Today we’ll take a look at an East Coast direct mortgage lender that is rapidly expanding nationwide, Intercontinental Capital Group.
The company is relatively young, having been founded in 2005, but since that time they’ve already managed to fund $9 billion+ in home loans.
And it appears those numbers are only going to grow much larger, with the goal to fund one billion monthly going forward.
Intercontinental Capital Group recently made a deal with North Carolina to bring 500 new jobs to the state as part of a corporate expansion in Charlotte.
Let’s learn more about this lender that’s making waves to see if they could be a good fit for you.
Intercontinental Capital Group Fast Facts
Direct-to-consumer retail mortgage lender
Offer home purchase loans, refinance loans, and reverse mortgages
Based out of Melville, New York
Founded in 2005 by current CEO Dustin DiMisa
Licensed to lend in 46 states and the District of Columbia
Funded nearly $9 billion since inception including $1.6 billion last year
A Costco preferred mortgage lender
As noted, Intercontinental Capital Group is a fast-growing East Coast mortgage lender that is currently licensed in 46 states nationwide.
Given their growth, they’ll likely be licensed nationally sooner rather than later. At the moment, they’re licensed to do business everywhere other than Hawaii, Missouri, Nebraska, and West Virginia.
While they’re headquartered in Melville, New York, they are also building out a massive corporate campus in Charlotte, NC with plans to invest nearly $6 million and significantly expand their workforce.
Last year, they originated roughly $1.6 billion in home loans, with California and New York each accounting for about 20% of total production.
They are also quite active in the states of Florida, Georgia, Maryland, New Jersey, and Texas.
It appears they specialize in mortgage refinancing, with such loans accounting for about three-quarters of overall volume.
Aside from operating under the Intercontinental Capital Group name, they also run several other brands, and are part of the Costco Mortgage program.
Intercontinental Capital Group Brands
eReverse Mortgages
Fellowship Home Loans
Own It Home Loans
Proven Mortgage
Veterans Community Home Loans
How to Apply for a Mortgage with Intercontinental Capital Group
It’s possible to apply directly from their website if you feel comfortable going it alone
But they also have a loan officer directory and contact form if you prefer to speak to someone first
Their digital mortgage platform is powered by fintech company Ellie Mae
It allows you to complete the application from your phone, tablet, or computer (and is mostly paperless)
To get started, head over to their website and literally click on “Get Started.” That will direct you to a very brief contact form that just asks for your name, email, phone number, and state.
If you don’t want someone to reach out, they also list their phone number, which you can call to get connected with a loan officer.
This may be the better approach if you’re just inquiring about home loan rates and available programs.
If you click on “Loan Options,” it’s possible to begin the application on your own as well. It’ll ask if you’re already working a loan officer, and if yes, will provide a drop-down list of names.
Speaking of, they have a loan officer directory on their site that features bios, reviews, and contact info for all their loan officers if you need help deciding who to work with.
Their digital mortgage application is powered by Ellie Mae, which is one of the leading companies in the space.
It allows you to complete many tasks remotely, such as linking financial accounts using your bank/employment credentials, scanning/uploading documents, and eSigning disclosures along the way.
Once your loan has been submitted, you can log on to the borrower portal to check status, get updates, and make contact with your lending team if you have any questions.
Loan Programs Offered by Intercontinental Capital Group
Home purchase loans
Refinance loans (rate and term and cash out)
Reverse mortgages
Conforming loans backed by Fannie Mae and Freddie Mac
Government home loans backed by the FHA/USDA/VA
Jumbo home loans
Fixed and adjustable-rate mortgage options are available
They appear to offer three main types of mortgages; purchase loans, refinance loans, and reverse mortgages, all of which are available on 1-4 unit residential properties.
This includes both rate and term refinances and cash out refinances, though it’s unclear if they offer home construction loans or home renovation loans.
With regard to loan type, you can get a conventional loan backed by Fannie Mae or Freddie Mac, a government-backed loan (FHA/USDA/VA), or a jumbo loan that exceeds the conforming loan limit.
Intercontinental Capital Group seems to specialize in mortgage refinancing, with about 75% of last year’s total loan volume comprised of such transactions.
You can get either a fixed-rate mortgage, such as a 30-year or 15-year fixed, or an adjustable-rate mortgage, like a 5/1 or 7/1 ARM.
Intercontinental Capital Group Mortgage Rates
Unfortunately, Intercontinental Capital Group does not publicize its mortgage rates online, so it’s unclear how they rank compared to other banks and lenders out there.
However, their interest rates received an “excellent” rating on LendingTree, and many Zillow reviews indicate a lower interest rate than expected.
But since we don’t know where they stand, it’s probably best to call and discuss loan pricing before proceeding with an application.
The same is true of their lender fees, which don’t appear on their website. Be sure to inquire about what fees are charged, such as underwriting, processing, and a loan origination fee, if applicable.
Also take the time to comparison shop with other lenders before committing to ensure they offer a good deal relative to other options.
Intercontinental Capital Group Reviews
On LendingTree, the company has a 4.9-star rating out of 5 from over 1,600 customer reviews, with a 99% recommend rating. That’s clearly hard to beat.
