PHOENIX — A new kind of home mortgage is now up for grabs. It’s meant to stimulate the slow housing market. But it comes with a caution sign.
National lender United Wholesale Mortgage is offering a zero-down mortgage, which means no payment upfront is needed.
The company may sound familiar to Arizonans. Its founder is Matt Ishbia, owner of the Phoenix Suns.
The program allows buyers to pay for 97 percent of the home with a traditional first mortgage. Instead of a down payment, the buyer pays for the remaining 3 percent of the home with a second mortgage. That second mortgage is fixed with no interest.
Only first-time homebuyers are eligible.
“This could make all the difference because it could help someone get a part of the American dream,” said Arizona real estate broker Jim Zirbes, who is bullish on the program.
But just 16 years ago the U.S. housing market crashed, in part, because of risky mortgages. Zirbes says he believes conditions are healthier today in the market and the mortgage offered by UWM is not the same as a typical ARM loan because it has no interest attached.
“I appreciate the caution. It’s totally understandable somebody would be afraid of the what-ifs,” Zirbes said. “But if you take a chance, the chances of reward are exponentially higher than for something that could go bad.”
Financial experts say the zero-down mortgage program carries risk because the homeowner begins with no equity. Homeowners are more vulnerable in a crisis (such as losing a job) if they have to sell within the first few years of purchasing the home. Another downside is the second mortgage must be paid off during the re-sale of the home.
First-time homebuyers should consult a reputable lender to determine if their income and credit rating makes them good candidates.
“As long as they are planning to stay for at least a few years, of course no one can predict the future because of uncertainty, but that is a win-win for most people,” Zerbis said.
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