Rocket Mortgage, the nation’s largest mortgage lender, has introduced a new bridge loan product aimed at helping homeowners buy a new home before selling their current one — offering a competitive edge in today’s ultra-competitive and expensive housing market.
Relocating is like trying to conduct a symphony in the middle of a thunderstorm — every piece has to come in on cue, but chaos is constantly crashing in. Selling an existing house and buying a new one is hard enough to balance, but movers might also need to find a new job or enroll their kids in a new school. It’s a delicate balancing act with high emotional stakes, where one disruption — a delayed sale, a job that starts too soon, a school that’s already full — can derail the entire plan.
Rocket’s bridge loan attempts to smooth the process over by allowing clients to tap into their record-breaking home equity — which averages about about $181,000 nationally — to cover down payments or closing costs on their new home. This enables buyers to make non-contingent offers, a major advantage when competing with cash buyers in hot markets like San Jose, where 67.1% of homes sold above asking in February, and in other high-demand cities like Oakland, San Francisco, and Newark.
“Buying and selling a home at the same time can be one of the most stressful parts of the journey,” said Bill Banfield, Chief Business Officer and Economist at Rocket. “Rocket Mortgage’s new bridge loan alleviates this by helping people purchase on their terms – not the market’s. It removes one of the biggest barriers to moving: immediate access to the equity in their current property. With this new flexibility, buyers can quickly and confidently secure their next home.”
Asked whether the new product is available to Rocket Pro's broker partners, a company spokesperson responded “The bridge loan is launching in retail first, but we are exploring opportunities to integrate Rocket Pro in the future.”
Despite the 21% surge in housing inventory reported by National Association of Realtors (NAR) in May, existing-home sales have been subdued. In an exclusive interview with NMP, Banfield explained that's likely because housing inventory has a long way to go before it fully recovers: "The inventory levels are improving, but they're still materially below the 2017, 2018, and 2019 levels. And so there's not a lot of great inventory to choose from," he said.
Buyers are still competing in a tough market, but Banfield explained how a bridge loan can help strengthen their offers and become more attractive to sellers.
"With a bridge loan, [homeowners] can tap into that existing home equity to use as their downpayment or to help fix up their home. However, you want to approach it, you can. It can at least make part of the process easier, because you can then go and make offers with confidence," Banfield said. "Not only does the idea of a bridge loan make it easier for the buyer, because they can make offers on their own terms in their own timeline, but it actually makes it better for the seller as well."
The bridge loan offers up to six months to sell the existing home, with interest-only payments during that period. To qualify, the property must be listed for sale, under contract with a real estate agent, or have a guaranteed buyout agreement in place. Borrowers must also be using Rocket Mortgage for their new purchase loan.
Some buyers might initially be dissuaded by bridge loans since they come with higher interest rates and require a higher credit score compared to traditional loans. For Rocket's bridge loan, borrowers need to have a 740 FICO score, and can expect an interest rate of around 9% to 9.5%. But, Banfield points out that buyers are still getting a better deal with a bridge loan versus a HELOC or cash-out refinance.
"The the benefit of a bridge loan with a 6 month term is that it's fully intended to be a short term loan that's paid off as soon as the home is sold," Banfield said. "This is an installment loan... you don't need to include it in the calculation for qualification. So it makes it easier to qualify on the purchase transaction, because that the bridge loan payment isn't applied."
For HELOC loans or cash-out refinance loans, all of the borrowers' debts would be included. However, because bridge loans are structured to be paid off within a few months, it doesn't need to be included in the qualification of the new purchase.
The launch is part of Rocket’s broader push to eliminate financial barriers to homeownership. Earlier this year, the company rolled out RocketRentRewards, a program for qualified first-time buyers who can earn up to $5,000 in lender credits, or 10% of their past year’s rent, toward closing costs.
Rocket positions the bridge loan as a strategic solution not just for buyers in overheated markets, but also for those seeking to avoid the costs and disruption of temporary housing or rushed sales.