On Zillow, they have an equally impressive 4.97-star rating out of 5 based on about 800 reviews, which seems to be as close to perfect as one can get.
Over at SocialSurvey, it’s another strong rating of 4.8 out of 5 from a whopping 11,000+ reviews. So again, they’re consistently making homeowners happy.
They also have an ‘A+’ Better Business Bureau rating and have been an accredited company since 2010.
That being said, results can always vary, but if you’re like most who have worked with them in the past, your experience should be a positive one, based on the many reviews.
In summary, Intercontinental Capital Group may be a good choice for an existing homeowner with a straightforward loan scenario who is looking to refinance.
Their use of the latest technology, coupled with their near-perfect reviews could make for a very good experience, assuming their rates/fees are also low.
Intercontinental Capital Group Pros and Cons
The Good
Can apply for a mortgage online via smartphone or computer
Also have physical branch locations in several states
Offer a digital mortgage application powered by Ellie Mae
Lots of loan programs to choose from including reverse mortgages
First, total home sales should be 6.2 million or higher during 2020-2024. This is new home sales and existing home sales combined. The demographic bump in 2020-2024 is giving us a push in demand.
Second, because of the downtrend in inventory since 2014 and the demand pick-up we will see in the years 2020-2024, we had a risk of home prices accelerating too much. So, I set a five-year home-price cumulative growth level of 23%. If home prices grew between 0-23% in the five years of 2020-2024, we should be OK with where wage growth was going.
The fact that the 23% home-price growth level has been smashed in just two years and inventory just collapsed to all-time lows has created the most unhealthy housing market post-2010. The only risk to that 6.2 million line in the sand has been this:
Home prices grow above that 23% level: check
Mortgage rates spike higher: check
The two things I had as risk factors are now in play.
We have a risk to sales here, and the one area where we could be most in trouble is the new home sales sector. This sector on an apples-to-apples basis is more expensive than the existing home sales market. It’s also driven more by mortgage buyers who tend to be older and make more money than the new-home buyers. Compared to the existing home sales marketplace, it doesn’t have a high cash buyer or investor buyer profile.
Today, new home sales came in as a miss of estimates at 772,000, but the revisions were all positive so there’s not too much going on here. The builders are struggling to finish their homes, and there is a risk to builders in a rising rate environment when you have people wait so long to build a house.
Regarding the new home sales sector itself, it’s just an OK marketplace and has been for some time.
From Census: Sales of new single‐family houses in February 2022 were at a seasonally adjusted annual rate of 772,000, according to estimates released today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.0 percent (±11.9 percent)* below the revised January rate of 788,000 and is 6.2 percent (±13.7 percent)* below the February 2021 estimate of 823,000.
As you can see below, the new home sales market from 2018-2022 doesn’t look like the housing market we had from 2002-2005. Without exotic loan debt structures, credit always has limits, which is a good thing. Could you imagine this housing market if we eased lending standards? I would be protesting in front of Congress and speaking at congressional hearings if lending standards were reduced.
From Census: The seasonally‐adjusted estimate of new houses for sale at the end of February was 407,000. This represents a supply of 6.3 months at the current sales rate.
My rule of thumb for anticipating builder behavior is based on the three-month average of supply:
When supply is 4.3 months and below, this is an excellent market for the builders.
When supply is 4.4 to 6.4 months, this is an OK market for the builders. They will build as long as new home sales are growing.
When supply is 6.5 months and above, the builders will pull back on construction.
Currently, the monthly supply headline is 6.3 months, and the three-month average is at 5.93 months. This is just an OK marketplace, so don’t look for the builders to be really pressing to build now, especially when rates have risen so much. They’re mindful of higher rates because in 2013, 2014 and 2015 they had to deal with a miss in sales expectations. Then in 2018, when mortgage rates got to 5%, we saw a supply spike in the monthly home sales data and their stocks were down over 30%.
As you can see below, the completion data looks terrible. It’s taking forever to build a home and that has created a huge number of homes under construction. The risk is that cancellations can rise by the time the home is ready for move in.
From Census: The median sales price of new houses sold in February 2022 was $400,600. The average sales price was $511,000.
As always, the years 2020-2024 were going to be different. The builders have pricing power that means they can push the price onto their consumers. Like home sellers, they try to make as much money as possible. The only thing we have that creates balance in this market is higher rates, hence why I am team higher rates.
From the National Association of Home Builders, the builder’s confidence has faded recently, and you have to go with this data because it has been good historically with where housing starts and new home sales. Until you find a base on the data line, go with the trend. We no longer have the COVID-19 comps in play with the moderation in the data that needed to happen.
Purchase application data
Regarding the purchase application data that came out on Wednesday, some context needs to be discussed here. Purchase application data is down 2% week to week, 12% year over year. This data line has been negative year over year since June of 2021. A big theme of my work on HousingWire is to try to talk about housing data making COVID-19 adjustments because if you didn’t realize that we had some high comps due to the make-up demand of COVID-19, you might have thought housing was crashing in the middle of last year.
