September 19, 2024

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Best mortgage lenders of August 2024 #CashNews.co

Best mortgage lenders of August 2024 #CashNews.co

Cash News

“One size fits all” does not apply to mortgage lenders — some specialize in specific home loan types while others focus on certain clientele. Finding the best mortgage lender depends on your needs and financial situation.

At Yahoo Finance, we evaluated over two dozen top companies in the mortgage lending space before picking our favorites. Read about the best mortgage lenders to learn which is the perfect fit for your journey to homeownership.

In this article:

Truist mortgageTruist mortgage

The Yahoo view: Truist Bank distinguishes itself as a mortgage lender by offering down payment assistance and lender credits, among other advantages for first-time home buyers. However, it has only an average customer satisfaction score.

Stars: 4.00

Read our full Truist mortgage review

Key benefits

  • A Community Homeownership Incentive Program offers lender credits, low or no down payments, and no mortgage insurance to eligible borrowers in qualifying areas.

  • Mortgages for medical professionals may include lower down payments, waived mortgage insurance, and the exclusion of student loans from debt-to-income requirements.

Need to know

  • Published mortgage rates default to one discount point to show a more favorable mortgage interest rate but can be adjusted to zero points.

  • Truist scores near the average for customer satisfaction, according to the latest J.D. Power Mortgage Origination Satisfaction Study.

Learn more: Best mortgage lenders for first-time home buyers

Loan types offered

Pennymac Pennymac

The Yahoo view: Pennymac is the top FHA lender because it earned a 5-star rating in the mortgage rate category of the Yahoo Finance analysis. It has low median interest rates compared to competitors. Online features were also impressive.

Stars: 3.8

Read our full Pennymac mortgage review

Key benefits

  • If mortgage rates drop after you close a home loan with Pennymac, get a $2,000 credit toward closing costs when you refinance within three years.

  • Use a Pennymac-affiliated real estate agent and get between $350 and $9,500 in cash after closing.

Need to know

  • Although Pennymac accepts a 580 credit score for FHA loans, the advertised FHA mortgage rates on its website are for a 680 score — your rate could be higher with a lower credit score.

  • Pennymac has a below-average rating for customer satisfaction, according to the 2023 J.D. Power Mortgage Origination Satisfaction Study.

Learn more: Best FHA loan lenders

Loan types offered

Navy Federal Navy Federal

Navy Federal

The Yahoo view: Navy Federal is an excellent VA loan lender and offers low interest rates compared to competing VA mortgage lenders.

Stars: 4.41

Read our full Navy Federal Credit Union mortgage review

Key benefits

  • The No-Refi Rate Drop offer allows you to lock in a lower mortgage rate six months or later after closing — for a $250 fee — without additional closing costs or changing your loan terms.

  • A rate guarantee states that Navy Federal will match a better rate offered by a competing lender on the same loan or pay you $1,000 after you close with the other lender.

  • The Special Freedom Lock allows an interest rate reduction of up to 0.50% if rates fall before you close on your loan.

  • Military Choice loans allow benefits similar to VA mortgages to current and former service members who don’t have further entitlements.

  • Buy your home through a Navy Federal real estate agent partner and receive between $400 and $9,000 cash back.

Need to know

Learn more: Best VA loan lenders

New American FUndingNew American FUnding

Stars: 3

Read our full New American Funding review

Key benefits

  • New American Funding offers the three major government-backed loan programs: FHA, VA, and USDA loans. You can qualify for these mortgages with lower down payments and often with relatively low credit scores.

  • With New American Funding, you only need a 500 credit score and 10% down payment to get an FHA loan. You can also qualify with a 580 score and 3.5% down payment.

  • Many mortgage companies require a debt-to-income ratio of 43% or less for FHA loans, but New American Funding allows DTI ratios of up to 57%. Certain limitations apply.

