No Money Down Mortgage? SF Credit Union offers up to 100% of the cost of mortgage.

Seeking to tap into demand for financing for first-time homebuyers trapped between sky-high rents and million-dollar-plus median home prices in parts of San Francisco and Silicon Valley, San Francisco Federal Credit Union (SFFCU) has announced a no-money-down mortgage program that will finance up to $2 million mortgages for workers in San Francisco and San Mateo.

The program, called POPPYLOAN, will finance up to 100 percent of the cost of a home purchase anywhere in the nine counties comprising the Bay Area: San Francisco, San Mateo, Marin, Napa, Sonoma, Santa Clara, Alameda, Contra Costa, or Solano. There is no added requirement for private mortgage insurance (PMI).

The mortgages will be structured as 30-year “5/5” adjustable rate loans that carry a fixed rate for the first five years (currently around 4 percent) and then adjust to a new fixed rate for each five-year term thereafter. The adjustments are capped at no more than 2 percent per period, with a lifetime aggregate rate increase limited to no more than 6 percent.

SFFCU hopes to attract renters in the Bay Area’s highest rent districts to trade their leases for loans that eliminate the barrier to entry into homeownership that a down payment of even 10 percent can be to a first-time buyer in the region, where average home sales prices in San Mateo and San Francisco counties have recently topped $1 million for the first time.

“Too many of our members have given up hope of buying a home because of escalating home prices and the required down payment,” said Rebecca Reynolds Lytle, senior vice president and chief lending officer for San Francisco Federal Credit Union. “However, these same families are paying more than a mortgage payment for monthly rent. Paying $3,600 for a one-bedroom apartment is about the same as making a monthly payment on an $800,000 mortgage. We created POPPYLOAN to help middle-class families realize their dream of buying a home without having to move out of the Bay Area.

Lytle says the credit union has the reserve capacity to originate up to $100 million of the loans, which will be held in the institution’s loan portfolio. The program is available for purchase loans on owner-occupied single family, 2-4 unit multifamily properties, condominiums and townhouses. Tenants-in-common properties also qualify. On an $800,000 mortgage with one point pre-paid interest and a $1,200 origination fee, closing costs are estimated at about $24,000.

The program will compete with mortgage giants Fannie Mae and Freddie Mac, both of which offer as high as 97 percent financing on purchase mortgages, but have resisted no-down lending since the 2008 housing crisis. The POPPYLOAN program mirrors other 100 percent  financing programs that have proved successful over the years, including those offered by the Navy Federal and North Carolina credit unions, as well as BBVA Compass, a commercial bank operating in the southeastern U.S. which introduced a 100 percent financing program earlier this year.

Brett Goetschius: editor@theregistrysf.com