Another day, another affordable home loan program launches, this time “OneDown” from Guaranteed Rate.
As the name implies, you only need to put 1% down when purchasing a home, which is about as close to zero as it gets.
If you’re wondering why lenders are offering such mortgages, it comes down to affordability, or a lack thereof.
Home prices remain at or near all-time lows, despite some pullback a few months back.
And mortgage rates remain stubbornly high, with the 30-year fixed close to 7%.
Guaranteed Rate OneDown: Their 1% Down Home Purchase Loan
If you’re in the market to buy a home, despite those pesky high interest rates (and home prices), you might be feeling a little stretched.
To alleviate some of that burden, Guaranteed Rate has joined other lenders in launching a 1% down mortgage, which they call OneDown.
As you may or not know, Fannie Mae and Freddie Mac offer loans with just 3% down, such as HomeReady and Home Possible.
But apparently that is still too much for some buyers, so Guaranteed Rate is chipping in an additional two percent contribution towards that down payment.
They will provide 2% or up to $2,000 (whichever is lower), meaning you’ll probably get the full $2,000 in most cases unless you’re buying a sub-$100,000 home? I don’t think those exist anymore.
On top of that, OneDown also provides borrowers with a $1,000 contribution toward their lender fees, such as underwriting, processing, origination fee, etc.
So you can reduce your cash outlay at closing via a smaller down payment and fewer closing costs.
Who Qualifies for Guaranteed Rate OneDown?
If the program sounds interesting, let’s talk about qualifying.
Like many other homebuyer assistance programs, this is geared toward first-time home buyers.
That means you can’t currently own a home, and it must have been three years since you owned a home in the past.
And while no geographic restrictions apply, there are income limits. Your area median income (AMI) must be under 80%, which you can look up here.
Additionally, the loan must be for the purchase of a primary residence. No second homes or investment properties.
The property itself must be a single-family residence or condo/townhouse. It’s unclear if multi-unit properties are permitted.
You must also contribute a minimum of 1% down payment from your own funds, and you’ll likely need at least a 620 FICO score.
Lastly, at least one borrower (assuming there are multiple) must complete a homebuyer education course if all occupying borrowers are first time home buyers.
I believe the $3,000 ($2k down payment and $1k closing costs) comes via a grant and lender credit, meaning it doesn’t need to be paid back.
But always verify with the company itself before moving forward.
Tip: You may be able to combine this offer with a seller paid temporary buydown as well to lower your monthly payment too.
Is Guaranteed Rate OneDown a Good Deal?
While it’s nice to get some financial assistance, Guaranteed Rate isn’t alone here. There are several other lenders offering similar deals.
For example, Guild Mortgage 1% Down Payment Advantage is basically the same deal, but with up to $5,000 in down payment assistance. That’s up to $3,000 more than Guaranteed Rate.
The difference is they offer a 1% temporary buydown instead of the 1% lender credit toward closing costs.
Then there’s Rocket Mortgage ONE+, which comes with a 2% grant as well and mortgage insurance at no cost to the borrower.
Another possible winner is the new U.S. Bank Access Home Loan, which offers up to $12,500 in down payment assistance and a lender credit up to $5,000. But it has geographic restrictions.
You also find similar deals in your local city or state that provide a non-repayable grant. So be sure to check those options as well.
Ultimately, if you plan to use Guaranteed Rate anyway, this is a bonus $3,000 in value assuming you max it out.
And that could make the dream of homeownership a little bit easier, especially with mortgage rates and home prices so high at the moment.
Just always take the time to compare options, and consider the big picture, including mortgage rate, lender fees, and so on.
It might be possible to find a different lender that charges less, thereby saving you money a different way.