Detroit-headquartered Rocket Mortgage on Monday rolled out a lender-paid 2-1 temporary buydown program for lower-income households.
The program, dubbed “Welcome Home RateBreak,” is available to buyers purchasing a single-family home and earning 80% or less of their area median income (AMI). Rocket estimates the size of this segment at more than 90 million people.
The product, offered through both Rocket Mortgage and its wholesale arm Rocket Pro TPO, has a loan limit of $350,000. It is funded by Rocket through an escrow account that will cover the difference between the reduced payment and what the payments would be at the full note rate. The product is available in all 50 states.
“Some people have the down payment money but they just don’t like the interest rate. They are waiting for the interest rate to come down and we thought, ‘Why don’t we help them ease into the transition of housing?’ We can give them a rate that is materially lower and we will fund the difference,” Bill Banfield, chief business officer and economist at Rocket Companies, said in an interview with HousingWire.
For example, a homebuyer with a $250,000 loan at a 6.99% rate would typically pay $1,661 per month. With “Welcome Home RateBreak,” their first-year rate would be 4.99%, reducing the payment to $1,340. In the second year, the rate would be 5.99%, with payments of $1,497. After that, the payments return to the 6.99% rate for the remainder of the loan. This buyer would save more than $5,800 from the two-year buydown, according to Rocket.
Rocket has been rolling out a series of mortgage products to address affordability, including ONE+, a 1% down home loan program that launched in May 2023.
With ONE+, buyers whose income is equal to or less than 80% of their AMI are only required to make a down payment of 1% of the purchase price, with Rocket covering the remaining 2% needed to reach the required threshold for conventional loans.
The program also eliminates the monthly mortgage insurance premium for the borrower, which is traditionally required if the buyer puts down less than 20% of the purchase price.
Rocket originated $24.6 billion in mortgages in the second quarter of 2024, up from $20.2 billion in the previous quarter and $22.3 billion in Q2 2023. The company’s GAAP net income of $178 million from April to June was lower than its $291 million profit in Q1 2024 as expenses increased compared to its revenue during the period.
In the company’s Q2 2024 earnings call, executives projected a challenging mortgage market in the coming months, due in large part to regulatory changes, low affordability levels and consolidation in the industry.
