Home buyers will be able to put as little as 1% down as payment for a home under a new program launched by Rocket Mortgage

Rocket Mortgage has introduced a new initiative that enables individuals with low to moderate incomes to make a down payment as low as 1% on their desired homes.

Rocket Mortgage (RKT) has launched a program called ONE+ that allows aspiring homeowners with limited financial resources to purchase homes in their area by only paying 1% of the home's purchase price. This program also eliminates the need for mortgage insurance, reducing the overall cost of homeownership.

To ensure that the mortgages originated by Rocket are sold and guaranteed by government agencies Fannie Mae (FNMA) and Freddie Mac (FMCC), Rocket will contribute 2% of the borrower's loans. Additionally, the mortgage premium, which is typically required for buyers who put down less than 20% on a home, will be reduced.

In an exclusive interview with MarketWatch, Rocket Mortgage CEO Bob Walters expressed great enthusiasm about the program's launch, stating that it will have a significant impact on many people. Walters emphasized that the program's strict credit standards would prevent a repeat of the subprime loan crisis, which was caused by irresponsible lending practices.

Under the new program, individuals purchasing single-family and manufactured homes, whose income is 80% or less than the median income in their area, will only need to put down 1% for their home. Rocket estimates that approximately 90 million people in the U.S. meet these qualifying guidelines.

According to the National Association of Realtors, typical first-time homebuyers usually put down between 6% and 7%. In the first quarter of 2023, the average homebuyer made a down payment of around $24,000, as reported by Realtor.com.

While the option to put down as little as 3% already exists through government-backed Federal Housing Administration loans, borrowers would still have to pay mortgage insurance. Certain groups, such as veterans with Veterans Affairs mortgages, are exempt from making a down payment and paying mortgage insurance fees.

Some private lenders have also introduced very low to no down payment programs. For example, Bank of America (BAC) launched zero down payment mortgages with no closing costs for first-time buyers in specific Black and Hispanic neighborhoods. Similarly, the San Francisco Federal Credit Union offers zero down payment mortgages, but with an adjustable-rate structure and limited to individuals working in San Francisco or San Mateo County.

Rocket Mortgage's 1% down program, which became available on Monday, is open to qualifying homebuyers in all 50 states.

Rocket Mortgage is one of the largest non-bank mortgage lenders in the U.S. However, the company reported a net loss of $411 million in the first quarter of 2023.