How to Buy a Home with Just 1% Down + Understanding Your ARM Loan Options

For many first-time homebuyers, the biggest hurdle to homeownership is the down payment. Thankfully, new programs like UWM’s Conventional 1% Down and alternative mortgage options like ARM loans are making it more accessible than ever to own a home, even in today’s market.

Whether you're saving for your first home or looking to explore financing options, this blog breaks down two powerful tools you should know about: UWM’s 1% Down Payment Program and ARM loan products such as the 5/1, 3/1, and 7/6 ARM.

🌟 UWM’s Conventional 1% Down Program: A Game-Changer for First-Time Buyers

If saving for a down payment has held you back, this program could be your breakthrough.

🔑 Program Highlights

• Buyers put down just 1 percent of the purchase price.

• UWM contributes an additional 2 percent, up to $7,000, toward your down payment.

• Combined, that brings the total down to 3 percent, the minimum required for a conventional loan.

🧾 Key Eligibility Requirements

• Primary residence only

• Income must be at or below 80 percent of the Area Median Income (AMI)

• Minimum credit score of 620

• Homebuyer education is required for first-time buyers

• Must meet HomeReady or Home Possible guidelines

• Requires DU or LPA Accept/Eligible findings

📋 Program Parameters

• 30-year fixed mortgage

• Loan-to-value (LTV) up to 97 percent

• Available only through the Broker Channel

• Not available for correspondent loans

💡 Why This Helps Homebuyers

• Makes homeownership achievable sooner with less upfront cost

• Frees up cash for furniture, moving expenses, or rate buydowns

• Especially helpful in underserved communities

🧠 Mortgage Insurance Options

• Choose between Borrower Paid Monthly (BPMI) or Lender Paid Mortgage Insurance (LPMI) based on your financial strategy

🏡 Adjustable Rate Mortgages (ARMs): Smart Financing for Short-Term Goals

If you're planning to move or refinance within the next five to seven years, an ARM loan might be the right fit.

📌 What Is an ARM Loan?

An Adjustable Rate Mortgage, or ARM, starts with a low fixed interest rate for a set period of time, then adjusts periodically based on market conditions.

Examples of Popular ARM Options:

• 5/1 ARM: Fixed for five years, then adjusts annually

• 3/1 ARM: Fixed for three years, then adjusts annually

• 7/6 ARM: Fixed for seven years, then adjusts every six months

🔍 ARM Loan Details by Product Type

✅ 5/1 ARM (FHA and VA)

• FHA

  • Minimum FICO: 580

  • Maximum LTV: 97.75 percent

  • Not eligible for temporary rate buydowns

• VA

  • Minimum FICO: 580

  • Maximum LTV: 100 percent

  • Loan amounts up to $4,000,000

✅ 3/1 ARM (VA Only)

• Primary residences only

• Minimum FICO: 580

• Maximum LTV: 100 percent

• Loan amounts up to $4,000,000

• Adjustment caps: 1 percent for the initial adjustment, 1 percent for subsequent adjustments, and a 5 percent lifetime cap

✅ 7/6 ARM (Jumbo and Conventional)

• Fixed rate for seven years, then adjusts every six months

• Eligible for:

  • Primary residences

  • Second homes

  • Investment properties

📉 Margin and Index Basics

Your adjustable rate is calculated using a margin plus an index:

• Conventional and Jumbo: 2.75 percent margin

• FHA and VA: 2.25 percent margin

Example Calculations:

• Conventional ARM: 2.75 margin + 1.00 index = 3.75 percent fully indexed rate

• VA ARM: 2.25 margin + 4.00 index = 6.25 percent fully indexed rate

⚠️ Potential Risks with ARMs

• Payment shock: Your payment may increase significantly after the fixed-rate period ends

• Not ideal for long-term homeowners

🤔 Why Choose an ARM Loan?

• Lower initial rates mean lower upfront payments

• Ideal for buyers who plan to move or refinance in the near future

• Industry data shows fewer than 10 percent of borrowers keep the same mortgage for more than seven years

🛠 Final Thoughts

Both of these options — UWM’s Conventional 1 Percent Down Program and the variety of ARM loan structures — are designed to empower more people to become homeowners with greater flexibility and affordability.

Whether you're working toward your first home or exploring financing strategies in today’s evolving market, it's essential to work with a knowledgeable lender and real estate professional who can guide you through the best path for your goals.

Have questions about which program is right for you?
I’m happy to walk you through your options and connect you with a trusted lender partner who specializes in these loan types.

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