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Mortgage Lenders Innovate to Help Homebuyers Cope with Higher Rates

Rocket, Guild and UWM are among lenders providing homebuyers with options, such as temporary rate buydowns and reduced fees on refis if rates come down.

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The nation’s biggest mortgage lenders continue rolling out loan products designed to help homebuyers cope with higher mortgage rates, with Rocket Mortgage announcing a new program Tuesday that provides up to $7,500 in lender credits for first-time homebuyers in six major cities.

Other recent announcements include Guild Mortgage’s Payment Advantage program, which takes a percentage point off the borrower’s interest rate for the first year of payments and expanded temporary rate buydown options from United Wholesale Mortgage.

Rocket Mortgage’s Purchase Plus initiative is a special-purpose credit program available to first-time homebuyers within specific census tracts in Atlanta, Baltimore, Chicago, Detroit, Memphis and Philadelphia.

Rocket’s Purchase Plus program provides a base credit of $5,000 plus an additional lender credit equal to 1 percent of a home’s purchase price up to a maximum of $2,500, for a potential savings of $7,500 on mortgage costs.

Bob Walters

“Homeownership has a significant impact on strong communities and the creation of generational wealth,” said Rocket Mortgage CEO Bob Walters in a statement. “Our Purchase Plus program is a catalyst that will help narrow the homeownership gap by addressing a concern we’ve heard time and again — the difficulty of saving for out-of-pocket expenses when buying a home.”

Rocket Mortgage in September announced an “Inflation Buster” mortgage that gives homebuyers a lower rate and monthly payment during the first year of their loans. Rocket’s Rate Drop Advantage program, launched in July, provides savings on refinancing costs if rates come down in the next three years.

Guild Mortgage’s Payment Advantage program, announced Dec. 20, is a lender-paid 1-0 temporary buydown, providing a 1 percentage point reduction on the borrower’s interest rate for one year. Guild’s Payment Protection program also allows for a rate and term refinance with no lender fees if rates go down in the future.

Many lenders now offer the option of temporary rate buydowns, in some cases offered as a seller concession in lieu of a price reduction.

United Wholesale Mortgage (UWM), which rolled out an aggressive “Game On” pricing strategy in June that helped it overtake Rocket Mortgage during the third quarter as the nation’s leading lender, introduced temporary rate buydowns in August.

UWM started out offering 2-1 and 1-0 buydown options for conventional primary and second-home purchases, as well as FHA and VA primary home purchases. It expanded the program in November to include 3-2-1, 2-1, 1-1 and 1-0 buydown options.

On Dec. 21, UWM announced 2-1 or 1-0 temporary rate buydowns for prime jumbo borrowers.

A 3-2-1 buydown reduces the interest rate by 3 percentage points in the first year, 2 percentage points in the second year and 1 percentage point in the third year. After that, the borrower pays the original locked rate for the duration of the loan term.

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