In an effort to provide as many options as possible to potential homeowners, Quicken Loans has collaborated with Freddie Mac to provide a purchase mortgage loan that only requires a 1% down payment.
Here is yet another example of why you should shop around to find the best mortgage loan to suit your financial situation. Mega banks such as Bank of America and JPMorgan Chase have only recently been able to offer loans with a 3% down payment. Quicken Loans’ 1% down mortgage is 66% lower.
The program was spawned out of the partnership between Quicken and Freddie Mac that was announced in October 2015. The executive vice president of Freddie Mac’s single-family division, Dave Lowman, remarked that the partnership was designed to feature co-developed products to meet the needs of emerging markets, including Millennials, first-time homebuyers, and middle-class borrowers.
The 1% down mortgage is structured to be part of Freddie Mac’s Home Possible Advantage Program, which launched in December 2014, and requires a 3% down payment. So how does Quicken Loans offer a 1% down payment? The lender offers a 2% grant to the borrower, effectively creating 3% in equity.
But the 1% down program isn’t for everyone; there are strict qualifications. This loan is only made available for a purchase mortgage, not refinancing, and can only be used on a single-family home or condo, not a second home, investment property, or co-op. Additionally, borrowers must have a FICO score of 680 or above, must earn less than the median income for their county, and carry a debt-to-income ratio (DTI) of 45% or less.
If the obstacle preventing you from homeownership is little cash on hand, this may be an option for you.