Rocket Mortgage and its wholesale arm Rocket Pro TPO will reduce homebuyers’ monthly mortgage payments by one full percentage point for the first year of their loan.
Dubbed the “Inflation Buster” program, Rocket aims to give borrowers a reprieve to combat high inflation and affordability challenges, the company said in a statement Friday.
Rocket Mortgage will be covering the difference in mortgage payments in the first 12 months through a special escrow account. For Rocket Pro TPO, home sellers or real estate agents will be funding the program, similar to a buydown program rival United Wholesale Mortgage launched last month. UWM announced that its temporary rate buydowns – fueled by seller concessions – would reduce borrowers’ interest rates by up to 2% for the first two years of a mortgage.
Rocket said that a homebuyer with a $400,000, 30-year fixed rate mortgage with 5.75% interest would generally pay about $2,334 in principal and interest. Through its inflation buster program, the monthly payment would drop by more than 10% to about $2,086, which would save the borrower a total of $2,972.40 in the first year of their loan, Rocket said.
“The Inflation Buster pairs perfectly with the Rate Drop Advantage program which covers many of the costs to refinance when interest rates fall,” Bob Walters, CEO of Rocket Mortgage, said in a prepared statement. “Combined, these put buyers in the driver’s seat with unmatched benefits.”
The Rate Drop Advantage program, launched in July, covers a portion of closing costs of a refinance transaction if interest rates drop and borrowers refinance within three years of purchasing a home. The program waives the fees for appraisal, credit report pulls, processing and underwriting for an average savings of about $2,000, according to the lender.
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Amid inflation, uncertain economic conditions and intensified competition in a shrinking mortgage origination market, Rocket has rolled out a range of new products and increased its conventional loan limit to reach more borrowers and brokers.
In August and September, Rocket Mortgage and Rocket Pro TPO announced the offering of home equity loans to capitalize on record home equity levels. Earlier this month, Rocket Pro TPO preemptively raised conforming loan limits to $715,000, becoming the first lender to do so ahead of the Federal Housing Finance Agency‘s announcement in November.
The lender said the new conforming loan purchase limit will offer better pricing, require a smaller down payment for home purchases and easier documentation compared to a jumbo loan.
A day after Rocket’s announcement, UWM said it too would raise limits on conforming loans to $715,000.
Rocket Companies, the parent of Rocket Mortgage and Rocket Pro TPO, reported a profit of about $60 million in the second quarter, down from $1 billion in the previous quarter. Loan origination volume dropped to $34.5 billion from $53.8 billion during that same period and the gain-on-sale margin also fell to 2.92% from 3.01%