As housing affordability wanes, mortgage lenders have gotten increasingly creative to help borrowers qualify.
The latest innovative product is “Movement Boost,” a zero-down FHA loan offered by South Carolina-based Movement Mortgage.
Instead of requiring a minimum 3.5% down payment, home buyers can take out a repayable second mortgage that covers those funds and closing costs if needed.
This means a home buyer doesn’t need any cash to close in some cases, which often proves to be a roadblock.
Read on to learn more about the new loan program.
How Movement Boost Works
Movement Boost takes the standard FHA loan and supercharges it by removing the 3.5% down payment requirement.
Instead, borrowers wind up with a first and second mortgage, the latter covering the down payment and up to 1.5% in closing costs if necessary.
The first mortgage is set at 96.5% of the purchase price, with the remaining 3.5% funded via a repayable second lien.
This second lien features a mortgage rate 2% above that of the first mortgage. And the loan term is 10 years.
For example, if you purchased a $300,000 home, you’d take out a first mortgage at $289,500.
You’d typically need $10,500 to make the minimum down payment of 3.5%.
But with Movement Boost, that $10,500 could be financed via a second mortgage. Additionally, you could tack on another 1.5% ($4,500) for closing costs.
Let’s pretend the interest rate on the first mortgage is set at 6.5%. That would make the second mortgage rate 8.5%.
This would result in a monthly payment of $130.18 if the loan amount were $10,500. Or $185.98 if you took out a larger $15,000 loan to cover closing costs also.
While you’d have to make two monthly mortgage payments, the tradeoff would be $10,500 to $15,000 more dollars in your pocket.
Movement Boost Guidelines
- Home purchase loan for first-time and repeat buyers
- Must be a primary residence
- Single-family homes, 2-unit properties, condos, and manufactured homes permitted
- Minimum 620 FICO score (640 for manufactured homes)
- Maximum DTI ratio of 50%
- Can finance down payment and up to 1.5% in closing costs
- Available in all states except for New York
As noted, Movement Boost is an option for a home buyer looking to take out an FHA loan who wants/needs help with the down payment and possibly closing costs too.
This means you need to be a home buyer, though both first-timers and repeat buyers are eligible.
Additionally, a minimum 620 FICO is required and the maximum DTI ratio is 50%.
In terms of allowable property types, single-family homes, condos, two-unit properties, and manufactured homes are permitted.
If it’s a manufactured home, you need a minimum FICO score of 640.
In all cases, the property must be your primary residence, the one you intend to live in full time throughout the year.
Those who wish to come in with a larger down payment can also apply gift funds from an acceptable source.
The new product is available nationwide in all states except for New York.
Who Is Movement Boost Designed For?
Simply put, Movement Boost is geared toward the home buyer who lacks a down payment. Or one who doesn’t want to lock up all their cash in a property.
It combines a low-down payment FHA loan with down payment assistance to provide zero down home loan financing.
The program is part of Movement Mortgage’s Grab The Key initiative, which focuses on helping more underserved communities tap into homeownership.
By financing the down payment instead of paying it at closing, borrowers can deploy their money elsewhere. Or continue to build up their reserves while owning a property.
The caveat is that the borrower must qualify for two mortgages instead of one. However, the loan amount on the second mortgage will be comparatively small.
And as seen in our example, may only set the borrower back $100-$200 per month. It also features a shorter payback period, which allows the homeowner to build equity faster.
As always, be sure to compare all available loan options with multiple banks, brokers, lenders, and local credit unions.
Also ask yourself if you’re ready for homeownership if you lack the minimum down payment required.
It’s generally advisable to have several months of reserves set aside so you can continue to make payments if facing some kind of hardship.
Of course, financing the down payment instead of paying it upfront may allow you to set aside those funds.
Lastly, be sure to compare the pros and cons of an FHA loan vs. conventional loan to see which is best for your situation.
One downside to an FHA loan is that the mortgage insurance remains in force for the life of the loan.
Movement Mortgage was a top-30 mortgage lender in 2022, funding about $23 billion during the year.
Read more: Rocket Mortgage Launches a 1% Down Home Loan