Add Guild Mortgage to the list of lenders offering down payment assistance programs in order to court more buyers at a time when mortgage rates remain elevated.
The California-based lender rolled out a 1% down payment advantage program this week that allows customers to buy a home with a minimum down payment of 1% of the purchase price. Guild will also cover 1% of the borrower’s interest rate for the first year with a lender-paid temporary buydown.
A 3% minimum down payment is traditionally required for a conventional loan, but Guild will cover 2% of the required 3% minimum down payment in the form of a non-repayable grant, with a maximum grant amount of $5,000, according to the company.
To qualify for the 1% down payment advantage program, buyers must have a minimum credit score of 620 and a 95 to 97% loan-to-value first mortgage. The program is only available to first-time and repeat buyers purchasing single-family homes with income equal to or less than 80% of the area median income (AMI).
“We know that accessibility to homeownership goes beyond just lowering the down payment. It’s about ensuring long-term sustainability by tackling the three critical financial challenges of buying and maintaining a home: upfront costs, monthly expenses, and financial resilience after purchasing a home,” David Battany, Guild’s executive vice president of capital markets, said in a press release about the program.
Qualified borrowers can also take advantage of its payment protection program to refinance with no lender fees if rates drop, the company said. The refinance must close no later than December 31, 2025 — and the borrower must have made at least six consecutive on-time payments on the purchase loan before applying to refinance.
In addition, the borrower must close or have closed their purchase loan with Guild between October 17, 2022 and December 29, 2023 with a non-bond FHA, VA, USDA or conventional conforming or high balance loan in order to be eligible for the payment protection program.
Other lenders, including United Wholesale Mortgage (UWM) and Rocket Mortgage, have rolled out conventional 1% down mortgage loan programs during the second quarter of 2023 in an effort to gain more market share.
UWM requires homebuyers to have a minimum credit score of 620 and a 97% LTV to be eligible for its 1% down program. Since reviving its conventional 1% down program in April, UWM made enhancements to allow borrowers with less than 80% of the AMI to qualify.
To qualify for Rocket’s ONE+ program, buyers must have an income of less than 80% of their AMI. Rocket covers the mortgage insurance costs for buyers and puts no limit on the down payment assistance amount it’s providing to borrowers.
Guild, a purchase-focused lender with a distributed retail model, delivered a $32.7 million net loss in Q1 2023. The lender originated $2.7 billion in the first three months of this year, down 9% from the previous quarter.
Guild reported $147.8 million in cash and cash equivalents in Q1 – which is less cash to tap into for its down payment advantage program compared to UWM and Rocket — and had $1.2 billion in unutilized loan funding capacity during that period.
