The new 1% Down Home Loan is an enhancement to an already affordable lending product with low down payment options and flexible credit qualifying standards for Washington State homebuyers! This new loan program is based on the already existing qualifying credit, income, and asset criteria for conventional financing.
With the 1% down loan program, the 2% “gift or grant” against the 3% down requirements is coming from the mortgage company, Guild Mortgage. This program is another sign of improved lending conditions for well-qualified homebuyers.
This program is designed to provide mortgage options to credit worthy, low- to moderate-income clients with an expanded eligibility for financing homes in designated low-income, minority, and disaster-impacted communities.
Watch This Short Video I Made Explaining the **NEW** 1% Down Loan
What Does Credit Worthy Mean?
The 1% Home Loan program refers to “credit worthy” as a borrower that has a minimum credit score of 680 (versus the 620 minimum with the 3% down HomeReady program). Click here to apply for the 1% Down Home Loan.
In order to be “credit worthy”, the borrower must meet the conventional post bankruptcy (4 year wait), short sale (4 year wait) , and foreclosure (7 year wait) qualifying guidelines.
What Does Low-to-Moderate Income Mean?
Like other down payment assistance programs such as the HomeReady™ Mortgage program is designed to assist families that need a little help when it comes to purchasing a home.
The U.S. Dept of HUD applies designated AMI codes (area median income) for areas throughout each county in Washington State. The AMI is a statistic for purposes of determining the eligibility of applicants for certain federal housing programs. HUD determines AMI on an annual basis for each metropolitan area and non-metropolitan county, making adjustments for household size and other factors.
The 1% Down Home Loan has 3 levels of income eligibility:
1. Area allowing for 80% of the AMI (most common)
2. Area allowing for 100% of the AMI
3. No income limit (search no income limit areas here)
For example, in Everett, Wa, using the 98208 zip code, you’ll see the AMI $85,100/yr, and the eligibility code allows for 100% use of the AMI (gross annual household income). Therefore the max household income to qualify for a HomeReady™ Mortgage is $85,100.
But check this out – if you were to cross interstate-five into the 98203, 98204, or 98201 zip codes, the AMI is still $85,100, BUT the eligibility code has NO INCOME LIMIT. There are no restrictions to household max income. This is huge to know!
Examples of Home Loan Eligibility By City
* Seattle HomeReady™ Mortgage Eligibility – mostly 100% of AMI $96,000 (with multiple areas of NO INCOME LIMITS near hwy 522 in North Seattle)
* Everett HomeReady™ Mortgage Eligibility – mostly 100% of AMI $96,000 (with multiple areas of NO INCOME LIMITS)
* Mt. Vernon, Wa HomeReady™ Mortgage Eligibility – mostly 100% of AMI $68,200 (with multiple areas of NO INCOME LIMITS near East College Way toward Skagit Valley CC)
* Marysville HomeReady™ Mortgage Eligibility – mostly 100% of AMI $96,000 (with multiple areas of NO INCOME LIMITS near downtown Marysville/State Avenue)
Use this link to look up areas you may be considering buying, then contact me when you are finished so that I can verify the information you find (PS – calculating AMI income can be confusing). HomeReady Income Lookup
The Nine 1% Down Home Loan Facts To Know:
(1) Minimum 1% Down Payment
(2) Does NOT allows for the use of gift funds toward down payment
(3) Allows gift funds to cover closing costs only
(4) Does not allow for non-occupying co-borrower
(5) Flexible debt-to-income ratio limits, possibly up to 50% vs 45%
(6) Requires a 5-hour course in home ownership education (we offer them)
(7) Low Private Mortgage Insurance premium factor (over 45% dti, 700 Fico required)
(8) Very low 30-yr fixed rate
(9) Does NOT allow manufactured homes or 2-4 unit properties
The 1% Down Home Loan Summarized
The most common reason why a this loan option is used is for it’s reduced monthly PMI factor associated with the low 1% down payment benefit. Also, I can also confirm that homebuyers enjoy the flexible credit and underwriting guidelines relative to being a first time homebuyer.
How to Get Approved For the 1% Down Home Loan
I encourage you to reach out to me through email or phone to have a mortgage planning discussion surrounding your mortgage goals and budget. There are so many additional factors that go into qualifying for a 1% Down Home Loan. It’s also important that you are working with a professional that understands the ins and outs of this new program; and someone that can compare this program with a USDA Home Loan, Fannie Mae HomeReady Program, FHA loan, and 5% Down Conventional Loans.
To apply for the 1% Down Home Loan at New American Funding, visit my Mortgage Concierge Page and follow steps one and two.
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