First, as you can see from the chart below, the market we had from 2002-2005 never existed in housing from 2014-2022. We cannot have a credit boom because speculation debt has been taken off-grid post-2010 with credit. It was always a slow and steady ride from the 2014 lows.
This is the year-over-year data since the start of the year. I have talked about how we would still have some makeup demand COVID-19 comps into February, and that’s what happened from my view: makeup demand spilled over into early 2021.
Jan. 5: -12%
Jan. 12: -17%
Jan. 19: -13%
Jan. 26: -11%
Feb. 2: -7%
Feb. 9: -12%
Those make-up demand comps are now gone.
Feb. 16: -7%
Feb. 23: -6%
March 2: -9%
March 9: -7%
March 16: -8%
Now, this week the year-over-year data shows -12%. You can see some of the weakness, but nothing too drastic. We can compare these previous times when housing was soft too.
In 2013-2014, when the 10-year yield went from 1.60% – to 3%, it created a negative 20% year-over-year data trend for most of the year. As you can see below, that downtrend was noticeable but we are far from those levels today.
2014 was the last year total inventory rose from weakness in demand. When rates rose toward 5% in 2018, we only had three negative year-over-year prints in the purchase application data, and the total inventory didn’t grow that year.
This year, inventory has collapsed again, and I have downgraded the housing market to a savagely unhealthy market because we simply lack homes, creating forced bidding. For me to stop saying this housing market is unhealthy, I need to see inventory get back up in a 1.52 – 1.93 million range, which takes us back toward 2018-2019 levels. Historically, that level of inventory is low but the market was still much more balanced then.
Speaking at a housing conference in 2019, I explained to the audience that it was a good thing that real home prices went negative. I had a big smile back then as housing was balanced. We don’t have a balanced housing market any longer.
Why won’t inventory grow? At the end of 2017, existing home sales went from 5.72 million and trended toward 4.98 million by Jan 2019, and we saw no inventory growth back then!
Housing tenure has doubled; homeowners on paper in 2018-2019 were already in great shape and now look better than ever on paper with the last refinance boom. What a hedge against inflation this year! But, housing tenure has become a severe problem in the housing market as inventory is collapsing in 2022.
While I am on team higher rates and welcome this significant bit of news to try to create more days on the market to cool this terrible home-price growth down, I am not blinded by the reality that this can also cause issues with home sellers who want to buy a home. Home seller data has been showing some stress, and that is the last thing I wanted to see right now.
However, it makes sense when inventory has collapsed to such low levels, and now rates are higher. Are you going to risk selling your home, not getting the home you want, and renting at a higher cost? This is the last thing I wanted to see in 2022, and since we are so close to April, it’s a reality we have to deal with for the rest of the year as long as inventory is still negative year over year.
Going out for the rest of the year, keep an eye out for that new home sales data. One of my six recession red flags is that new home sales and housing starts fade into a recession. Because the new home sales marketplace means more to an economy than the existing home sales marketplace, it’s more important to look at that.
Housing construction jobs and big-ticket item purchases are things that move with the demand of new homes. The existing home sales market results in a transfer of commission, moving trucks and some big-ticket item purchases.
Going back to my summer of 2020 premise of what can cool down the housing market, a 10-year yield over 1.94% should. Even though mortgage rates are still low historically, rising rates do matter, and with the home-price growth we saw in 2020, 2021 and 2022, it matters even more. You can see why I believe in economic models; they keep us in line.
This is a guest post from Sierra Black, a long-time GRS reader and the author of ChildWild, a blog where she writes about frugality, sustainable living, and getting her kids to eat kale. Previously at Get Rich Slowly, Black told us about sweating the big stuff.
Buying in bulk is great, right? You get the things you want and need, and pay less for them. As an added bonus, you don’t have to shop as often (at least, this is a bonus for me, since I hate shopping).
Because I hate shopping and love discounts, I buy most everything in bulk: toilet paper, frozen foods, light bulbs, even toys. But bulk buying has its risks too, and after years of practicing it, I’m learning to see them.
For me, the three key dangers in bulk buying are:
Making a bad investment in a good product that you need or love.
I love a particular brand of gel pen, and I use them daily. They cost about $1 per pen in packs of ten, and about $0.50 per pen in packs of 100. I was at the store the other day, trying to decide how many pens to buy. The decision was made for me by the fact that I am on a cash diet at the moment and had only ten dollars in my purse. Yes, I’m paying more per pen. But the 100-pack of pens is an investment. It ties my dollars up in pens, and prevents me from earning interest on them in a savings account.
Here’s a Wall Street Journal article that makes this point about Forever Stamps (which are also a bad investment, but a fine purchase if you use a lot of stamps).
Buying something you might use but don’t need in bulk.
My kids love Puffins cereal, so when I got the chance to buy an entire case of it on sale, I did so. This was in January. We just finished the last box of Puffins. Let me tell you, there have been some scenes around the breakfast table in the past six months.
It turns out no one likes Puffins that much. Buying the cereal in bulk might have saved me a few dollars, but it made my kids unhappy about breakfast. That did not improve our quality of life, which is what frugal living is all about for me.
