1% Down Payment

These are mortgage programs that allow borrowers to buy a home with a down payment as low as 1% of the property purchase price. Borrowers make a 1% down payment and then receive a down payment gift from the lender, and this is added to their total down payment. For example, a borrower wants to buy a $100,000 house, so they contribute $1,000 (1%) of the purchase price. The borrower uses personal funds or gift funds from a relative to pay the down payment, and then they receive a gift for $2,000 (2%) of the purchase price from the lender, which makes a total down payment of 3%.

The down payment credit enables borrowers to purchase the home when they have only 1% do provide as a down payment.  This loan program is a Conventional Loan Program offered through one of our lender partners. It is available with no Mortgage Insurance (MI).

What are the advantages and disadvantages of the 1% down purchase program? The advantages are obvious, the buyer is able to qualify for a home purchase with a lower down payment. The disadvantages might be:

Advantages:

  • The buyer is able to qualify for a home purchase with a lower down payment.

Disadvantages:

  • A lower down payment means less initial equity in the home
  • The rates on this program are higher than rates on a 3%, 5%, 10% down payment, etc. Typically, the lower the down payment, the higher the rate.

Borrower qualification and eligibility requirements for 1% down payment programs may vary by lender. Borrowers must understand how 1% down programs work and determine if it is the right mortgage option for them.