In an effort to boost affordability for those most in need, Rocket Mortgage has launched a new program called “Welcome Home RateBreak.”
Similar to their Inflation Buster product rolled out two years, it is a lender-paid interest rate buydown.
It allows home buyers to enjoy a discounted mortgage rate for the first two years of their loan term.
After that, the rate reverts back to the note rate that they qualified for the remainder of the term.
Home buyers with area median income (AMI) of 80% or less are eligible for the potential savings.
How Rocket Mortgage Welcome HomeBreak Works
As noted, it’s a temporary buydown offered by Rocket Mortgage to home buyers with area median income (AMI) of 80% or less.
Rocket has estimated that some 90 million people nationwide meet this definition. You can look up your local AMI here.
You must also be purchasing a single-family home (apparently condos aren’t eligible) and you must meet all other underwriting criteria, such as minimum credit score, max DTI ratio, and so on.
Rocket cited an example where a home buyer qualifies for a $250,000 loan at a rate of 6.99% (APR 7.399%).
This would normally result in a monthly principal and interest payment of $1,661.
But thanks to the temporary buydown, their mortgage rate the first year would be 4.99%, reducing the payment to $1,340.
In year two, the rate discount would be just 1%, or 5.99% in this example, with a monthly payment of $1,497.
For the remaining 28 years, the mortgage rate would be 6.99%. Rocket says the savings total over $5,800, with the funds set aside in a special escrow account.
Borrowers would simply make a discounted payment for the first two years, with the difference drawn from the escrow account, which is funded by Rocket Mortgage.
The Welcome HomeBreak benefit can also be paired with Rocket Mortgage’s ONE+, which allows home buyers to purchase a property with a 1% down payment.
And is also available via the company’s Rocket Pro TPO channel if working with a mortgage broker.
Is This a Good Deal?
Whenever I talk about mortgage promotions, I always say to look at the big picture. That is, the all-in price including rate and lender fees.
So if Rocket Mortgage is providing a temporary buydown for two years, we also need to consider the alternatives.
Can you secure a lower interest rate elsewhere? If so, how much lower? Is it possible another mortgage company can offer a lower rate and buydown as well?
What if a different lender is able to offer a rate of 5.50% right off the bat, and it’s good for a full 30 years?
And what are the closing costs? You need to consider both the interest rate and the fees involved.
This is why it’s important to gather a few quotes from different sources (including mortgage brokers) to see what other companies can do. Without that context, it’ll be impossible to know if it’s a “deal” or not.
Lastly, consider the possibility of a mortgage refinance in the near future. If mortgage rates come down, as they are expected, the rate you get today might not be as important.
After all, you may only have it for a short period of time anyway before exchanging it for a lower rate, assuming you qualify for a refinance at that time.
Read on: Temporary vs. Permanent Mortgage Buydowns: Which to Choose and Why
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