United Wholesale Mortgage (UWM) is embracing the comeback of the conventional 1% down loan, a product that allows homebuyers to purchase a home by contributing only 1% toward the down payment.
The leading wholesale company says it will contribute an additional 2% — capped at $4,000 — which will give the borrower a total of 3% for the down payment.
“We are bringing back the conventional 1% down to give independent mortgage brokers a competitive edge with borrowers and real estate agents, while also helping make homeownership more affordable and accessible for borrowers across the country,” said Mat Ishbia, president and CEO of UWM. “We’re going to continue developing products and solutions that will help get more borrowers into homes faster, easier, and cheaper, and conventional 1% down is a great example of how we’re doing that.”
According to the company, the product's goal is to allow more homebuyers to reach their minimum down payment faster and easier, with UWM providing the additional money for borrowers to achieve 3% equity.
The limited offer will be available to homebuyers who have an income at or below 50% of the Area Median Income (AMI) and a 97% loan-to-value (LTV) ratio. A spokesperson for the company said the end date of the program has not been announced.
"It's been a massively exciting day not just for the company, but for our brokers," said Alex Elezaj, a UWM director and chief strategy officer, in an exclusive interview with NMP. "We're essentially giving customers to take advantage of this loan a $4,000 grant as a community investment. Affordability and inflation issues mean that people need help getting into affordable homes. And we don't change the mortgage rate to subsidize us providing that 2% down."
Elezaj also echoed that this is just a trial for UWM. "Whenever we launch a new product, we don't put an end date on it. We're seeing how it goes," he said. "This program is exclusive for UWM and our independent mortgage brokers. It's a massive lift for them to be able to offer this, it puts them a step above the rest."
Kevin Barker, a managing director and senior research analyst at Piper Sandler that covers UWM, said the wholesale mortgage company's newest move is likely in conjunction with recent federal programs aimed at affordability. "The fact that you can buy a home with 1% down does give me pause," Barker said. "When you have limited skin in the game, it's easier for default rates to be higher."
That's Barker's main concern, he said in an interview with NMP. "While this is a step towards affordability, it's also UWM's move to encourage more purchase demand," he said. "But there's still risk. Lowering the money put down gives potential for default risk. It's going to offload risk for the government, too."
