The dream of homeownership is one that many people aspire to achieve. However, the prospect of saving for a hefty down payment can be daunting, exacerbated by the misconception that you need 20% down to buy a home. Thankfully, there are alternative options available. And in this blog post, we will explore how you can buy a house with only 1% down. We’ll walk you through the process, debunk the myth of the 20% down payment requirement, and explain how this specialty program can make homeownership more attainable with JVM Lending.
Buying A Home With Only 1% Down – Yes, It’s Possible!
This home loan option allows buyers to purchase a home with just 1% down, significantly reducing the initial cash requirement. The program is actually similar to traditional 3% down mortgages, but our program comes with a 2% grant. So buyers only have to come up with 1% of the purchase price while still starting out with 3% of equity.
What makes our 1% program even better is that it does not require Private Mortgage Insurance (PMI) or Mortgage Insurance (MI), – unlike almost all other low-down-payment mortgage options. This ensures that your payment will be that much lower and 100% predictable. What’s also great is that this program is not limited to just first time home buyers – this program is open and available to all qualified buyers, regardless of prior homeownership.
The Home Purchase Overview
Buying a home is an exciting journey, but it requires careful planning and preparation. First, start by familiarizing yourself with the real estate market and determining your budget. Getting pre-approved for a mortgage will give you a better idea of what you can afford.
Once you find your dream home, the process includes making an offer, negotiating with the seller, locking in an interest rate, completing inspections, and finally, closing the deal. With the 1% down payment program, you’ll be well on your way to making this dream a reality.
How a Down Payment Impacts Monthly Payments
The down payment you put towards a home directly affects your monthly mortgage payments. Obviously, the more you can contribute upfront in the form of a down payment, the smaller your loan amount will be. It of course follows that a smaller loan amount will have a lower monthly payment. So, while a 20% down payment may seem ideal from a payment perspective and, at the same time, unattainable from a savings perspective, alternative options like a 1% down payment loan with no PMI can significantly help with the financial obstacles that would otherwise prevent you from buying a home.
Debunking the Myth of Needing 20% Down to Buy a Home
There’s a common misconception that buying a home requires a down payment of 1o% to 20%. Surveys have shown that nearly 50% of consumers believe 10% or more was necessary for a home down payment, but this is simply not true.
According to data from the National Association of Realtors (NAR), most homebuyers put down much less. First time homebuyers on average put down 5% on their home purchase, while repeat buyers on average put down 17% thanks to their ability to transfer their existing equity. Fortunately, in today’s evolving real estate landscape, there are a variety of low down payment options available, making homeownership more accessible to a broader range of buyers – and our 1% down option is one of the best there is for all qualified homeowners.
No PMI: Keeping Monthly Costs Low
One of the most significant advantages of the 1% down payment program is the absence of PMI. Unlike traditional low down payment loans, you won’t have to pay this additional monthly cost, resulting in significant savings. This means your fixed monthly payment remains affordable and predictable, giving you peace of mind as a homeowner.
Qualifying for the 1% Down Payment Program
Because the 1% down payment program is a conventional loan product tied to affordable housing goals, there are several requirements you should know about to determine your eligibility:
- Income Limitations: To qualify for the 1% down payment program, your income must not exceed 80% of the median income in the area where you plan to buy a home. For example, let’s consider Dallas County, Texas, with an area median income of $102,700. To calculate the income threshold for eligibility, multiply the area median income by 0.8: $102,700 × 0.8 = $82,160. This means your qualifying income cannot exceed $82,160 to participate in the program. You can verify your area’s median income using Fannie Mae’s lookup tool, which will help you determine if you meet the income requirement for this innovative homeownership opportunity.
- Minimum FICO® Score: To be eligible for the program, you need a qualifying FICO® Score of 620 or better. Having a credit score within or above this range demonstrates your creditworthiness and financial responsibility, increasing your chances of approval.
- Property Type: The 1% down payment program is designed for single-unit primary residences only (condominiums or single-family homes). If you plan to purchase a property to reside in as your primary home, you meet this requirement.
- Down Payment Limitation: The program allows for a maximum initial down payment of 5%. This includes the 1% contribution from your own funds and the 2% grant. With this structure, you can start your homeownership journey with substantially less cash out of pocket.
Moreover, it’s essential to consider the concept of qualifying income. While there are income limits for eligibility, the program recognizes qualifying income in particular. This means that if you can meet the debt-to-income ratio (DTI) requirements without relying on bonus income or including another borrower on the loan, you do not need to include these additional sources of income in your qualifying income. This consideration provides some flexibility and may increase your chances of qualifying for the program, even if you think your income might be too high.
Our 1% down program has a maximum loan amount of $350,000. So, 1% down buyers always need to be conscious of that limit when looking for homes to purchase.
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December 4, 2023
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1% Down Is All You Need
The dream of homeownership is within reach, even if you don’t have a 20% down payment. By exploring alternative options like the 1% down payment program through JVM Lending, you can significantly reduce the initial cash outlay and benefit from fixed monthly payments without the burden of PMI. Take advantage of this innovative program and start your journey to homeownership with only 1% down. Owning a home may be more achievable than you think, and this program is designed to make that dream a reality. Don’t let misconceptions hold you back—explore your options with JVM Lending. We’ll help you qualify for the program so you can step into the world of homeownership with confidence.