New advantage program with 1% down payment launched by Guild
Guild Mortgage has now joined the rank of lenders that are extending down payment assistance programs in a bid to attract more prospective homeowners during a period when mortgage rates remain significantly high.
This lender, which is headquartered in California, recently introduced a unique 1% down payment advantage program. With this innovative scheme, potential homeowners have the opportunity to purchase their dream homes with a minimum down payment that equals just 1% of the total buying price. Notably, Guild also pledges to cover 1% of the borrower’s interest rate for the first year through a lender-paid temporary buydown.
Traditionally, to secure a conventional loan, buyers are expected to make a 3% minimum down payment. However, Guild’s new program will cover 2% of this requirement in the form of a non-repayable grant, up to a maximum of $5,000. This is a significant benefit for potential homebuyers, as outlined by the company.
In order to qualify for this beneficial 1% down payment advantage program, there are certain criteria buyers must meet. They must possess a minimum credit score of 620 and a 95 to 97% loan-to-value first mortgage. Moreover, the program is only accessible to both first-time and returning buyers of single-family homes, whose income equals or is less than 80% of the Area Median Income (AMI).
David Battany, Guild’s executive vice president of capital markets, in a press release about the program, explained that, “We understand that homeownership accessibility extends beyond simply reducing the down payment. It’s about guaranteeing long-term sustainability by addressing the three crucial financial hurdles associated with buying and maintaining a home: initial costs, monthly expenditures, and financial resilience post-home purchase.”
The company also provides a payment protection program for qualifying borrowers who can refinance with zero lender fees in case of a drop in rates. This refinancing opportunity must be finalized no later than December 31, 2025, and the borrower needs to have made at least six consecutive on-time payments on their purchase loan prior to their application for refinancing.
Moreover, the borrower needs to finalize or must have finalized their purchase loan with Guild between October 17, 2022, and December 29, 2023, with a non-bond FHA, VA, USDA, or conventional conforming or high-balance loan, to be eligible for the payment protection program.
Various other lenders, such as United Wholesale Mortgage (UWM) and Rocket Mortgage, have also launched similar conventional 1% down mortgage loan programs in the second quarter of 2023 in a strategic move to gain more market share.
In order to be eligible for Rocket’s ONE+ program, applicants must have an income that does not exceed 80% of their Area Median Income (AMI). Rocket takes responsibility for the mortgage insurance costs on behalf of the buyers and offers unrestricted down payment assistance to borrowers, with no specified maximum limit.
Guild, primarily focused on purchase lending with a distributed retail model, faced a net loss of $32.7 million in the first quarter of 2023. The company originated loans worth $2.7 billion during the first three months of the year, a decrease of 9% compared to the previous quarter.
In terms of financial resources, Guild reported $147.8 million in cash and cash equivalents during the first quarter, which is a lesser amount available for its down payment advantage program compared to UWM and Rocket, and had $1.2 billion in unutilized loan funding capacity during that period.