This bulk-buying hazard is the one I fall for most, because I do “save money” doing it. But it creates a sunk cost. I now have 12 boxes of cereal in my cupboard, and I have to eat them or throw away the money I spent. If I’d “saved money” by buying one box and banking the rest of my dollars, I’d have more money available to buy food the kids and I really want to eat, instead of stoically plowing through another box of Puffins.
Buying things you don’t need or want, simply because they are cheap.
The other day, I was biking past Harvard when I noticed a book sale going on in the Yard. I happened to have $20 in my pocket, and was strongly tempted to stop and buy $20 worth of books from their table.
Instead, I decided to take my $20 to a bookstore and buy one book from my 30-day list. I got a book I’d been waiting to buy and knew I would read and continue to use for reference, rather than going for the cheaper books I could buy in bulk. I got fewer books, but more value (and less clutter).
Costco, Target and the other big box stores know that people will buy things just because they’re cheap. When you walk into Target the first thing you see is a large section of items for $1. I used to have a habit of tossing $5 – $10 worth of stuff into my cart: novelty socks, pens, candles, stickers.
When I had a buying mindset, all of these things seemed like great deals. I was getting more stuff for less money. Now I try to avoid getting more Stuff, even when it’s cheap. I buy less in bulk — just like I buy less in boutiques — and I’m watching my savings grow because of it.
J.D.’s note: I’m stupid about buying things just because they’re cheap. Or free. I’m always dragging home free Stuff that becomes clutter. Also, Kris just reminded me that I bought a case of my favorite pens last spring. Photo by Listener42.
Pretax money is invested before any taxes have been deducted, while after-tax money is invested after taxes have been deducted. Investments in tax-deferred retirement accounts such as IRAs and 401(k)s are made pretax, which means there is a larger sum of money to invest. While applying taxes reduces the amount of money available to invest, sometimes after-tax investment vehicles such as Roth IRAs can produce better overall returns because, unlike pretax accounts, withdrawals from these after-tax accounts can be made without owing taxes. A financial advisor can help you evaluate after-tax and pretax investment options.
Pretax vs. After-Tax Basics
The terms “pretax” and “after-tax” when applied to income, expenses or contributions tell you whether taxes have been applied to the amount. Wages, for example, are normally after-tax, because the employer withholds taxes before handing out paychecks. Contributions to Roth-type retirement accounts and regular brokerage and bank accounts are also made after tax.
Many people save for retirement pretax by contributing money to IRAs and similar tax-advantaged accounts. These funds can be placed in a retirement account before any income taxes are levied. When you are preparing your tax return, any money you put into an IRA, for instance, is deducted from your total taxable earnings, which generally reduces your total tax liability.
Comparing Pretax and After-Tax
Investing money before taxes have been levied means you’ll be investing more than you would if you did it after paying taxes. And, all else equal, investing a larger sum means earning more from your investment. This simple rule of thumb underlies much of the popularity of saving for retirement pretax using IRAs and similar tax-advantaged accounts. If people could only save after-tax dollars in ordinary bank or brokerage accounts, there would be less incentive to sock away money in these accounts.
However, pretax is not always the best. Sums invested pretax in IRAs and similar retirement don’t completely evade taxation. Taxes on contributions as well as any earnings from investments in the account are only deferred. Savers will owe taxes later, at their then-current rate of taxation, when they withdraw funds from the account.
If the individual’s tax rate is lower in retirement, pretax investing can be advantageous. However, if you earn a lot of income over your career and have a large retirement nest egg, your required minimum distributions and other sources of income could mean your income and tax bracket are higher after you’ve retired than when you put money away pretax.
If an individual’s tax rate will be higher in retirement than it is at the time the investment was made, it can be better to invest after-tax in a Roth-type retirement account. This can work well for younger people just starting their careers before their earnings increase enough to put them in higher income-tax brackets. After paying taxes a relatively low rate when contributing, funds in these accounts grow tax-free and can be withdrawn later without owing any taxes.
Choosing Pretax or After-Tax
Deciding whether to invest pretax or after-tax requires considering your individual situation. Examine the following factors:
Account for investment returns: Start by looking at the expected rate of return on your investments.
Understand how taxes are applied: Capital gains on stocks held more than a year generally are taxed at a lower rate than ordinary income such as interest on bonds. Considering tax treatment of different types of income can help you decide on an after-tax or pretax investment.
Calculate returns after all taxes are applied: Roth IRA or Roth 401(k) withdrawals won’t incur taxes as long as the investor is age 59.5 or older and has had the account for at least five years. For pretax investments, it’s necessary to apply taxes to any sums withdrawn from the accounts before you can estimate the actual return. For instance, if you withdraw $10,000 from a pretax investment and are in a 25% tax rate in retirement, the amount left after taxes would be 75% of $10,000 or $7,500. Money invested in a regular brokerage account with no tax advantages has to pay any taxes due on the money before it’s invested as well as on earnings but as they are earned. However, withdrawing money from a regular account doesn’t usually trigger any additional taxes.
