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loanDepot accessZERO: You Can Buy a Home with Zero Down Again

October 31, 2023


In order to make homeownership more accessible, loanDepot has launched a new program called “accessZERO.”

As the name suggests, it allows prospective home buyers to purchase a property without a down payment.

It comes at a time when affordability has rarely been worse, thanks to a combination of significantly higher mortgage rates and record high home prices.

At last glance, the popular 30-year fixed was approaching 8%, up from around 3% in early 2022.

And home prices continue to climb higher in most parts of the country, thanks to an ongoing lack of inventory.

How loanDepot accessZERO Works

To combat eroding affordability, SoCal-based direct lender loanDepot has unveiled accessZERO.

It combines a regular 3.5% down FHA loan with a repayable second mortgage that covers up to 5% of the purchase price.

This 5% can be used for both the down payment and for closing costs, allowing a home buyer to come to the table with nothing out of pocket.

The second mortgage is a 10-year, fully-amortized mortgage that is repaid like a normal mortgage.

As such, the borrower has two mortgage payments to make each month, but nothing is required upfront at closing.

For example, a buyer purchasing a $400,000 home could get a first mortgage for $386,000 and a $20,000 second mortgage to cover down payment and closing costs.

The resulting payments could be something like $2,700 on the first mortgage, assuming a 7.5% mortgage rate, and a somewhat nominal amount on the second because of its small size.

Depending on interest rate, it might add a couple hundred dollars to the overall payment.

The borrower would still need to qualify for both loans and they’d be factored into the maximum debt-to-income ratio.

Additionally, there is a minimum credit score required, which appears to be as low as a 600 FICO.

Both first-time home buyers and repeat home buyers are eligible for this program, which seems to be available nationwide.

The down payment assistance is offered by Tule River Finance Authority, according to an ad promoting the product by the company.

And homebuyer education may be required for first-time buyers taking advantage of the program.

However, unlike other near or zero-down mortgages, there do not appear to be any area median income (AMI) restrictions.

So it should be open to all those who would typically qualify for an FHA loan.

Is Down Payment Still a Hurdle? Or Is It the Monthly Payment?

While loanDepot’s new accessZERO program tackles the down payment head-on, it still makes you wonder about monthly payment.

Over the years, down payment has often proved to be a hurdle to homeownership, but lately it might be mortgage payment.

After all, mortgage rates have surged in the past 20 months or so, rising from 3% to nearly 8%.

Requiring homeowners to make two monthly mortgage payments instead of just one could more strain on the borrower’s DTI ratio.

So while they won’t necessarily need the down payment, qualifying for both mortgages could prove to be more difficult.

But for someone uninterested or unable to come up with down payment funds, it could be a workable solution if the income is there.

Just note that mortgage rates are often higher the less you put down, so that too could bump up total housing costs.

Earlier this year, Movement Mortgage launched a zero down FHA loan as well, which seems to be structured quite similarly.

Known as Movement Boost, it combines a 3.5% down FHA loan with a repayable 10-year second mortgage for up to 5% of the purchase price.

And the interest rate on the second loan is set at 2% above the rate on the first mortgage.

Lately, a handful of lenders have also launched 1% down mortgages, though many of these have area income restrictions.

Some examples include the U.S. Bank Access Home Loan, the Rocket Mortgage One+, and Conventional 1% Down from wholesale lender UWM.

Meanwhile, Frost Bank launched a zero down home loan known as the Progress Mortgage.

So it’s clear affordability continues to be an issue for many of today’s prospective home buyers, with no letup in sight.

loanDepot accessZERO Highlights

  • A zero-down FHA loan
  • Combines a 3.5% down first mortgage with a second mortgage
  • Second mortgage covers up to 5% in downpayment assistance
  • Can be used for both the down payment and closing costs
  • First-time and repeat home buyers permitted
  • There do not appear to be area income restrictions
  • Must be an owner-occupied property
  • Minimum FICO score of 600
  • Available to home buyers nationwide



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