Need to know

  • The lender’s website shows sample FHA loan rates, but these rates are misleading. On the day we checked, rates were reduced by three mortgage discount points, and they factored in a 20% down payment and 740 FICO score. It’s best to ask for an interest rate estimate tailored to your financial situation.

Learn more: Best mortgage lenders for bad credit

Your effort to find the best mortgage lender begins early in the home-buying process — before you start seriously shopping for a house.

You’ll reach out to a lender to get an idea of where you stand. Perhaps confirm your homebuying qualifications with a second lender. Get a preapproval from one or the other. Then start house hunting.

After you have a contract on a home in hand, you’ll expand your mortgage lender search, ask for loan offers, and narrow the field to a home loan lender that hits all the right notes.

Your personal nominees for “best mortgage lender” to finance your house should come from different types of lenders: a bank, an online provider, or a local credit union, to name a few. Each will have their own strengths and weaknesses.

You will also want to consider lenders that specialize in the type of loan you may be looking for (if you know) — that might include conventional loans, VA-backed mortgages, lenders that cater to first-time home buyers, FHA loans, refi, jumbo, or home equity products.

When shopping multiple lenders, protect your credit score by submitting all loan applications within 45 days. FICO considers numerous credit inquiries for a single type of loan within a 45-day period to be related and won’t compound the impact to your credit score.

Read more: The credit score needed to buy a house in 2024

A mortgage is a type of loan used to buy a home. If you can’t afford to pay for a house in cash, you use the money you do have on hand for a down payment, then borrow the rest with a mortgage.

A mortgage is a secured loan, meaning your house is used as collateral. If you fail to make mortgage payments, you could face foreclosure and lose the house.

Read more: What is a mortgage?

There are many types of mortgage loans, but the best mortgage lenders usually offer the following common kinds of home loans that benefit the most borrowers:

You might think of a conventional loan as a “regular mortgage.” There are two types of conventional loans: conforming and jumbo. People often use the terms “conventional” and “conforming” interchangeably — a conforming loan is simply a mortgage under the limit set by the Federal Housing Finance Agency (FHFA). In 2024, the conforming loan limit is $766,550 in most parts of the United States and $1,149,825 in higher-cost areas. A jumbo loan is a type of conventional loan for more than the FHFA limit, and you’ll usually need a higher credit score and down payment to qualify.

Read more: What is a conventional loan?

FHA loans are mortgages insured by the Federal Housing Administration (FHA). Though the FHA backs these mortgages, you’ll still apply for them with a private mortgage lender. These are good options for first-time home buyers because they only require a 580 credit score (with a 3.5% down payment) or a 500 score (with a 10% down payment). You can also qualify with a higher debt-to-income ratio than with conventional loans.

Read more: How an FHA loan works

A VA loan is insured by the U.S. Department of Veterans Affairs (VA), and it’s for people affiliated with the military and their spouses. VA loans don’t have a set minimum credit score — the required score varies by lender. These loans also don’t require a down payment.

Learn more: How to qualify for a VA loan

The list of mortgage types goes on and on, but here are a few other kinds of mortgage loans you might qualify for:

  • USDA loan: This mortgage is for low-income borrowers buying in qualifying rural areas, and it’s insured by the U.S. Department of Agriculture (USDA).

  • Fixed-rate mortgage: This is a very common type of mortgage (you can get conventional, FHA, VA, and USDA loans with fixed rates) that keeps your rate the same for the entire life of the loan. On a 30-year loan, your monthly payment toward the mortgage principal and interest will be the same for the entire 30 years.

  • Adjustable-rate mortgage (ARM): An ARM locks in your rate for a predetermined amount of time and then changes it regularly. For example, a 5/1 ARM keeps your rate the same for the first five years, then it increases or decreases once a year for the rest of your term.

  • HELOCs and home equity loans: Home equity lines of credit (HELOCs) and home equity loans are “second mortgages.” You borrow against the equity in your home and have a second mortgage payment along with your first one.

