Last month, United Wholesale Mortgage, the nation’s largest home mortgage lender, announced it would begin offering loans requiring down payments of just 1% of the home’s purchase price. Fellow lender Rocket Mortgage soon followed in its footsteps, announcing the launch this week of a similar program called One+, which doesn’t require borrowers to pay private mortgage insurance (PMI), or PMI that traditionally kicks in with down payments of less than 20%, Realtor.com reports.
These bargain mortgages create a more affordable route to homeownership for cost-burdened Americans, but experts also warn that low down payment loans could be risky for borrowers who have limited savings.
And as home prices have begun falling in certain parts of the county, buyers who don’t make larger down payments could find themselves owing more on their mortgages than their homes are worth in these areas.
“Making it easier for everybody to get a mortgage with only 1% is like putting candy in front of a baby,” says mortgage lender Shmuel Shayowitz, president and chief lending officer at Approved Funding in River Edge, NJ. “People who should not be buying homes will be encouraged and enabled to buy homes.”
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