Over the last few months, a growing trend is emerging, as lenders of various sizes begin to offer certain borrowers the opportunity to get a mortgage loan with a down payment of 3%, or less.
Lenders like Quicken Loans and Guaranteed Rate recently announced 1% down programs, and major lenders like Bank of America, Wells Fargo, JPMorgan Chase, and others of significance launched their own 3% down loan programs recently.
Earlier this week, Fifth Third Mortgage joined that trend, and went beyond it, by announcing that it is offering mortgage loans that require no down payment from the borrower, assuming the borrower meets certain and specific requirements.
But, Fifth Third isn’t the only lender that is now offering zero-down mortgages.
BancorpSouth is also now offering zero-down mortgages to certain borrowers, the bank said in an announcement this week.
According to BancorpSouth, the bank’s new “Right@Home” mortgage is expanding mortgage credit opportunities for many consumers in the bank’s eight-state service area by lowering or eliminating the up-front costs for certain borrowers.
BancorpSouth operates 239 full service branch locations as well as additional mortgage, insurance and loan production offices in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee and Texas.
“BancorpSouth is committed to its ongoing consumer outreach efforts and providing access to affordable mortgage products for all consumers in our market,” said Phil Sandoval, BancorpSouth first vice president and community development lending manager. “The Right@Home mortgage features flexible criteria that can help qualified consumers achieve homeownership.”
The Right@Home mortgage, which is only available for borrowers that meet certain qualifications (detailed below), offers alternative sources for down payment and closing costs, features a low down payment, a maximum loan-to-value ratio of 100%, and a fully amortized 30-year fixed rate.
The loan program also features no lender fees and no requirement for private mortgage insurance.
To take part in the Right@Home mortgage program, qualified borrowers are required to provide only a minimum contribution of $500, which, according to Sandoval, is typically met through an earnest money deposit or a cost paid out of closing, like the cost of an appraisal, for example.
According to Sandoval, to qualify for the Right@Home mortgage, borrowers must have a minimum FICO score of 640.
But, Sandoval said that if a borrower does not have a valid FICO score or does not use traditional credit, the bank uses “non-traditional credit” to evaluate the borrowers' credit history.
According to Sandoval, whether using traditional or non-traditional credit, the borrowers’ credit profile has to contain a minimum of two trade lines with 24 months' acceptable payment history.
Additionally, Sandoval said that in order to quality, the borrower's income has to be low or moderate, or the property has to be located in a low or moderate income census tract.
According to Sandoval, BancorpSouth defines low income using U.S. Census Bureau data as less than or equal to 50% of the estimated median family income for the metropolitan statistical area. Moderate income is less than or equal to 80% of the estimated median family income for the same area.
BancorpSouth defines a low income census tract as one where the median income for that specific tract is less than or equal to 50% of the estimated median family income and a moderate income census tract s one where the median income for that specific tract is less than or equal to 80% of the estimated median family income.
According to Sandoval, the program is for the purchase of primary residences or no-cash-out refinances. Additionally, first-time homebuyers and repeat homebuyers are eligible as long as they do not own another property at the time they close on the Right@Home loan.
BancorpSouth said that it has actually been offering its Right@Home mortgage since December 2015, and the program now represents a “substantial” portion of the bank’s total loans to low- to moderate-income borrowers purchasing or refinancing a home.
Scott Dickey, president of BancorpSouth Mortgage, said the bank has been “very encouraged” with the results of the Right@Home mortgage since its introduction.