesale Mortgage, Chicago Infrastructure Trust, Movement Mortgage, Fifth Third Mortgage, and Bancorp South all offer some variation of a three percent equity mortgage.

In most instances the buyer is responsible only for 1 percent of the downpayment. The remaining 2 percent is acquired in the form of a grant from the lender, which, usually, does not have to be repaid. The remaining 97 percent of the loan amount is taken in the form of a 30-year conventional loan.

In other cases, such as Movement Mortgage’s zero down loan for first-time homebuyers, as defined as someone who has not owned a home in at least three years, the buyer would be supplied the entire three percent equity through a grant that would not have to be paid back. Fifth Third Mortgage and Bancorp South also have a zero down loan program.

Mary Ann McGarry, President and CEO of Guild Mortgage, spoke on the reasoning for creating their 1 percent down purchase loan.

“We wanted to make home-buying more attainable for more people, including millennials who are entering the housing market in increasing numbers … [w]e were able to create this breakthrough national program because we are a direct lender with many decades of strong investor relationships and first-time homebuyer expertise.”

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