DENVER–Credit Union of Colorado is now offering a zero-down conventional mortgage–but with a twist.
No downpayment mortgages came under significant criticism after contributing to the housing crisis of a decade ago, but the credit union says its underwriting significantly reduces the risk.
“We are looking for a way for individuals to get into the market right away rather than having to save up a downpayment while the prices are going up,” VP-Marketing Doug Schneider told the Denver Post.
Denver has been among the hottest home value markets in the country, with prices up nearly 9% over one year earlier, the Post noted.
The Credit Union of Colorado is underwriting mortgages for up to 97% on homes valued up to $467,100, with an added cost each month for private mortgage insurance, according to the Post. The $1.5-billion CUC has also added a twist in that it says it will cover the remaining 3% of a home’s cost via an interest-free loan repayable at a future sale or refinancing, the Post reported.
There is a slightly higher rate on the mortgages, which are priced 37.5 basis points above Credit Union of Colorado’s standard 30-year, according to the credit union.
How to Qualify
The CU said that in a rising rate environment, even with the slight premium over the traditional mortgage it is still advantageous for a borrower to lock in now rather than wait a year.
To qualify, a borrower must have a credit score at 700 or higher and total debt payments that don’t exceed 43% of income. Any property must be in Colorado and owner-occupied. Owners must take an online education course and pass a quiz, according to the Post.
In addition, loans are only being made to prime borrowers and CUC hold the loans in portfolio.
Schneider told the Post Credit Union of Colorado projects it could do as much as $50 million in the mortgages.