Compare post-tax and after-tax: For example, if you want to invest $10,000 in an after-tax account and you are in a 25% tax bracket, you’ll have to earn approximately $13,333 and pay $3,333 in taxes in order to have $10,000 available to invest. If that $10,000 earns 5% annually for 10 years, it will be worth $16,289. You can withdraw all of it without owing taxes after age 59.5 if the account is at least five years old.
Say instead you invest $13,333 in a pretax account, also 5%. After 10 years, you’ll have $21,718. If you withdraw the full amount and your rate is still 25%, you’ll owe $5,429 in taxes and be left with the same $16,289 as you got with the after-tax investment.
If, however, during the interim you have retired and your tax rate has dropped to 15%, you’ll only owe about $3,258 on emptying the pretax account. This will leave about $18,641. In this case, the pretax investment produces a larger return net of taxes.
If you are in the 15% bracket when you fund an after-tax investment and are in the 25% percent bracket when you retire, the situation is reversed. In that case, you’d need about $11,765 to have $10,000 to invest after tax. Again, you’d wind up with $16,289, which you can withdraw tax-free.
Investing $11,765 pretax at 5% gives you $19,164 after 10 years. a sizable increase. If you withdraw that amount when you are in the 25% bracket, however, your nominal tax liability will be $4,791, leaving you just $14,373. In this case, the after-tax investment generates a better overall result by about $1,916, which is the difference between $14,373 from the pretax method and $16,289 using an after-tax approach.
The Bottom Line
You can invest pretax before taxes are levied or after-tax after taxes have been applied. Pretax investing and after-tax investing both have advantages and drawbacks. Whether it is advisable to invest pretax or after-tax depends on individual circumstances, including whether you expect to be in a higher or lower tax bracket when you withdraw funds.
Investment Tips
Deciding whether to invest pretax or after-tax requires you to understand your tax situation and financial goals. A financial advisor is well-equipped to help you do just that. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
SmartAsset’s Investment & Return Calculator can make it much simpler to compare the relative advantages of after-tax and pretax investing.
Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
Add this to the list: control costs while growing and use an off-the-shelf tech system when you are small.
“The focus for me is: I want to grow in a very sustainable, methodical way,” Shoemaker said.
TLS will focus on the wholesale channel but not compete with United Wholesale Mortgage (UWM), Shoemaker said. The core business will be conventional government lending, though TLS will create value-added products and services. Despite inheriting more than 9,000 brokers from Homepoint, TLS will only do business with the “right brokers,” Shoemaker said.
“That capacity allows us to take about $400 million a month, which is a very small number relative to what we were generating at Homepoint. The people we’ve hired allow us to take it from $20 million to $400 million a month. We’re about halfway there, and we’re in month two and a half [since the transaction]. Once we get there, we’re going to focus on optimizing things.”
Shoemaker answered a range of questions in an interview with HousingWire in mid-June.
This interview has been condensed and edited for clarity.
Flávia Nunes: Why did Homepoint choose to sell its origination business to TLS?
Phil Shoemaker: There were a few things important to me as well as to Willie [Newman, Home Point Capital CEO and president] and the team at Homepoint that put this deal together. We wanted to make sure that we set the origination team up for success. The best way to do that, based on everything I’ve learned the last 28 years, is to accomplish a couple of things.
We wanted to find a platform where the capital, the ownership structure, was long term, meaning we were looking for a group of individuals that owned a mortgage entity to operate in perpetuity, and there was no strategy to build it up to a certain level and then sell it. To that extent, the owners of TLS, two of them are close friends of mine, are looking to build a successful mortgage bank that is sustainable and profitable with time. That means doing things methodically, sustainable across the market cycles, and maybe not growing as fast.
Nunes: Will TLS only operate in the wholesale channel?
Shoemaker: I do think the model is mattering more and more. Despite the competitive dynamic of wholesale, I still think wholesale is the right model to access the purchase market, the primary market. And the reason why I think that’s the case is because I think it’s the best for the borrower. Anytime you’re aligned with the consumer, overtime you’ll win.
Now, the competitive dynamic in wholesale is fairly unique, and I don’t think that’s gonna change because the main incumbent is good at what they do. We’re all gonna need to keep stepping up and doing it better. The whole nature of wholesale is optionality; brokers want choices. We’re not looking to do business with every broker out there; we’re looking to do business with the people that are aligned with us culturally.
Nunes: How has the transition of employees from Homepoint to TLS been so far? How has their compensation changed?
Shoemaker: We’re still going through that process, we’ve gotten most people over. When the last person joins TLS, it’s gonna be just around 100 or so people. In total, by the time we’re done, there’s probably gonna be upwards of 140. It was our goal to make sure that everyone transitioned without seeing an impact at least to their base compensation.
The market overall is seeing salaries, and probably more variable compensation, start to normalize because there was a bit of a run-up in 2020. We’re seeing salaries start to come back to a more normal level across the board. Within that, I think you’ll have two types of strategies: companies trying to bring new people in, train them and pay them at a lower level, and then you have people – and this is more the strategy where we’re – going more towards the highly experienced people. We want to pay them fair compensation, and we want to give them an upside based on the performance of the company.
Nunes: The cost structure was a problem at Homepoint. How will you control expenses at TLS?
