Zero-Down Loans Undergoing Reboot

The zero-down conventional mortgage loan product is being brought back at the Credit Union of Colorado. Experts say this will likely entice first-time buyers, and give some housing crash survivors a shudder.

In the program, the credit union will underwrite mortgages for about 97 percent for homes valued up to $467,100, and an added private mortgage insurance fee will be added each month. The institution will cover the last three percent of the home's cost with an interest-free loan to be repaid at a future sale or refinance. According to The Denver Post, qualifying buyers will pay 0.375 percent more on a 30-year mortgage rate than if they had made the down payment, translating to 5 percent interest for zero-down borrowers.

“We are looking for a way for individuals to get into the market right away rather than having to save up a down payment while the prices are going up,” said Doug Schneider, vice president of marketing at the credit union, which got its start serving state employees. Metro Denver home prices were rising 8.6 percent in April from a year earlier. And while that’s below the pace of prior years, only a few areas can beat Denver when it comes to home price appreciation the past five years.

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