Guaranteed Rate now offers a nationwide 1% down payment mortgage program named Double Match in an effort to lessen one of the biggest roadblocks to homeownership: the down payment.

The Chicago-based lender is the eighth-largest retail mortgage lender in the U.S., and one of the first mortgage lenders to offer 1% down mortgages.

In an exclusive interview with HousingWire, Kasey Marty, executive vice president of secondary marketing with Guaranteed Rate, said, “We hope and anticipate, from a national scale, that the program creates an opportunity for borrowers and for every office we have.”

Not even a month ago, Guaranteed Rate became one of five lenders who partnered with the City of Chicago and Chicago Infrastructure Trust to help bring more Chicago residents into homeownership through a new 1% down payment loan.

But unlike the Double Match program, the partnership with the City of Chicago requires borrowers to purchase a home within the city limits since it was created to build a stronger, more durable economy in Chicago.

Meanwhile, under the new Double Match program, qualified borrowers only need to put down 1% and will receive an additional 2% grant through the program. The 2% Double Match grant is completely forgivable and doesn’t need to be repaid if the buyer moves or refinances, Guaranteed Rate said.  

The Double Match program can be used to purchase condos, single-family homes and town homes and can be coupled with a mortgage credit certificate, which allows homebuyers to claim a tax credit for some portion of the mortgage interest.

In addition, the program can be applied toward loan amounts of $417,000 or less, and qualified buyers must have a FICO score of 680 or higher.

Guaranteed Rate noted that eligible income limits vary based on where the home is located, but these limits may be waived in certain areas.

Industry growth

This program, while new to Guaranteed Rate, isn’t new to the industry. If it looks familiar, it’s because you’ve seen it in headlines already, but it might seem more familiar as Freddie Mac’s Home Possible Advantage program, which the government-sponsored enterprise launched in December 2014, and requires a 3% down payment.

Since Guaranteed Rate is covering the other 2%, the program works under Freddie Mac’s Home Possible Advantage program.

Marty noted that Guaranteed Rate will service the loans and Freddie Mac will buy the loans.

So far, only a handful of lenders have announced 1% down mortgage programs, with all of them announcing a partnership with Freddie Mac.  

Earlier in July, United Wholesale Mortgage announced a 1% down payment program where it would provide eligible homebuyers with a 2% lender-paid down payment.

And, unbeknownst to many in the market, Quicken Loans began offering a 1% down mortgage late last year.

Prior to this, the market was only beginning to adjust to the 3% down mortgages, as top lenders like Bank of AmericaWells Fargo and JPMorgan Chase jumped on the bandwagon.

The market is changing though, paving the way for these 1% down programs to be available and even more accepted. Shortly before United Wholesale Mortgage announced that it was launching a 1% down program, Mat Ishbia, CEO of UWM, said in an interview that he believes 3% down mortgages were going to become the new normal.

Marty, executive vice president of secondary marketing with Guaranteed Rate, explained that 1% down programs are viable options since the real estate market is strong and most real estate areas are experiencing appreciation at this point.

For example, in its latest home price report, CoreLogic Chief Economist Frank Nothaft said, “Housing remained an oasis of stability in May with home prices rising year over year between 5% and 6% for 22 consecutive months.”

“When you have the combination of a real estate market that shows home appreciation and the affordability of a buy-versus-rent market, I think more areas are going to create these types of programs,” said Marty.

Pair this with the fact that ability-to-repay qualifications are being met, and you simply need to have a lender that is willing to take the risk, Marty explained.

Purchase is king

In the wake of Brexit, mortgage applications shot up, specially refinance applications due to the sharp drop in mortgage interest rates. However, this is an anomaly in what should be a purchase-driven market moving forward.

After the U.K. voted to leave the European Union, mortgage applications surged 14.2%, driven by refinance activity, but looking at the most recent report, it was purchase applications that surged, rising 23% compared with the previous week.

According to a recent report from Capital Economics, Brexit should have no more effect on the housing market and should no longer lower mortgage rates.

Marty echoed a similar sentiment, saying that after Brexit there was a high percentage of refinance activity at Guaranteed Rate, but each week since, purchased volume has steadily increased.

Given that the future of lending is purchase business, Marty explained that the new Double Match program should be a reminder to everyone they work with that there is opportunity in the purchase market.

Before Brexit, Marty said Guaranteed Rate was 65% purchase to 35% refinance. Add in the Double Match program, and he anticipates purchase volume rising 3% to 5%.

Right now, there is no time limit on the availability of this program.

Guaranteed Rate will continue to monitor the program as it gains ground. Right now, “We are one day in,” said Marty.