Zero
Down

No
PMI

100%
Financing

The landscape of first-time home buying in the U.S. is fraught with challenges compounded by stagnant wages, increasing living costs, and fluctuating economic conditions.

Adding in constraints of skyrocketing real estate prices and a scarcity of inventory, the prospect of stepping onto the property ladder for the first time is a tough climb. The challenges are stark; despite the existence of first-time homebuyer loan programs, both from private lenders and those supported by the federal government, the goal of affordable entry into homeownership remains an elusive one as these programs each come with their own impediments.

Government-backed loan programs, such as the USDA Rural Development loan, have specific location requirements, with properties needing to be situated in rural development areas designated by the USDA as having populations of less than 50,000. These areas, characterized by lower population densities and exclusion from larger metropolitan statistical areas (MSAs), create a distinct geographic hurdle for prospective buyers. Similarly, Fannie Mae’s HomeReady mortgage offers a low down payment option but requires private mortgage insurance and compliance with income limits. To be eligible, the borrower’s total annual income must not exceed 80% of the area median income (AMI) for the county where the property is located, adding another layer of complexity and obstacle to entry.

To address these challenges, REV introduced its StartSmart First-Time Homebuyer Program to the market in an effort to offer a more inclusive approach, removing geographic and income limits and extending the definition of a first-time homebuyer.

This broader definition, aligned with the U.S. Department of Housing and Urban Development’s (HUD) guidelines, includes individuals who have not owned a home in the last three years, displaced homemakers, as well as single parents who have only owned a home with a former spouse during their marriage. This flexibility extends to loan qualification, where only one person on the loan needs to qualify as a first-time homebuyer. For example, if a married couple is purchasing a home together, only one of them needs to meet this condition to be eligible.

Rayfus Hagood, a 35-year-old father of three young children, shared his journey of transitioning from a cramped 1100 square foot townhouse to a 2044 square foot single-family home. Reflecting on his experience, he stated, “StartSmart really made a difference by steering me away from the FHA loan and its requirements, ultimately saving me money. Rent was escalating to mortgage-like figures for a space that didn’t justify it.” Hagood emphasized the challenges of the competitive housing market, particularly with a growing family, but expressed contentment at paying slightly more for a significantly larger home with a front yard and a large backyard.

With the money he had saved for a down payment, which was not required for StartSmart, Hagood was able to use the funds for home improvements and furnishing the new home.

Looking ahead, he anticipates the potential for more savings with the option to modify and recast his mortgage for a lower payment when rates decline – a feature that is specific to REV, and something he values about his mortgage loan with REV.

Data from the South Carolina Association of Realtors shows the challenges faced by prospective homebuyers, as the median home price in the state has surged by 8% in the past year, hitting an all-time high. In the Charleston metro area, the situation becomes even more daunting as median home prices have increased by 10%, exacerbating the struggle for first-time buyers to save for a down payment.

“This is a product that we are really proud of,” said Director of Real Estate Lending Ken Malinowski. “StartSmart breaks through geographical and income qualifying limits to offer a solution that acknowledges the diverse realities of today’s homebuyers. With rising home prices, it’s tough for many young professionals to come up with a down payment. With StartSmart, we don’t require a down payment, and you won’t get penalized with private mortgage insurance for not having one.”

A people-first organization, REV places a premium on taking a personalized approach to each applicant, offering flexibility in working with individuals who may not meet traditional qualifying criteria. This level of adaptability is often absent in dealings with larger banking institutions. “We genuinely want this product to help a wider range of individuals, regardless of their circumstances,” Malinowski said. “Life doesn’t always fit neatly into a predefined box, and we will work with you. At the end of the day, it’s about making homeownership a reality for everyone.”

The StartSmart product is a 30-year fixed conventional loan, promising a consistent interest rate throughout the loan term and providing borrowers with a steady monthly principal and interest payment.

In contrast, the majority of lenders offer first-time homebuyers’ programs through adjustable-rate mortgages (ARMs). While ARMs may initially attract borrowers with lower introductory rates, they pose a risk due to potential fluctuations in interest rates and monthly payments when the loan adjusts according to its terms. Over the duration of the loan, an ARM may end up being costlier than a fixed-rate mortgage, influenced by market changes and rate fluctuations. Over the past five years, rates have increased by nearly 3%, forcing those with an ARM product to adjust to a higher rate and payment.

According to the National Association of Realtors, the median age of first-time homebuyers is 35 years old. This demographic trend indicates that millennials typically consisting of those born between 1981 and 1996—have reached the stage in their lives where buying a home is becoming a top priority. In a housing market where demand for affordable options is on the rise, particularly driven by a surge in millennial buyers, StartSmart emerges as a strategic solution to address the pressing affordability challenges faced by newcomers to the real estate market.

StartSmart has been on the market for less than a year but has proven to be a vital solution for many buyers facing entry barriers prevalent in various programs within the secondary market. The commitment of REV’s StartSmart First-time Homebuyer’s Program goes beyond the transactional aspects; it opens doors to more opportunities for increased buying power, stability, and the potential to build equity and accumulate wealth over time. By nurturing financially healthy families and individuals through homeownership, they are better positioned to reinvest in their neighborhoods, contributing to the development of resilient and thriving communities.

For more information on REV’s StartSmart First-Time Homebuyer program, please visit REVfcu.com/mortgage-loans.