0% financing is BACK

Home buyers will be able to buy a home without putting any money down under a new program launched by United Wholesale Mortgage (one of the largest U.S. mortgage lenders). The Pontiac, Mich.-based company’s new program is available to first-time home buyers and people earning at or below 80% of an area’s median income, the company said in a press release. 

But here’s the catch. UWM will give eligible buyers a second-lien loan of up to $15,000, in the form of down-payment assistance, for 3% of the home’s purchase price. The loan will not accrue interest or require a monthly payment. Buyers can also choose when and how often they want to make payments on that second loan, which must be paid in full by the end of the loan term if the first mortgage is paid off or if the borrower refinances the mortgage, UWM said. Even the federal government acknowledges the steep hurdle that down payments pose to aspiring homeowners.

President Joe Biden, during his State of the Union address, called on Congress to provide up to $25,000 in down payment assistance to first-generation home buyers. UWM’s program is similar to down-payment assistance programs at the state and local levels, so “this isn’t a new concept,” according to Wilner. But it’s important that home buyers fully understand the terms of the loan they are taking on before signing any documents, one expert said. A balloon payment refers to a bigger-than-usual one-time payment that is required by the lender at the end of the loan term, according to the Consumer Financial Protection Program.

On its website, UWM states in the fine print at the bottom of the page that the second loan “has no minimum monthly payment requirements, a term of 360 months and is fully due as a balloon payment upon the occurrence of either a refinance of the [first mortgage], [or] payoff of the [first mortgage] or the final payment.” “So there are three points in time [when] this payment is due,”

Lederer noted: When a person refinances, pays the mortgage off or sells the house. If a homeowner is prepared for these circumstances, there is no issue at play — but “if you don’t have a plan, it can result in foreclosure on the house,” she warned.

Source: Los Angeles Real Estate Investors Association
lloyd@larealestateinvestors.com