Get Into Your Dream Home With Just 1% Down Using A 1 Down Home Loan

Buying a home is an exciting milestone in life, but saving up enough for a down payment can feel like an impossible obstacle for many potential homebuyers. With home prices continually rising and down payments typically 15-20% of the purchase price, coming up with tens of thousands of dollars or more seems out of reach for the average person. But what if I told you there are mortgage programs that allow you to buy a home with just 1% down? It’s true! 1 down home loans are becoming more widely available, making homeownership possible even if you have limited savings.

In this article, I’ll explain what a 1 down home loan is, who offers these low down payment mortgages what the eligibility requirements are and whether a 1% down mortgage is a good option for you. Stick with me – by the end, you’ll understand how you may be able to realize your dream of homeownership much sooner than you thought!

What Is A 1 Down Home Loan?

A 1 down home loan, also known as a 1% down mortgage, allows you to purchase a home by only putting 1% of the purchase price down as a down payment. The rest of the purchase price is covered by the mortgage loan.

For example, if you buy a $300,000 home, you would only need to provide $3,000 upfront rather than $60,000 (if a 20% downpayment was required). This makes homebuying possible for those without tens of thousands in savings.

Traditionally, lenders have required anywhere from 3-20% as a down payment on a home. But some government-backed mortgage programs, such as FHA loans, have allowed down payments as low as 3.5%. In recent years, more lenders have introduced their own proprietary 1% down mortgage programs to help improve affordability.

Who Offers 1% Down Home Loans?

Some of the top lenders currently offering 1 down home loans include:

• Rocket Mortgage – Rocket Mortgage’s ONE+ program allows borrowers to put down as little as 1% on a mortgage. Rocket provides a 2% grant to cover part of the downpayment.

• United Wholesale Mortgage – United Wholesale Mortgage’s 1% Down Program provides 2% of the down payment as a grant. Borrowers supply 1%.

• Movement Mortgage – Movement Mortgage offers a 1% down mortgage option combined with a 10-year second loan to cover the down payment.

• LoanDepot – LoanDepot’s mello smartLoan requires just 1% down with no mortgage insurance.

• Fairway Independent Mortgage – Fairway’s Ideal 1% Down program offers 1% down conventional loans.

As you can see, more and more lenders are piloting 1% down mortgage offerings. Ask your lender or mortgage broker if they offer anything similar.

Who Is Eligible For A 1 Down Home Loan?

While specific eligibility guidelines vary by lender, there are some general requirements to qualify for a 1% down home loan:

• Income Limits – Most 1 down programs have income caps based on the median income in your area. For example, Rocket’s ONE+ program is limited to borrowers earning no more than 80% of their area median income.

• Good Credit – You’ll need a credit score of at least 620 for most 1% down mortgages. Some programs require higher scores.

• Debt-to-Income Ratio – Your total monthly debt payments, including the new mortgage, usually cannot exceed 43% of your gross monthly income.

• Loan Type – Most 1% down mortgages are conventional loans that meet Freddie Mac or Fannie Mae guidelines. Government-backed FHA, VA and USDA loans go as low as 0% down for certain borrowers.

• First-Time & Repeat Buyers – 1% down mortgage programs are open to both first-time homebuyers and repeat buyers. There are typically no restrictions on property location either.

• Loan Purpose – You can use a 1% down loan for either purchasing a primary residence or a second home. Investment properties usually require higher down payments.

As with any mortgage, you’ll go through underwriting where the lender verifies you can afford the monthly payments. Make sure to check with your lender on specific qualifications.

Pros & Cons Of 1% Down Home Loans

Let’s look at some of the key advantages and potential drawbacks of using a 1% down mortgage:

Pros

• Only need 1% down, making homebuying more affordable

• May receive downpayment assistance grants from lenders

• Avoid paying private mortgage insurance (PMI)

• Conventional loans may have lower rates than FHA, VA, USDA loans

• Can still qualify even with average credit

Cons

• Higher monthly mortgage payments with less equity

• Risk being “upside down” if home values decline

• May be more difficult to qualify through underwriting

• Low downpayment offers could disappear in the future

• Lenders may limit availability to certain income brackets

While 1% down home loans provide an awesome opportunity for buyers, you do take on more risk when you put down less money upfront. Make sure you budget carefully, build up your savings over time, and buy a home you can comfortably afford.

Tips For Getting Approved For A 1% Down Mortgage

If you want to get approved for a 1 down home loan, here are some tips:

• Shop around with multiple lenders to find the best low down payment program options.

• Work on improving your credit score and reducing debt before applying.

• Calculate your ideal housing budget based on expected income, debts, and other costs.

• Be ready to provide recent pay stubs, W-2s, and bank statements to your lender.

• Get pre-approved for a specific loan amount so sellers know you’re qualified.

• Be prepared to make a compelling offer on the right home when you find it.

• Consider using downpayment assistance programs for first-time buyers if you need help.

• Ask the seller for closing cost assistance or seek gift funds from family if possible.

With the right preparation and research, you can position yourself to buy a home with just 1% down through a specialty mortgage program.

Are 1% Down Home Loans A Good Idea?

Whether a 1% down mortgage makes sense depends on your personal financial situation. If you have limited savings but are ready to buy, then a 1 down loan could be your ticket to homeownership now rather than waiting years to save a full downpayment.

Just keep in mind the risks of less equity and higher payments. Be conservative when setting your budget and choose a home well below what a lender approves you for. You can always make extra principal payments to build equity faster too.

I recommend running the numbers with a mortgage calculator for both a 1% down loan and 3-5% down loan to compare. Look at the differences in monthly payments, interest costs, equity over time, and how much you’ll need to save.

Evaluate your own savings abilities, job security, lifestyle needs, and market conditions. This will help determine if buying now with 1% down aligns with your goals and risk tolerance or if waiting and saving more is the smarter call.

Either way, 1% down home loans are an exciting option for aspiring homeowners ready to buy sooner. Keep them in mind and seek out lenders offering these programs when you’re ready to make your dreams of owning a home come true!