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Guild Mortgage announced their new 3-for-1 equity loan program. The borrower puts down 1% while Guild provides an additional 2% down from lender assistance.
The nice thing is that the additional 2% is not a loan but rather a grant that need not be repaid. Sounds pretty good!
The new program follows basic agency low down payment program guidelines including:
- Flexible underwriting to allow all household income
- DTI to 50%
- 100% medium income with no limits for low to moderate census tracts
- Homebuyer education is required.
The question is from where does the 2% down payment grant come? Is it a true gift from Guild or is it built into the loan pricing?
If in the “grant” is built into the pricing, the borrower is actually repaying the “grant” through higher monthly payments. Not necessarily a bad thing. But, it may preclude some low to moderate income buyers from qualifying.
This is a program that may assist certain Millennials who have decent employment and income but lack the money for the down payment. They can afford the higher payments.
But, will it help others who will struggle to meet the monthly payment and leave them less disposable income to maintain homeownership.
My concern with programs like this is that, while they help people to get a home, they end up making it more difficult for them to keep it! The lender makes their money up front but others may pay for it later. That’s not so good.
So, let’s hope this program is done right and it truly helps more than it hinders.
