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The Yahoo view: As a leader in FHA lending, Pennymac is an obvious choice for borrowers seeking a low-down-payment loan. However, it requires a higher credit score than many FHA lenders.
Pennymac is the second-largest FHA lender by loan volume in the nation — and is rated by Yahoo Finance as the best overall FHA lender. It’s also on our list of the best VA loan lenders, and you’ll find Pennymac in our review of the best lenders for first-time homebuyers. So, the company knows a thing or two about how to make home loans, no doubt. That may seem surprising because Pennymac doesn’t have huge name recognition.
The reason: Pennymac is behind the scenes facilitating loans for other banks, credit unions, and independent mortgage brokers across the country. Called correspondent lending, it makes up the majority of Pennymac’s loan volume. However, you can still do business directly with Pennymac online.
Dig deeper: Best types of home loans for first-time home buyers
Key benefits
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Pennymac offers a rate buydown that lowers your interest rate by 1% for one year.
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A BuyerReady Certification shows home sellers that you are a serious — and credit-qualified — buyer. Plus, you will receive a $1,000 credit to apply to your closing costs.
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Use a Pennymac-affiliated real estate agent and get from $350 to $9,500 cash after closing.
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If rates go down after you close a home loan with Pennymac, get a $2,000 credit toward your closing costs when you refinance within three years.
Need to know
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While Pennymac confirms to Yahoo Finance that it offers FHA loans at FICO 580 as the FHA allows, advertised FHA mortgage rates require a credit score of 680. That might mislead potential borrowers of the interest rate they could earn.
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Pennymac has a below-average rating for customer satisfaction, according to the 2023 J.D. Power Mortgage Origination Satisfaction Study.
Dig deeper: FHA vs. conventional loan — Which should you choose?
Pennymac for FHA mortgage home buyers
Pennymac makes the second-highest volume of FHA loans in America. That’s expertise. With FHA-backed purchase loans, streamlines, and cash-out refinancing, you get credit history flexibility because these government-sponsored loans serve borrowers who may not qualify for a conventional loan.
The one downside to FHA-backed mortgages is MIP or FHA mortgage insurance premiums. MIP is an up-front charge at loan closing and an ongoing premium built into your monthly mortgage payment. It’s the price you pay for getting into a home with a low down payment.
That mortgage insurance ends up in the hands of the U.S. Department of Housing and Urban Development, the agency that runs the FHA loan program. In the event of loan default, the FHA pays a claim to the lender.
That protection serves as an incentive for lenders like Pennymac to take a risk on borrowers who are on the lower end of the credit score band.
Learn more: How to remove FHA mortgage insurance
Pennymac for home equity lending
Getting your home’s equity paid out in a lump sum is Pennymac’s option for homeowners looking to get cash out of their home without selling it or refinancing their mortgage. That’s especially important if you already have an interest rate below today’s prevailing rates.
The Pennymac home equity loan has a fixed interest rate and is available to owners with at least 15% equity in their homes.
Pennymac does not currently offer home equity lines of credit (HELOCs).
Dig deeper: The differences between HELOCs and home equity loans
Pennymac mortgage rates
With Pennymac, you don’t have to hunt for mortgage rates; they’re right on the homepage. Three popular loan interest rates are featured: 30-year fixed rates for conventional, FHA, and VA mortgages. Discount points are also clearly revealed and adjacent to the mortgage APR.
The FHA interest rate assumption is for a $250,001 loan on a primary residence in Los Angeles with 3.5% down and a 680 FICO score. The FHA only requires a minimum 580 credit score on FHA loans with 3.5% down, and many other lenders accept this lower score.
You can also drill down deeper with a mortgage rates page that displays additional loan terms on the three major mortgage products as well as jumbo loans. For even greater rate accuracy — but still not a final-approval interest rate — you can input:
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Property use (primary residence, investment property, second home)
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Preference (lower payment or lower down payment)
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Credit score range
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Property value
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Down payment
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ZIP code
With that information, you will see the three mortgage options with additional loan terms that more closely align with your credit and financial profile.
All without providing a bit of personal information.
This would be the perfect mortgage rate page; however, discount points are prepopulated and not adjustable. We would prefer having the option to price a loan with zero discount points.
Other than that, though, nicely done, Pennymac.
Read more: How to get the lowest mortgage rates
Applying for a mortgage with Pennymac
With an online application system, Pennymac lets you upload documents and even snap photos of required items. Using logins from your financial institutions, you can add savings account balances and existing loan information to complete an asset and liability profile.
Once you submit an online application, a loan representative will contact you to guide you through the process.
Dig deeper: How to get a mortgage in 2024
There are ample home-buying tools on the Pennymac site. Calculators include:
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How much can I borrow?
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How much will my payments be?
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Am I better off refinancing?
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Am I better off renting?
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How much is my home worth?
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How much should I put down for a new home?
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How advantageous are extra payments?
There are also hundreds of helpful articles in the Learning Center. Very impressive.
Dig deeper: See Pennymac in our review of the best lenders for first-time homebuyers
How Pennymac compares to other mortgage lenders
Pennymac vs. Guaranteed Rate
Pennymac is the nation’s largest FHA lender because of its vast network of affiliated mortgage brokers. However, as an independent business, it’s not always easy to find a local Pennymac lender near you. Thankfully, the loan process can be handled online and remotely.
Guaranteed Rate is also an FHA lender with an online mortgage process — and one of Yahoo’s best lenders for first-time home buyers. And home buyers looking for face-to-face service may want to know that Guaranteed Rate has hundreds of branch locations across the nation.
Guaranteed Rate mortgage review
Pennymac vs. Amerisave Mortgage
Pennymac’s Lender-Paid Buydown lowers your interest rate by 1% during the first year of a mortgage, effectively reducing your monthly payments. That helps temporarily offset fees that you may have financed into your loan.
AmeriSave offers FHA loans without mortgage origination fees. When loan offers vary between lenders, you’ll want to run the numbers to determine the most advantageous. In this example, a 1% rate reduction for the first year versus a loan without origination fees.
Shopping and comparing are essential when you’re buying and financing a home.
AmeriSave Mortgage review
This article was edited by Laura Grace Tarpley