United Wholesale Mortgage, the nation’s largest mortgage lender, has introduced the Zero Down mortgage for first-time homebuyers. This option is available to those who contribute less than 5% towards a down payment and have a credit score over 700 with no income limit, or a score of 620 with an income limit up to 80% of the Area Median Income.

Eligible buyers can receive an interest-free loan of $15,000 (or 3% of the purchase price, whichever is less), repayable when the mortgage is refinanced, the property is sold, or the loan term ends. The aim is to allow borrowers to refinance both the down payment loan and the first mortgage into one loan at a lower rate when interest rates drop.

Despite concerns, such as those voiced by CNN, likening this to the subprime mortgage crisis of 2008, it’s crucial to understand that down payment loans were not the root cause of that crisis. The problem then was the issuance of bad loans to unqualified borrowers. Down payment assistance programs have been around for years, and similar programs have been available since 2008. For example, FHA loans offer 96.5% loan-to-value (LTV) loans with an upfront mortgage insurance premium, and VA loans provide 100% LTV financing.

A potential risk of the Zero Down mortgage is that borrowers could owe more than their home’s value if prices drop. However, CoreLogic’s recent forecast predicts a 3.7% increase in national home prices from March 2024 to March 2025.

Overall, today’s mortgage market is much safer and more robust than it was in 2008.