Dig deeper: Types of mortgage loans

First, narrow your search down to three or four lenders. Apply for mortgage preapproval with all of them in a short timeframe so that when you’re looking at interest rates and fees, you’re comparing apples to apples. Once you have a preapproval letter in hand, you can start shopping for homes.

When you make an offer on a home — and it is accepted — you’ll choose your favorite lender from your list and send them the necessary documentation, such as bank statements and tax returns, to apply for an official mortgage approval. The lender will usually take around 30 to 45 days to complete the underwriting process and schedule a closing day. The day you close on the house, you will sign the paperwork for your mortgage, become a homeowner, and receive the keys to your new house.

Learn more: How to get a mortgage

When adding lenders to your roster of contenders, look for these five traits shared by the best mortgage lenders:

A preapproval is the ticket to shopping for a house. But it’s only the first step. The lenders competing to win your business should have low-friction application procedures and easy document exchange, preferably with secure online paperwork capabilities.

Starting out, you may not know your best loan option. Is it a conventional mortgage or an FHA-backed loan? Maybe a jumbo? The lenders you talk to should be well-equipped to meet your funding needs with a variety of mortgage loan types.

The best mortgage companies fairly price their loans without piling on a lot of expensive fees. There is a long list of potential loan charges to be aware of, but a mortgage origination fee can be as much as 0.50% to 1% or more of the loan cost. Look for lenders who waive lender origination fees.

The best lenders will show interest rates on a number of loan options and clearly disclose fees built into the interest rate, such as discount points.

Are your questions answered quickly, and are you guided through the loan process along the way? The best mortgage lenders provide concierge-level service.

We seriously considered the following mortgage lenders for our best-of list, but they weren’t quite as strong as our top picks:

Just because any of these lenders didn’t make our top mortgage lender list doesn’t mean one won’t be a good fit for your home purchase. Read our individual mortgage lender reviews to learn more about each company.

Mortgage lenders are often better than banks because they specialize in home loans rather than a variety of financial products. They also usually have a quicker mortgage underwriting process. But your bank could be a good fit if it offers special mortgage perks for existing customers. Some national banks, such as Truist, also have the bandwidth to offer unique benefits to mortgage borrowers.

If you’re set on using a bank rather than a mortgage lender, the best bank may be the one you already use. Banks sometimes offer benefits to home buyers who are already customers. Otherwise, Yahoo Finance’s top bank for mortgages is Truist because it ranks high in our affordability, loan costs, and rate transparency categories.

Rocket Mortgage is the top mortgage lender in America by loan volume. It also ranks highly in customer satisfaction according to the 2023 J.D. Power Mortgage Origination Satisfaction Study.

The best place to get a mortgage loan depends on what type of mortgage you want and your personal finances. Based on our methodology, Navy Federal is the best place to get a VA loan, and Pennymac is the best place to get an FHA loan. Truist is the best for first-time home buyers because it offers unique perks to first-timers, and New American Funding is best if you have bad credit because it has multiple low-credit loans available and allows a high DTI ratio for FHA loans.

Yahoo Finance has assessed almost two dozen top mortgage lenders’ interest rates using Home Mortgage Disclosure Act (HMDA) data. Of the lenders we’ve evaluated, the ones with the best rates are Navy Federal, Pennymac, Wells Fargo, PenFed, USAA, Better Mortgage, AmeriSave, and Mr. Cooper. These lenders scored 5 out of 5 in the interest rate category of our methodology.

Yahoo Finance identified the best mortgage lenders for each type of loan by analyzing and grading leading national lenders, which were compiled and sorted by loan volume from 2023 Home Mortgage Disclosure Act data. The lenders were then scored on a quintile scale for five criteria: the median interest rate offered to borrowers, rate transparency, median fees and loan costs, affordability factors including loan offerings and down payment assistance, and online educational resources and calculators featured on lender websites.

Review of the Nationwide Multistate Licensing System’s data on regulatory actions enabled a 10% penalty to the score of any lender with a mortgage-related administrative or enforcement action within the past five years.

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