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Over the past few months, 1% down payment mortgages are back with a vengeance.
We’ve already looked at a similar product from Rocket Mortgage One+ and rival United Wholesale Mortgage.
The programs have resurfaced as both home prices and mortgage rates remain extremely high.
Now San Diego-based Guild Mortgage has gone a step further by adding 1% down loans with a temporary buydown.
If that’s not enough to persuade a borrower to buy a home, who knows what is?
Guild Mortgage 1% Down Payment Advantage
Guild Mortgage’s new “1% Down Payment Advantage” program allows borrowers to finance up to 99% of home purchases.
On top of that, the company will also reduce your mortgage rate by 1% for the first year.
This is known as a temporary buydown, in which the funds are held in a buydown escrow account and spread over the course of the first 12 months.
As a result, the home buyer receives a lower monthly payment for the first year, and only a 1% down payment is required.
The down payment piece works by combining a 3% down conforming loan and a 2% non-repayable grant offered by Guild.
The maximum amount of the said grant is $5,000, meaning a maximum purchase price of $250,000 to receive the full 2%.
A minimum FICO score of 620 is required and area median income limits apply. Additionally, it must be a primary residence.
Both first-time home buyers and repeat buyers are eligible, but home buyer education is required.
It may even be possible to get your mortgage rate as low as 2% the first year and 1% the second year.
To accomplish this, you’ll need a seller’s contribution to temporarily reduce the rate to 2% for the first year, with the guild offering a 1% discount in year two.
This is known as a 2/1 buydown and provides payment relief for a full 24 months before the mortgage rate kicks in.
Guild Mortgage Payment Protection
But wait, there’s more. Guild is adding another benefit to its 1% Down program called “Payment Protection”.
The way it works is simple. At closing, the borrower will receive a “Payment Protection Program Certificate,” which can be used to refinance without lender fees.
You must have made six consecutive on-time payments on the purchase loan before applying for the refinance. ,
This must be a rate and term refinance (no cash withdrawals allowed) and the loan must not be closed after December 31, 2025.
Waived fees include fees paid to the lender, including origination, processing, underwriting, administration, closing or funding fees.
However, third-party fees may still apply, such as title insurance, escrow, and so on.
To sum things up, the guild is basically throwing the kitchen sink at the borrowers.
They’re offering a 2% subsidy for the down payment, a 1% reduction in the mortgage rate during the first year, and no lender fees if you refinance with them in the near future.
This goes to show how difficult the mortgage lending environment is currently. Volume has dropped sharply as mortgage rates approach 7%.
Guild Mortgage is a top-30 mortgage lender nationally and has funded approximately $20 billion in home loans through 2022.
But volume declined from about $34 billion a year earlier, forcing mortgage companies to get increasingly creative to garner new business.
good deal or not?
As always, you have to consider the big picture. Firstly, does it make sense to buy a home at this time?
Prices remain high and mortgage rates are no longer a bargain. And if you need a grant to make it work, you may be in over your head.
Second, is Guild offering the best combination of mortgage rates and fees relative to other options?
Sure, it’s nice to get a discount on your mortgage rate and a grant for the down payment in one year, but other companies offer similar programs.
So you still need to take the time to shop around with other lenders, credit unions, banks and mortgage brokers.
If Guild offers the best price and throws in all these extra perks, then maybe they could be a solid option.
Read more: Pursue an offer of $200 if they can’t beat your mortgage offer.
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