1% Down Payment

1% Down Payment

Can you handle a 1% down payment? If so, you may be able to take advantage of a Freddie Mac’s program that was designed to help first time home buyers.

Interest rates for 30-year fixed mortgages are at nearly historic lows and have been for some time, but you have not been able to save the 20% down payment that is typically required for a new home. If you qualify, some Federal Housing Administration (FHA) programs can reduce your down payment to 3.5%. Unfortunately, that is still out of your range.


The Home Possible Advantage program was introduced in December 2014 by Freddie Mac. While the Home Possible Advantage program requires a 3% down payment, lender supplies the other 2% as a grant. This allows the program to meet the 3% criteria with only a 1% contribution from the homeowner.

Thanks to this program, you could purchase a $300,000 home for a down payment of only $3,000 — assuming that you meet the eligibility requirements.

The program is only available for the purchase of a single family home or condominium. It is not available for purchase of a second home or investment homes, and cannot be used to refinance an existing home.


To qualify, your income must be below the median income for the county you live in. To demonstrate the ability to pay, your debts must be low enough to keep your total debt-to-income ratio at or below 45%, and you must have a minimum FICO credit score of 680.

The 1% down payment program is ideal for millennials who are in the early stages of their careers. They have not had time to save up sufficient down payment funds, but have relatively stable and moderate entry-level incomes. As long as debt has been properly managed, they can take advantage of the currently low rates without having to wait and potentially being priced out of the market entirely.

This program has another great advantage compared to 3.5% FHA loans. There are no life-of-loan or upfront mortgage insurance premiums to deal with. Those costs are often financed into an FHA home loan, pushing the loan-to-value (LTV) ratio above 98%. Thanks to the 2% grant, the 1% loan program allows you to retain greater equity at a lower LTV ratio.

The tradeoff for a low down payment is a higher loan amount and therefore larger monthly payments, so make sure that you have the income and the fiscal discipline to handle those payments. If so, and you are interested in the 1% program, Apply here for a free consultation . The 1% down program is not right for everyone, but for some it may make the difference between being a homebuyer and being forced to save and wait — and hope that rates and home prices stay relatively low.

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