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Open the door to homeownership with 3-2-1 Home Plus, a low down payment mortgage program

Are you ready to start your homeownership journey but need down payment and credit score flexibility? You aren’t alone. According to the National Association of REALTORS®, over 20% of homebuyers ages 23-41 find saving for a down payment to be one of the most challenging steps in the homebuying process. And 22-24% of applications from those same buyers are denied due to a low credit score.

Fortunately, there are ways to buy the home you want without having a perfect credit score or putting down a large sum of money. But how much down do you really need, and how low can your credit score go? It’s possible to have a 620 credit score and put down just 3% of a home’s value with a low down payment mortgage program like 3-2-1 Home Plus. If you’re a first-time homebuyer with a low-to-moderate income, read on for information about how a low down payment or low-credit score mortgage can ease your financing concerns.

Buying a home with a low down payment or low credit score mortgage

In addition to your interest rate and debt-to-income ratio, two other factors may help determine if you meet the minimum requirements for a home loan.

  • 1. Down payment

    A down payment is a percentage of your home’s purchase price that you must pay upfront, with the remainder paid by a loan. You may be unaware that there are mortgage programs with down payments of less than 20%, such as Conventional loans with 3% down payment options.

    While a larger down payment helps lower your borrowing costs and monthly payments, putting less down can have advantages. The main benefit is becoming a homeowner sooner, so you can start building home equity instead of paying rent.

    If you’re looking to put some money aside for a down payment, here are a few strategies to save:

    • Build a budget and stick to it
    • Set a realistic monthly down payment savings goal
    • Take advantage of direct deposit by allocating a portion of each paycheck automatically into your savings account
    • Focus on eliminating high-interest debt first
    • Cut unnecessary spending
    • Look into first-time homebuyer down payment assistance programs
  • 2. Credit score

    Your credit report determines your credit score, ranging from 300 to 850. A higher credit score reflects your credit worthiness as a borrower and traditionally leads to lower interest rates and a larger credit line.

    A Conventional loan is a 620 credit score mortgage, meaning a minimum credit score of 620 is required. A lower-than-average credit score can signify past credit issues or a lack of credit history. The good news is that you can take steps to improve your credit score before buying a home. Start by focusing on these tips first:

    • Make your payments on time
    • Pay down your credit card balance
    • Negotiate a settlement with any creditors
    • Take a break from applying for new credit cards or other loans
    • Fix errors on your credit report
    • Avoid large purchases

A 3% down payment Conventional loan for first-time homebuyers

If you choose a 3% down mortgage, you may be eligible for Guild Mortgage’s 3-2-1 Home Plus program. This innovative program is designed to provide first-time homebuyers like you with a low down payment option and the flexibility to make a home your own.

  • First-time homebuyers can receive a $2,000 eGift card to The Home Depot®*
  • Guild Mortgage will also provide additional assistance ranging from $1,000 to $2,500 based on Area Median Income (AMI) and property type that can be applied toward closing costs or used to increase your down payment**
  • The 3% down payment mortgage program through Guild can be funded by a gift, such as a wedding or graduation present
  • To qualify, borrowers must have a minimum credit score of 620
  • Pre-purchase homebuyer education counseling is required***

The gift funds with this program can give you peace of mind knowing you have extra resources to put towards minor repairs or improvements without tapping into your cash reserves or placing constraints on the money for your down payment.

“In many cases, a first-time buyer might pass on a property that needs a few upgrades. The Home Depot® Gift Card provides a sense of security. The customer can purchase a home in an area they love and make those upgrades, whether it’s for new flooring, fresh coats of paint, or landscaping. They can also choose a new water heater, washer and dryer, energy-efficient windows, design services or any other product or service offered by The Home Depot®.”

—David Battany, Guild Mortgage’s executive vice president of capital markets

Get a low down payment Conventional loan with Guild Mortgage

Ready to take advantage of our low down payment mortgage options? Reach out today and get one step closer to home with Guild’s 3-2-1 Home Plus program.

*In the state of NV, the consumer receives a $2,000 lender credit in lieu of a gift card. Payment subject to maximum allowable lender credit and minimum contribution requirements. Some loans require a minimum cash investment by the borrower, which may limit the amount of any lender credit or payment by Guild under the offer. **Freddie Mac BorrowSmartSM down payment/closing cost assistance amounts of $2,500, $1,250 or $1,000 based on Area Median Income and other eligibility criteria. $1,000 assistance applies to manufactured homes. ***Pre-purchase counseling requires a $99 counseling fee.

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

By |Published On: November 2nd, 2022|Categories: Guild Blog, Mortgage 101|Tags: , , |

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.