Key Details:
- ONE+, a new 1% down home loan program, was announced by Rocket Mortgage this week.
- In addition to saving upfront costs for the down payment, ONE+ also offers mortgage insurance at no cost to the homebuyer.
This week, Rocket Mortgage announced ONE+, a 1% down home loan program in the United States.
American homebuyers who are purchasing single-family homes and whose income is equal to or less than 80% of their area median income (AMI) can qualify for the new program. Rocket Mortgage estimates that more than 90 million people will meet the income requirements for ONE+.
What are the savings?
With ONE+, qualified homebuyers only have to save up 1% of a home’s purchase price for a down payment, compared to the typical 3% needed for conventional loans. If purchasing a $250,000, this would reduce the downpayment from $7,500 to $2,5000.
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. ONE+ is a response to that feedback and the latest example of Rocket’s commitment to creating programs that help make homeownership more attainable.
In addition to the upfront savings that come with a 1% down payment, ONE+ eliminates the monthly mortgage insurance fee for borrowers. Mortgage insurance is typically required for loans with less than a 20% down payment.
Using the example from above, if a homeowner has a $242,500 loan, the monthly payment for mortgage insurance can be as much as $245. Over the course of seven years (the average amount of time mortgage insurance is paid), this adds up to as much as $20,500—significant savings for any homeowner.
What are the risks?
The United States isn’t the only country aiming to make homeownership more affordable. Last week, a no-deposit 100% mortgage loan was announced in the UK—an option that comes with risks for the borrower, especially if home prices decline.
As far as 1% options in the U.S., Rocket Mortgage’s ONE+ comes shortly after United Wholesale Mortgage announced its conventional 1% down option. While these types of options help reduce costs for low-to-moderate-income earners, it does not solve the issue of low inventory. So those who qualify still have to deal with getting an offer accepted.
Even so, affordability remains a top issue, so any program designed to help homebuyers is enticing, so long as the risks don’t outweigh the reward. There are some questions regarding ONE+ that are currently unknown, as outlined by Housing Wire:
- What are the risks the borrower faces if they default?
- Is Rocket Mortgage working with a down payment assistance nonprofit or government-sponsored enterprise (GSE)?
- How does this option affect mortgage rates?
Frustrated buyers may be eager to jump on any type of program that makes homeownership more affordable. But as a real estate professional, it’s essential to do your due diligence and ensure consumers understand all aspects of the program.
When you are able to provide unbiased advice—even when it’s not something the consumer wants to hear—you’ll continue to gain trust and set yourself apart from the competition.
