Last month, United Wholesale Mortgage, the largest U.S. home mortgage lender, announced it would begin offering loans with as little as 1 percent of the purchase price of a home for a down payment. Following close behind is fellow Rocket Mortgage, which this week announced a similar program called One+. Rocket Mortgage does not require borrowers to pay private mortgage insurance, or PMI, which traditionally kicks in when a buyer's down payment is less than 20 percent. (PMI is typically 0.5% to 1.5% of the loan amount per year, payable in monthly installments.)

Both lenders charge an additional 2% of the home's selling price so that the borrower has at least 3% down. (United Wholesale Mortgage will only fund up to $4,000 of the additional equity the borrower obtains. (Rocket Mortgage borrowers, on the other hand, have no restrictions). The loans also have income limits and are geared toward low- and moderate-income borrowers.

"This is a really good way to expand homeownership for families who might not otherwise have access to the American dream," says David Stevens, CEO of Mountain Lake Consulting, which services the mortgage industry and does not work with United Wholesale Mortgage or Rocket Mortgage.

"One of the unfortunate realities of homeownership is that saving for a down payment can be quite difficult," he added." Oftentimes, it ends up excluding families with more diverse backgrounds."

He expects these new loans could help families of color and single parents who see down payments as a barrier to homeownership.

"The biggest issue people have right now is affordability and down payments," said Adam Speck, executive vice president for purchasing at Rocket Mortgage." That's what customers have been asking for."

However, some warn that these very low down payment loans can be risky for borrowers, especially those with limited savings.

And, as home prices have begun to fall in certain areas of the county, buyers who don't make larger down payments may find themselves owing more on their mortgages than their homes in those areas are worth.

"Making it easier for everyone to get a mortgage with only 1 percent is like putting candy in front of a baby," said Shmuel Shayowitz, president and chief lending officer of Approved Funding in River Edge, N.J." Those who shouldn't have to buy a home will be encouraged and enabled to do so."

According to a recent analysis by Realtor.com®, the average down payment in the first quarter of this year was 13 percent.

These low or no down payment loans are not unprecedented.

The popular Department of Veterans Affairs loans and U.S. Department of Agriculture loans do not require any down payment. Government loans cater to active duty military personnel, veterans and their families, or people buying property in rural areas, respectively.

Last year, Bank of America introduced a zero down payment program for first-time homebuyers purchasing property in historically black and Hispanic neighborhoods in certain cities.

Borrowers with qualifying credit scores can also obtain government-backed loans with as little as 3 percent down or Federal Housing Administration loans with as little as 3.5 percent down. Many of these borrowers receive down payment assistance from all levels of government or through other sources, so their personal contribution may be less than the minimum requirement.

"Does 1% or 3.5% really make that much of a difference?" Stevens, a mortgage consultant, asks." Our goal is to ultimately expand the pool of potential homebuyers."

Alex Elezaj, chief strategy officer for United Wholesale Mortgage, said, "The additional funding of up to $4,000 that United Wholesale Mortgage provides to borrowers to put down 3% is "basically a subsidy."" This helps make homeownership more accessible and affordable nationwide."

Not everyone qualifies for these mortgages.

Borrowers still need to have a high enough credit score, enough income, and low enough debt to be approved for these mortgages. For joint wholesale mortgages and rocket mortgages, buyers must have a credit score of at least 620 and an income no greater than 80 percent of their area median income. The latter means that if the typical local household income in an area is $100,000, then borrowers there cannot earn more than $80,000 per year.

Those seeking a Rocket One+ mortgage must purchase a single-family home. And conventional 1% down loans from United Wholesale Mortgage are only available through mortgage brokers.

"The buyer must still qualify for any [monthly] payments," said Stevens, a mortgage consultant.

Rocket mortgage borrowers also don't have to worry about paying mortgage insurance each month. Lenders plan to make a one-time payment when the borrower receives the loan.

Some in the mortgage industry believe lenders will charge higher mortgage rates or fees to cover down payment assistance - and in Rocket Mortgage's case, lack of mortgage insurance. But the two lenders told Realtor.com that the loans offer the same mortgage rates and fees as their high down payment mortgages offer.

Elezaj of United Wholesale Mortgage said the goal of its 1 percent down payment loans is to help borrowers while also securing additional business for lenders. With mortgage rates soaring, many buyers have been pushed out of the market while others wait for rates to fall. As of Friday afternoon, the average rate on a 30-year fixed-rate loan was 7.14 percent, and few homeowners wanted to refinance, according to Mortgage News Daily.

Mortgage applications fell 34.3 percent year-over-year in the week ending May 19, according to the Mortgage Bankers Association. This includes purchase loans and refinancing.

Taking out these loans is risky.

Most first-time homebuyers don't realize how much it costs to own a home. There are the big-ticket items that eventually need to be replaced, such as the roof or the boiler or the furnace or appliances like the washing machine. Then there's maintenance, such as gutter cleaning, landscaping the property, and repairing the HVAC system. Then there are those unexpected expenses, when something goes wrong without warning. Homes are called "money pits" for a reason.

Homeowners who don't have much equity in their properties don't have anything to use to pay for those expenses. If they choose to take out these loans because they don't have much in the way of savings, they may not be able to pay these fees and mortgages.

"This has the potential to make it possible for homebuyers who shouldn't be buying a home," said mortgage lender Schajowicz." People who should be getting mortgages with 1 percent down should be higher quality people who have the income and reserves to pay their mortgages."

Another concern is that as the housing market adjusts and prices fall in many parts of the country, homebuyers using small down payments may find themselves underwater on their loans.

But in this era of accelerating housing cycles, that doesn't have to be a problem.

"They still have a place to live, [and] prices usually recover over time," says Keith Gumbinger, vice president of HSH.com, a mortgage information site.

But if they have to sell quickly, they could lose money if they owe more than the home is worth. They will have to take those losses.

Homeowners who don't have much money invested in the property themselves are also more likely to walk away if something goes wrong or the value of the property goes down. A foreclosure or short sale will seriously damage someone's credit.

"I don't even think those are real concerns," Elezaj said. He notes that borrowers still must have strong financial credentials to qualify for a loan." These are quality loans and quality borrowers."

Lenders absorb more risk than borrowers, Gumbinger says. If the borrower can't make the mortgage payments, the lender won't get paid until the home is eventually sold.