The down payment of a home can be one of the biggest hurdles to your purchase, as both new home buyers, and seasoned ones know.
There are many loans, grants, and programs out there that attempt to tackle the issue of the down payment, but none quite like the Conventional 1% Down Payment program.
The Conventional 1% Down Payment is a program that aims to help you get in a home with barely anything down.
The borrower puts 1% percent down, the lender contributes 2% towards the down payment, which gives 3% in equity at closing.
If you have any questions about how this works, please don’t hesitate to ask me – I work as a mortgage in the San Diego area and am more than happy to help.
For those looking for a great option in the San Diego, this loan offers: great low rates, a debt-to-income ratio of 43%, the ability to close in 30 days or less, and is available without monthly mortgage insurance.
This is an entirely new program when compared to the traditional 3% down programs most are familiar with.
It is available in all fifty states, so for those who are lusting after a San Diego home, but couldn’t find the right financing, need no longer worry.
Conventional 1% Down Payment
The Conventional 1% Down Payment is a fantastic resource, and one that is sure to help get more buyers and brokers in the door, especially if they are looking for a San Diego home, while also trying to save money.
There are some requirements that must be taken into consideration when applying for the Conventional 1% Down Payment program, however.
Here are the details about the program.
What Type of Loan Terms are Eligible for the Conventional 1% Down Payment?
The loan must be a 30-year fixed term with full amortization.
FHA: 203(b); 203(b)(2); 203(h); 234(c); in accordance with FHA guidelines. Temporary buy-downs permitted, per limits and rules.
USDA-RHS: in accordance with USDA guidelines. 2-1 or 1-1 Temporary buy-downs permitted, per limits and rules.
VA Loans: in accordance with USDA guidelines. 2-1 or 1-1 Temporary buy-downs permitted, per limits and rules.
Homes purchased with the Conventional 1% down payment program are not eligible for refinancing.
Does my Credit Score Matter?
Your FICO score has to be at a minimum of 700 FHA, VA and USDA loans.
Anything below 700 is unlikely to be approved.
As a rule of thumb, anything below 620 will be ineligible for most conventional mortgage loans and programs.
While this tends to be the case, and a FICO score of 740 plus qualifies you for the best interest rates and mortgage programs, some programs will still work with people that have a credit score below 620 or even no credit at all.
In some cases, your score can be slightly lower than 700 at 680 and you might still be able to qualify.
For a list of these programs, assistant programs, grants and mortgage programs, I highly recommend reading through my blog or contacting me directly.
I am happy to answer any and all questions you might have about these programs as well as the Conventional 1% Down Payment program.
Manufactured homes are not eligible.
Do I Need to be a First-Time Homebuyer?
You do not need to be a first-time homebuyer.
As a rule of thumb, a first-time homebuyer is someone who has either never owned a home or hasn’t owned a home within the last 3 years at the time of application or purchase of the property.
Most first-time homebuyers also have to attend first-time homebuyer education programs before they purchase their homes.
Fortunately, you do not have to worry about this with the Conventional 1% Down Payment program.
However, if all buyers or borrowers are first-time homebuyers, please see the section below on first-time homebuyer education, as it may be required in this instance.
Borrowers cannot have ownership interest in any other residential dwellings at the time of closing.
If All Borrowers are First Time Home Buyers, Home Buyer Counseling is Required From One of the Following:
1) An online homeownership education program developed by mortgage insurance companies
2) Homeownership education programs that meet the standards of the National Industry Standards for Homeownership Education and Counseling, or;
3) Programs using Freddie's CreditSmart (provided Modules 1, 2, 7, 11 and 12 are included).
What Types of Home Assistance Loans can I Use the Conventional 1% Down Payment with?
This is a special program with a specific lender and is only used with the San Diego Home Possible mortgage loan.
What can I Use the Conventional 1% Down Payment for?
It's very simple and straightforward.
You put down 1%. The lender gives you 2%. So, combined you are putting down 3%.
What Types of Homes are Eligible for the Conventional 1% Down Payment?
Approved home types for the Conventional 1% Down Payment include SFR’s (Single Family Residence), PUD’s (Planned Unit Development), condominiums, and manufactured homes on permanent foundations.
Homes that are purchased using the Conventional 1% Down Payment are allowed to be flipped by the homeowners – provided that the home is owner-occupied during the renovations.
In other words, you may use the Conventional 1% Down Payment to purchase a San Diego home, invest in the property, and then sell it for a profit.
What Types of Homes are Ineligible for the Conventional 1% Down Payment?
You may not use the Conventional 1% Down Payment to purchase multifamily homes or manufactured homes.
While this tends to be the rule of thumb, each situation can vary to some degree, so it is crucial that you talk with someone with expertise like man so that you fully understand the circumstances and requirements of your mortgage loan and all that you can expect during the life of a loan.
Do I have to be a U.S. Citizen to be Eligible for the Conventional 1% Down
Eligible borrowers include natural persons with a valid Social Security number and one of the following Residency statuses as determined by the United States Citizenship and Immigration Services (USCIS):
Permanent Resident Alien
Non-Permanent Resident Alien
The paperwork you will need to provide is the standard documentation you can expect any lender, bank or mortgage broker to require when analyzing your individual situation.
It helps to help documentation of your income, residency, credit score and other qualifying documents, such as: birth certificates, social security cards, income tax returns, pay stubs, proof of residency, drivers license or ID card, immigration papers / green card, any kind of proof of income such as W-2s, proof of any assets, etc.
Can I Have a Co-Borrower on the Loan?
A co-borrower is permitted so long as the co-borrower will be one of the occupants of the home.
Non-occupant co-borrowers are not allowed.
In other words, everyone on the loan that the Conventional 1% Down Payment is assisting with must occupy the home.
Non-occupants can, however, put gifts towards the loan itself, though this doesn’t necessarily apply to the Conventional 1% Down Payment program.
If you are not certain about whether any gifts or donations from family or friends would count towards the down payment, please don’t hesitate to reach out to me.
What is the Income Based on?
Income is based on a qualifying income, not household income.
Would I be Getting a Good Deal?
Let’s say the loan is for $400k.
The buyer, that’s you, puts $4,000 down.
This means you get $8,000 “Free”.
If we structure your offer to have the lender pay for your closing costs - or, the seller contribute - then, your only out of pocket is the $4,000 down.
In short, the Conventional 1% Down Payment program can help negate the often exponential costs that come with down payments and general mortgage issues.
If this loan doesn't work for you - keep in mind the State of California and the CalHFA all have plenty of wonderful programs, grants and assistance measures to help you get into the beautiful San Diego home of your dreams.
Whether it is with grant programs like the Sapphire Grant or the Help Grant, the CalHFA loans like MyHome Assistance, the CalHFA Zero Interest Program (ZIP), the ECTP, MCC Tax Credit Programs, or even just other government resources like FHA loans, VA loans or USDA loans, you always have options.
Many of these programs offer lower interest rates, lower down payments, more convenient terms, and all around better options, especially for low to moderate income individuals.
What do you think?
Leave a message in the comments section below - or call or text me at (760) 297-4539
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