(MarketWatch) Home buyers will be able to buy a home without putting any money down under a new program launched by United Wholesale Mortgage, one of the largest U.S. mortgage lenders.
The Pontiac, Mich.-based company’s new program will be available to first-time home buyers and people earning at or below 80% of an area’s median income, the company said in a press release.
UWM UWMC, 0.49% will give eligible buyers a second-lien loan of up to $15,000, in the form of down-payment assistance, for 3% of the home’s purchase price. The loan will not accrue interest or require a monthly payment.
Buyers can also choose when and how often they want to make payments on that second loan, which must be paid in full by the end of the loan term if the first mortgage is paid off or if the borrower refinances the mortgage, UWM said.
“Homeownership is something we’re very passionate about,” Melinda Wilner, chief operating officer at UWM, told MarketWatch.
The company had previously allowed buyers to put down as little as 1% on their homes, but it wanted to go further to help home buyers, she said. The lender is anticipating a higher volume of borrowers with its new zero-down program, Wilner added.
Poor underwriting practices were a key driver of the subprime-mortgage crisis in the U.S., the International Monetary Fund wrote in 2008. But unlike the low- and no-down-payment loans that proliferated during that time — when lenders made loans to people who eventually were unable to pay them and lost their homes — UWM’s program is different, Wilner said.
“It is such a different time now than it was back then,” she said. “Underwriting guidelines are very, very different now than they were in 2006 and 2008 … and last time, we had a whole lot of oversupply of houses. … Now, demand is way heavy, compared to the supply that’s out there.”
Even the federal government acknowledges the steep hurdle that down payments pose to aspiring homeowners. President Joe Biden, during his State of the Union address, called on Congress to provide up to $25,000 in down-payment assistance to first-generation home buyers.
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UWM’s program is similar to down-payment assistance programs at the state and local levels, so “this isn’t a new concept,” according to Wilner.