Shoemaker: The important piece is making sure every dollar we spend needs to go towards making a good loan. The experience I had at Homepoint was great. Of course, we all wish we could have worked out differently. That’s a given. But I really don’t regret it. It was a great experience. The people I met. The private equity investors – very good people. But you learn things, right? To some extent, the bigger you get, and the faster you do that, you start to get infected with a lot of costs that maybe are not necessarily directly attributable to making the loan. The focus for me is I want to grow in a very sustainable, methodical way.
The biggest lesson is skill matters in a big way. So, when you get larger, your fixed costs get diluted over a larger slice of production. That said, you still have to be efficient. The problem is the bigger you get, the harder it is to change things. Literally, it’s like turning the Titanic. You can’t build it and then come back and try to make it more efficient. It’s something you have to do on the way up. Maybe some people can, but that’s not what I intend to do. To be clear, I’m not trying to compete against UWM. That’s not my goal. And anyone out there that thinks they can; they’re crazy. Again, it’s a big market. I know it’s a challenging market. Wholesale will continue to expand. I’m just going to focus on what I can do well and the things I can control.
Nunes: Another problem at Homepoint was the technology. Tell us about TLS’s tech stack.
Shoemaker: I do believe that is part of the secret sauce. My first time actually dealing with a vendor was when I came to Homepoint. And here’s where I’ve got with that: I actually don’t believe there’s any strategic advantage in having and building your tech in-house. The more you try to customize and build things on your own, the more cost you create. If you’re doing a ton of volume, then sure it makes sense. But that’s not most of the world.
When you customize an out-of-the-box system, you actually end up with a scenario where you’re not only maintaining the cost structure of running your own proprietary system, but you’re also having to pay the vendor. We’re going to go all in on an off-the-shelf system. We’re currently using Ellie Mae, they’ve agreed to align with us on our roadmap, what we need. The expectation is we’re going to build a platform that is competitive, that doesn’t have any gaps, that performs well, and they’re going to bear that cost. My hope would be they then take that and they give that to other lenders and wholesalers and they’re able to take advantage of that, because we need more wholesale lenders, not less.
Nunes: TLS is a small lender. How big can the company be in the short term?
Shoemaker: Before Homepoint, TSL was doing maybe $20 million or $30 million a month — a very small company. That attracted me because I didn’t want to come into something where there was a whole lot of volume, and then you had to change things. It’s a lot easier to change things when you’re small. It also was all pure wholesale, so it wasn’t business channels that needed to be changed or shut down. The other benefit is the way it’s been set up is very scalable.
TLS was formed in 2019. Since then, it hasn’t scaled much. They grew about $350 million per month in 2020, when the refi boom was there. But they never really got big, so their emphasis is really just getting things right. As a result of that, their quality track record has been outstanding. At the time that we joined, they originated like 7,600 loans, and there were only seven loans out of that 7,600 that were bought back. It was a platform ready to take on some scale but didn’t have the people, experience or structure to do that. We are taking the best of salespeople, we’ve transitioned over to TLS. That capacity allows us to take about $400 million a month, which is a very small number relative to what we’re generating at Homepoint. The people we’ve hired allow us to take it from $20 million to $400 million a month. We’re about halfway there, and we’re in month two-and-a-half [since the transaction]. Once we get there, we’re going to focus on optimizing things.
Nunes:What will be TLS strategy in terms of products?
Shoemaker: We’re about to do a big marketing push on something called ‘buy before you sell.’ This is a partnership with a company called HomeLight, where we’re able to create liquidity for borrowers in their current homes and make it easier for them to get out of their homes and into a new one. It’s addressing the inventory issues. We’re going to focus on things like that. Our core business needs to be conventional government wholesale lending. But what we’re going to do is, rather than focusing on scale, we’re going to focus on creating value-added products and services around that, which will further diversify the business, make it more sustainable, and then will grow as the market conditions allow us to grow or it makes sense to grow.
Nunes:How will TSL compete in terms of price?
Shoemaker: TLS was doing about $20 million a month; we’ll be somewhere in the $130 million range this month, and next month we should be upwards of $200 million. We’re growing the business very quickly. And the reasons why we’re able to do that are: 1) We have control, and our cost structure is allowing us to price at a level that is in line with the market. 2) We do spend money on people, and so the service is ultimately where we’re going to win; 3) Our goal is to not do business with every broker–to be clear, we want to do business with the right brokers.
Nunes: Who is the right broker for TLS?
Shoemaker: It’s probably more of a cultural piece. We had 9,500 brokers or so at Homepoint and we have access to those brokers now at TSL, that’s basically what was acquired. But if we were to go to do business with all of them now, we would blow ourselves up. We can’t support them. We’re strategically deciding based on the products we offer; based on, for example, it being a purchase market. We’re focusing our energy on brokers that we think are best suited for this market as sequencing it in a way where we can ensure the service levels that we want to support. Rather than going for scale and getting vague, we’re going to focus on service, and we’re gonna define ourselves around being really best in class when it comes to purchase. Based on the size of TLS, I would not be surprised if we’re supporting LOs somewhere in the range of 1,500 or so.
