Rocket rolls out conventional 1% down home loan program

ONE+ will reduce upfront costs, eliminate monthly mortgage insurance fee: Rocket Mortgage

Rocket Mortgage introduced a new 1% down home loan program aiming to target more than 90 million borrowers. Rocket’s new product comes on the heels of rival United Wholesale Mortgage (UWM) rolling out a similar program.

Dubbed ONE+, a buyer using this program who’s purchasing a single-family home, and whose income is equal to or less than 80% of their area median income (AMI), is only required to make a down payment of 1% of the purchase price. The Detroit-headquartered lender will cover the remaining 2% needed to reach the required threshold for conventional loans, Rocket Mortgage said Monday. 

The program will not only reduce upfront costs, but will also eliminate the monthly mortgage insurance fee for the borrower, which is traditionally required if the buyer puts less than 20% down on their purchase.

The mortgage insurance will kick in at no cost to the client, a Rocket spokesperson said.

There is no limitation on the down payment assistance amount that Rocket is providing to borrowers.

“Clients can go up to the national conforming limit receiving 2% from us,” according to a spokesperson. 

For example, a homebuyer purchasing a $250,000 home would need a $2,500 down payment instead of $7,500, or a minimum of 3% down. ONE+ offers mortgage insurance at no cost to the client, which on a $242,500 loan can be as much as $245 per month. 

“That improves a homeowner’s monthly cash flow and can save as much as $20,500 over the first seven years after closing – the average amount of time mortgage insurance needs to be paid,” according to the firm. 

Rocket’s ONE+ launch comes about a month after its competitor UWM revived its conventional 1% down mortgage loan program. UWM’s “Conventional 1% Down” program covered the remaining 2% down payment for borrowers with income at or below 50% of the AMI, and a minimum credit score of 620 and a 97% LTV. 

The 1% down option — rolled out by UWM and Rocket — is not new. 

Other lenders have rolled out similar programs over the years to drum up more volume. These types of products function like a modification to Fannie Mae‘s HomeReady and Freddie Mac‘s HomePossible programs, which allow a 3% down payment — or what lenders refer to as 97% loan-to-value (LTV) — on conventional loans. 

Pricing is “very comparable” to HomeReady and HomePossible, the company’s spokesperson said.

Rocket’s ONE+ program comes from its funds, the company noted making clear that it’s not working with a down payment assistance nonprofit or a GSE.

Despite the Detroit-headquartered lender spilling red ink for two consecutive quarters, Rocket still has plenty of cash. 

Rocket reported $8.1 billion in liquidity — including $900 million in cash — unchanged from the previous quarter, according to its filings with the Securities and Exchange Commission (SEC). 

In the first quarter of 2023, Rocket reported a $111 million adjusted net income loss in the first quarter, following a $197 million loss in the fourth quarter of 2022.

The article was updated on May 24 5:22 am ET with Rocket’s comments.

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