The Housing Market Is In Serious Trouble

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With Zillow, they’ll allow you to put 1% down - and then from there, Zillow will match your deposit with an additional 2% at closing, saying in a statement that this program “can reduce the time eligible home buyers need to save, and open homeownership to those who are otherwise ready to take on a mortgage.”

As they say, by reducing the down payment burden to 1% of the purchase price, “a home buyer looking to purchase a $275,000 home in Phoenix, Arizona and saves 5% of their income would need only 11 months  to save for the down payment. By comparison, the same buyer who needed to save 3% of the purchase price would require two and half years (31 months) to save that amount.”

However, as of now, this is only a “pilot program,” available to first-time homebuyers, in Arizona, who make less than 80% of the area’s median income. Other companies offer something similar, with less restrictions.

For example, Rocket Mortgage offered a program called “One Plus,” available nationwide to anyone, whether or not it’s their first home, as long as your income is below 80% of the area median, and you have a credit score of 620 or higher.

Bank Of America even goes further with "no-money-down" loans. This was launched as a pilot program for first-time home buyers, that aims to help underserved neighborhoods in “designated markets throughout Charlotte, Dallas, Detroit, Los Angeles, and Miami.” This would allow individuals and families to obtain an affordable loan, with no money down, no PMI, no closing costs, and even: no minimum credit score.

According to Bank of America, “the company will make a downpayment for the client in the form of a grant of up to $15,000, giving them immediate home equity.” Bank of America also went on record to say that “their loans are underwritten with substantial rigor to ensure performance throughout various market and economic cycles” - which, basically means: they’ve built in a “margin of error” so that, if the buyer loses their job, sees a reduction in income, or experiences financial hardship - the home wouldn’t have a high risk of being foreclosed on.

In terms of the impact for the housing market, I think it’s really important to mention that these programs have been running for quite some time - they just aren’t openly advertised or talked about. Therefore, realistically - I don't think it will have any large effect.

On the positive side, I do think that these programs are incredibly helpful for those who have a stable income, are spending too much money on rent, aren’t able to save as much as they want, and KNOW they intend to live in the same home for at least 7-10 years.

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