Rocket Mortgage rolled out a 1% down payment product Monday, to support its efforts to get more purchase business through the door. This is the third product the Detroit lender has launched in the past six months targeting first-time homebuyers.
The program announced this week, dubbed ONE+, allows for a borrower to make a down payment of 1%, while the mortgage lender covers the remaining 2% needed to reach the required threshold for conventional loans. Rocket will also foot a borrower’s bill for monthly mortgage insurance fees.
“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,” said Bob Walters, CEO of Rocket Mortgage, in a written statement. “ONE+ is a response to that feedback and the latest example of Rocket’s commitment to creating programs that help homeownership more attainable.”
ONE+ is available to borrowers purchasing single-family homes, including manufactured homes, whose income is equal to or less than 80% of their area median income, the lender’s announcement said.
Other products launched recently by the mortgage shop to spur homebuying include a special-purpose credit program, which offers up to $7,500 in credits for first-time buyers to use toward their mortgage costs, and BorrowerSmart Access, a credit program done in partnership with Freddie Mac.
These purchase-oriented offers come at a time of declining origination activity, high interest rates and brewing economic uncertainty, which have had an impact on the bottom line of lenders across the country.
In the first quarter of 2023, Rocket’s direct to consumer channel closed $9.8 billion, while the partner network (which includes the wholesale business) did $7.1 billion at an 83 basis point margin.
The results were lower than the fourth quarter when Rocket produced $10.7 billion in direct to consumer and $8.4 billion from its third party originations business. It is also a significant drop-off from one year ago, when it did $33.8 billion (400 basis point margin) in direct-to-consumer and $21 billion (96 basis point margin) from the partner network.
Despite this, Rocket executives expressed a positive outlook on the months ahead, noting that they were starting to see “a healthy purchase pipeline…[with] purchase approval letters up 11% trending much higher…compared to the same timeframe last year.”