According to Housing Wire, to combat the rising cost of rent, San Francisco Federal Credit Union has announced a new loan program called POPPYLOAN; POPPY standing for Proud Ownership Purchase Program for You. Under this program, qualified customers would be able to finance 100% of their mortgage up to $2 million.
Coming only seven years after the housing market crash in 2008, this idea may seem a bit impetuous. However, when you take into account that some families are paying more for monthly rent than a mortgage payment, it certainly makes sense.
According to a Zillow analysis, renters can normally expect to spend 30% of their income on rent. However, the same report shows that nearly half of San Francisco renter’s income goes to rent! The disparity explains why renters have a hard time saving the money necessary for a down payment on a conventional mortgage.
Rebecca Reynolds Lytle, senior vice president and chief lending officer for San Francisco Federal Credit Union recognizes this and went on record saying, “Too many of our members have given up home of buying a home because of escalating home prices and the required down payment.”
In addition to being at least 18 years old and working in San Francisco or San Mateo County, San Francisco Federal Credit Union states, “POPPYLOAN™ eligibility also depends on a number of additional factors, such as credit scores, income, employment status, and property value and eligibility” under Frequently Asked Questions.
With the middle class shrinking, home ownership declining, and rent prices rising, it makes sense that banks and credit unions are creating products to qualify new home buyers. BBVA has its own zero-down mortgage program called HOME, Home Ownership Made Easier. However, one can only hope that history has not been forgotten and that financial institutions won’t compromise their underwriting integrity for a quick loan.