With existing homes still experiencing a sluggish sales season, first-time buyers are more hesitant to enter the buying market. According to the National Association of Realtors (NAR), first-time homebuyers accounted for 30% fewer purchases this June, compared to June 2023, and only were responsible for about 29% of all existing home sales.
In an effort to budge that 29% figure, Rocket Mortgage today introduced "Welcome Home RateBreak," a lender-paid 2-1 temporary buydown program. According to a release from the Detroit-based company, buyers can enjoy significant savings with a mortgage rate reduced by two percentage points in the first year, then one percentage point in the second year before returning to the note rate in the third year and until the mortgage is paid off.
The lower rate is accomplished through a special escrow account established and fully funded by Rocket Mortgage. During the first 24 months of the loan, the homeowner will make the reduced monthly mortgage payment, and Rocket Mortgage will cover the difference automatically. The homebuyer would be responsible for taxes and insurance premiums.
The program, however, is only available to homebuyers who apply directly to Rocket Mortgage, or buyers working with a mortgage broker who is partnered with Rocket Pro TPO. Homebuyers also have to be purchasing a single-family home and have income equal to or less than 80% of their area median income (AMI).
Rocket Mortgage estimates that more than 90 million people can benefit from this program, but did not disclose how long the program will be offered for.
Welcome Home RateBreak Work Breakdown
As an example, a homebuyer with a $250,000 loan at a 6.99% rate (APR 7.399%) would typically pay $1,661 per month, Rocket noted. With "Welcome Home RateBreak," their first-year rate would be 4.99%, reducing the payment to $1,340. In the second year, the rate would be 5.99%, with payments of $1,497. After that, the payments return to the 6.99% rate for the remainder of the loan. This results in over $5,800 in savings during the first two years.
"Rocket is committed to creating and delivering unique programs that address the challenges homebuyers face today," said Rocket's Chief Business Officer and Economist, Bill Banfield. "Many buyers fear being stretched too thin during the early years of homeownership, especially as they consider the cost of new furnishings and special touches to make the new home their own. By lowering the interest rate for the first two years, "Welcome Home RateBreak" provides financial breathing room, giving consumers the confidence to enter the market and make their homeownership dreams a reality."
