Garden State Home Loans has launched a 1% down payment program for first-time buyers, opening the door for millennial purchasers. This option is exclusive to home buyers in New Jersey, Connecticut, Florida and Pennsylvania.
With millennial homeownership on the rise, this program opens an avenue to greater eligibility and affordability for those with good credit and a low DTI. In addition to first-time buyers, those that haven't purchased a home in the last three years are also eligible.
The 1% down payment option is only applicable to purchase mortgages for properties used as a primary residence. The required credit score for this program is a hard 720 minimum, with a DTI of no higher than 43%.
Once a borrower using the program contributes 1% of a property's purchase price, the mortgage lender will supply an additional 2% toward the down payment, allowing the buyer to have 3% equity at the time of closing.
The maximum loan amount for this payment option is $424,100. The program is available with no mortgage insurance.
In 2014, Fannie Mae and Freddie Mac introduced 3% down payment options, opening the door for lenders to offer similar products. Freddie Mac has since tightened restrictions on seller-funded down payments and will no longer offer grants for the first 3% down starting Nov. 1.
Among those offering a 1% down payment option is Quicken Loans, whose executive vice president of capital markets, Bill Banfield, credited the company's 1% down program as "an instant success."