An overwhelming majority of LOs who responded to an NMP survey this weekend about United Wholesale Mortgage’s 1% down payment loan program believe the product is too limited to help their clients.
UWM, the nation’s leading wholesale company, launched the program last week, stating that borrowers could put 1% down, while it would contribute another 2% — capped at $4,000 — for a total of 3% for the down payment.
The program, however, is limited to homebuyers with income at or below 50% of the Area Median Income (AMI), and to a 97% loan-to-value (LTV) ratio.
Watch The Interest
In a video posted to Instagram after the launch, Eric Mojica, vice president of UWM sales, promoted the program as a way to help more borrowers. “It’s really going to help a lot of borrowers who might have been on the sidelines, people getting into homes who might not have had the chance before,” he said.
That’s not how LOs see it, according to NMP’s survey.
The survey, which was included in NMP’s “The Daily” newsletter on Friday, asked the following question: “Given the income limitations (such as 50% area median income), do you have borrowers who could qualify for UWM's 1% down-payment program?”
The survey received 117 responses, with 105, or 89.8%, of those responding selecting “No.” Just 12, or 10.2%, selected “Yes.”
A second question asked, “What percentage of your client base do you think would qualify for this program?” That question received just five responses, with answers ranging from “small percentage” to 10% to 25% to 50%. One respondent replied: “There are 12,600 homes for sale under 200,000 in Michigan.”
For those who responded “No,” a follow-up question asked “Why not?” That question received 70 responses.
Many of the replies were brief and to the point:
- “My clients make more than that.”
- “Income limit is too low to afford a home in my area.”
- “Home prices in our area are too high. Florida West Coast”
- “No one in my area can qualify for a mortgage if they’re only earning 50% of median income.”
- “Income will not be enough to buy a home in N.J.”
- “<50% AMI can hardly buy a property fit for a first time home buyer.”
- “Very limited audience.”
- “The income limit is way too low and $4,000 doesn't go very far either!”
- “50% of AMI is unaffordable and unrealistic.”
- “Income too low and nothing available in the price point for a borrower that would qualify — sales prices too high.”
- “Not a realistic income level for homeownership. Sizzle without the steak.”
Others who responded went into greater detail.
“On a $155,000 purchase, 97% = $150,350 loan,” stated Bill Thorpe. “At today’s rate of 6.625% with a 740 FICO, the payment is $963 + $45 MI. Property taxes and HOI are $280/month. For the Tampa, Fla., area, 50% of AMI = $41,050. With property taxes and HOI factored in, there is only $247/month available to cover any current debt service on credit cards, car payment, etc., or HOA if applicable. The prospect of a 1st-time homebuyer having little to no debt service is unlikely.”
“Even if they could qualify, there are no homes in my market (Phoenix, AZ MSA) priced to fit the guidelines,” stated Bob Gillespie. “In rural areas that may have homes in the range, the AMI will be too low to qualify at 50% of the figure.”
“50% AMI income will not afford a SFR in my market,” said Jason, who did not provide his last name. “$4,000 will not cover the 2% for any scenario in my market either. The original 1% down program from years ago was amazing, and did allow me to get business. This is dramatically different and limited for my market.”
Jason was not alone in referring to the program UWM offered in 2016-17.
“UWM had a similar program years ago, around 2016-2017, and the income median limit was not as low as the current requirement,” stated Inez Perez. “Based on the response to the introduction of the program, it can help UWM assess if they should increase the limit requirement. I participated in this program back in 2016 and 2017, and I don't currently see a significant market share of clients who can qualify for the 50% median income limit. As the market proceeds to make a turnaround, UWM will know if and when they can increase the income limit and determine if it's worth the risk and revenue. If they increase it, then I know we will have more opportunities to qualify more homebuyers. It was a great program advantage when they last offered it.”
Others were less charitable to UWM.
“I used their 1% program that they offered back a few years ago,” said Ernesto Guray. “The program worked with the (Fannie Mae) HomeReady/(Freddie Mac) Home Possible AMI numbers because the price point and rates made it so at the time. However, in my area (Southern California), the majority of my clients will have higher incomes OR if they do qualify — the price points are not sufficient to get a home. These days my buyers are not only disillusioned with price points and rates, but also tired of "gimmicks.” 1% programs, 20% CalHFA DP assistance programs, Biden grants that never come, 2/1 Buy downs. … Let's focus on buyers that did do "the work" and saved and meet standard FHA and Conventional guidelines and stop flooding the market with buyers that are not ready yet.”
“The only houses cheap enough to qualify would be in such poor condition that they would not be accepted,” added John Councilman. “Even in areas like Baltimore, which has the highest median income vs. home prices on the East Coast, $58,000 will rarely be enough to buy a home after paying P&I, taxes, insurance, and PMI if they have any other debts.:”
“Borrowers barely qualify at 80% of AMI on Home Ready and Home Possible, so 50% of AMI is unrealistic and once again UWM is all SMOKE AND MIRRORS!” added one woman.
UWM did not immediately respond to a request for comment on the survey.
