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In a bid to do more business with homebuyers, Rocket Mortgage is rolling out a new loan that lets low- and moderate-income borrowers buy houses with as little as 1 percent down — without having to pay extra for mortgage insurance.
Announced Monday, Rocket Mortgage’s ONE+ mortgage is a conventional loan, meaning it meets requirements set by Fannie Mae or Freddie Mac. The mortgage giants already offer programs that let borrowers put down as little as 3 percent — like Fannie Mae’s HomeReady mortgage and Freddie Mac’s Home Possible loan — but private mortgage insurance is required on loans with down payments of less than 20 percent.
Rocket’s ONE+ mortgage provides a 2 percent lender-funded grant so that buyers only need to come up with a 1 percent down payment. Rocket sweetens the deal by also picking up the cost of private mortgage insurance (PMI).
That means qualifying buyers can purchase a $250,000 home with a $2,500 down payment and save up to $245 a month on private mortgage insurance, paying just $1,454 a month in principal and interest on a hypothetical 30-year fixed-rate loan at 6 percent interest.
Since it generally takes 7 years to build up the 20 percent equity needed to get out of private mortgage insurance, that hypothetical borrower would save $20,500 over that period, Rocket calculates.
Bob Walters
“We talk with people from all walks of life every single day – many of whom are ready to own a home, and could easily make the monthly mortgage payments, but are having trouble saving for a down payment,” Rocket Mortgage CEO Bob Walters said in a statement. “ONE+ is a response to that feedback and the latest example of Rocket’s commitment to creating programs that help make homeownership more attainable.”
To qualify for the ONE+ mortgage, which is tied to affordable housing goals, homebuyers can’t make more than 80 percent of the area median income (AMI) and need a FICO score of 620 or better. The loan is only available to buyers putting down less than 5 percent — a maximum of 2.99 percent from their own pockets, plus Rocket’s 2 percent grant.
After losing its title as the nation’s biggest mortgage lender to rival United Wholesale Mortgage last year when rising rates brought an end to a refinancing boom, Rocket Mortgage has launched several initiatives to boost its purchase lending business. In April, Rocket announced it would offer homebuyers a closing credit of up to $10,000 if they work with a real estate agent that’s partnered with sister company Rocket Homes.
The BUY+ program provides homebuyers working with Rocket Homes Partner Agents a closing cost credit equal to 1.5 percent of their loan amount — about $5,000 for a homebuyer putting down 5 percent to purchase a $350,000 home. To claim the maximum $10,000 closing credit, a homebuyer would have to borrow close to $667,000.
Sellers who work with Rocket Homes Partner Agents can qualify for a “SELL+” rebate equal to 1 percent of their home’s sale price and are also eligible to participate in BUY+ if they also buy with Rocket Homes and Rocket Mortgage.
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