Nunes: Home Point Capital bought a share at TLS, but now it has been sold to Mr. Cooper. What will happen to this investment?
Shoemaker: Home Point, as part of the transaction with TLS, they did get 9.99% of the TLS that was the consideration that was given for the assets that were purchased. But the majority of TLS is owned, is in control, and the company’s isolated, with a group of individuals aligned to build this business for long-term sustainability.
The age of the young homebuyer Apart from income and education, age was also a factor. The Urban Institute’s analysis found that between 2019 and 2021, the proportion of young homebuyers started to grow across all racial and ethnic groups. Homebuyers younger than 45 increased from 51% in 2019 to 55% in 2021. This increase … [Read more…]
Skin microflora isn’t the only thing that can grow on you. Films can too. The internet identified several undeniably great films they weren’t feeling the first watch. After a few more viewings, though, initially wary film fans recognized these movies’ excellence.
1. The Big Lebowski (1998)
Dude, how can you not love The Dude? To be fair, Jeff Bridges’ protagonist in The Big Lebowski is so ridiculous and so dedicated to the word “dude” that I understand how many would see the movie as too much.
Similarly, over-the-top characters like John Turturro’s Jesus Quintana and John Goodman’s Walters Sobchak may take multiple viewings to appreciate.
2. No Country for Old Men (2007)
Movies from the Coen Brothers age like fine wine. According to some, No Country for Old Men was No Movie for For Them.
The 2008 Best Picture Oscar Winner received heaps of praise and was one of the must-see movies of its era. Therefore, the relatively slow pacing and the unconventional ending surprised action-seeking filmgoers. Because, honestly, what else could they possibly complain about when it comes to No Country for Old Men?
3. Napoleon Dynamite (2004)
“What are you going to do today, Napoleon?”
“Whatever I feel like I wanna do, gosh!”
Between the unforgettable comedic dialogue, oddball characters (Kip, Uncle Rico, and the llama Tina stand out), and utterly virgin-esque mannerisms of Napoleon himself, Napoleon Dynamite became an unlikely smash comedy.
However, the low-budget comedy didn’t land the first time with many viewers who didn’t understand the hype. With maturation and multiple re-viewings, they came to appreciate Napoleon’s brilliance.
4. Office Space (1999)
Mike Judge’s brand of comedy isn’t for everyone, and Office Space clearly targeted the cubicle-dwelling audience. A one-time critic said that Office Space seemed foreign the first time they watched it, but rewatching the movie after working an office job significantly elevated the film’s comedy.
5. The Godfather (1972)
One confessional cinephile admits they were an uncultured, 16-year-old neanderthal when they thought The Godfather was slow and tedious. They grew up, changed their mind, and thus we can forgive their youthful ignorance.
6. Vertigo (1958)
The acclaimed thriller from Alfred Hitchcock was not as “scary” as some viewers expected. Upon further review, converted fans of Vertigo came to appreciate the movie’s before-its-time cinematography and plot structure.
7. Whiplash (2014)
Truly one of the most shocking submissions on the internet’s list of films that did not immediately impress, Whiplash received near universal acclaim from audiences.
A one-time critic explained they missed a critical plot point at the movie’s end. The critic immediately became a Whiplash fan when they caught the subtle scene on second viewing.
8. The Life Aquatic with Steve Zissou (2004)
Writers Wes Anderson and Noah Baumbach are not for everyone, and The Life Aquatic With Steve Zissou is one of Anderson’s more ambitious films. The director’s brand of quirky, at times awkward comedy has a way of growing on viewers like that mole you’ve been meaning to have your dermatologist check out.
9. Step Brothers (2008)
Some viewers still don’t appreciate the artistry of two full-grown, established comedic actors playing infantile stepbrothers. While nobody claims Step Brothers to be a highbrow comedy, the absurdity of DIY bunkbeds and drum-set therapy becomes more comedic as the world grows increasingly serious.
10. Miami Vice (2006)
Viewers were absolutely pumped for a Miami Vice reboot starring box-office draws Colin Farrell and Jamie Foxx, directed by accomplished filmmaker Michael Mann. Many were expecting a South Beach-ified version of Heat yet encountered a more deliberate, artful movie.
With time, many have come to appreciate Mann’s rendition of Miami Vice as a quality film, though the initial disappointment still lingers in the film’s IMDb rating.
Source: Reddit.
Who is one actress you can never stand watching, no matter their role? After polling the internet, these were the top-voted actresses that people couldn’t stand watching.
10 Actresses People Despise Watching Regardless of Their Role
These 7 Celebrities are Genuinely Good People
We’ve all heard the famous adage that “no publicity is bad publicity,” and while it tends to be accurate, there are certainly exceptions. But what about those few stars who stay out of the limelight and get along without a hint of trouble?
These 7 Celebrities are Genuinely Good People
Have you ever known someone and thought you liked them—until you learned about their hobbies? Then you get to know them and then you’re like, “Wow, red flag.” Well, you’re not alone.
These 10 Activities Are an Immediate Red Flag
Some celebrities definitely seem to enjoy the limelight and keep working to stay in the public eye. While others quickly move out of the spotlight. Many of these actors and actresses stepped out of the spotlight to live a more private life without constant media pressures.
10 Celebrities That Made the Big Times Then Disappeared Off The Face of the Earth
We’ve all been there – sitting through a movie that we can’t help but cringe at, but somehow it still manages to hold a special place in our hearts.
These 10 Terrible Movies Are Still People’s Favorites
An IRA is a simple little thing. It’s a common, garden-variety retirement vehicle, basically nothing more than a savings account with initials — right? Wrong.
The rules regulating IRAs are varied and vexing; IRS Publication 590 [PDF], the definitive source for Uncle Sam’s shalls and shan’ts regarding IRAs, weighs in at a hefty 108 pages. And then there are all the guidelines about employer-sponsored plans — e.g., 401(k)s and 403(b)s. Whew! Seems like all this would be enough to fill a two-day conference focusing on nothing but retirement accounts.
Actually, it is. I know, because I attended one — Ed Slott’s two-day IRA workshop (fun!). Slott, a CPA and the operator of IRAHelp.com, is recognized as one of America’s foremost authorities on individual retirement arrangements (yep, that’s what the “A” in “IRA” actually stands for). At the conference, he and his team led 100 financial-services pros (and one Fool) through a 430-page manual that described the care and feeding of retirement accounts, as well as several real-life examples of people who made mistakes that cost them thousands of dollars.
Some examples:
A teacher withdrew $67,553 from her 403(b) to pay her daughter’s college expenses. She paid the income taxes, but thought she’d be exempt from the 10% penalty since the money was used for higher-education expenses. Sadly, that exemption applies only to IRAs, not 403(b)s or 401(k)s. Oops.
A widow inherited a $2,646,798 retirement account from her deceased husband. She transferred it to her own IRA, then withdrew $977,888. She wasn’t yet 59-1/2 but figured she’d be spared the 10% early withdrawal penalty since she inherited the account. Indeed, distributions from inherited accounts are exempt from the 10% penalty. However, since she transferred the account to her own IRA, she owed Uncle Sam $97,789. Bigger oops.
It would be the ultimate in stinkiness if you spent years — nay, decades — saving in a retirement account, only to lose thousands due to one simple mistake. Here are just some of the guidelines you must follow to prevent just such a mistake from happening to you.
Stuffing It The maximum you can contribute to an IRA in 2011 is $5,000 — or $6,000 if you’re 50 or older. Granted, the biggest source of your IRA’s funds is likely a transfer from a 401(k) or other employer plan, but contributing $5,000 annually is nothing to sneeze at. For one thing, sneezing at something is rude — but more importantly, contributing $5,000 a year to an account that earns 8% annually would result in $78,227 after 10 years and $247,115 after 20 years. Not shabby at all.
While contributing to an IRA can pay off over the long term, most people first contribute to their employer’s retirement plan, especially if the boss matches contributions. After that, you may want to contribute additional savings to an IRA; if you have money in a retirement plan with a former employer, moving that to an IRA also makes sense.
Here are the advantages of an IRA over a 401(k) or other plan:
More investment options. The typical 401(k) offers a menu of five to 15 mutual funds, whereas an IRA with a discount brokerage allows the owner to choose from among thousands of stocks, exchange-traded funds (ETFs), mutual funds, individual bonds, CDs, and, if approved, alternative strategies such as options.
Lower costs. This depends on the plan and the IRA provider, but the cost-conscious investor will have more ways to limit fees in an IRA, such as investing in index funds, ETFs, or stocks that you hold for many years (avoiding the annual expenses of funds).
There are two reasons not to transfer an employer plan to an IRA:
If you retire between the ages of 55 and 59-1/2, you can take money out of the plan from your last employer penalty-free, whereas withdrawals from an IRA before age 59-1/2 might result in a 10% penalty.
If you own stock in your employer, you’re likely better off transferring it to a taxable account to take advantage of net unrealized appreciation (NUA).
Getting It There From Here The easiest and best way to move money from one retirement account to another is with a “trustee-to-trustee transfer.” Contact the company to which you wish to move the money, complete the paperwork they send you, and they’ll handle the rest.
You want to avoid being sent a check payable to you alone. If that happens, you’ll generally have 60 days to get the money into the new account. Wait any longer and it may be considered a distribution from your previous plan, subject to taxes and possible penalties. In addition, 20% of the distribution may be withheld; you’ll have to cover that gap with personal funds when you move the money to a new account, but you’ll get a refund when you file your taxes. If you don’t make up that 20%, it, too, will be considered a distribution subject to taxes and penalties. This is all very bad.
If your current account provider insists on sending you a check, request that it be made payable to the new financial institution — for example, “XYZ Bank as trustee of IRA of John Doe” or “ABC Firm FBO Jane Smith” (FBO means “for benefit of”).
Spending It As mentioned earlier, you generally have to wait until age 59-1/2 before tapping retirement accounts, whether IRAs or 401(k)s — if you don’t, you’ll be charged a 10% early-distribution penalty. However, there are several exceptions. Some apply to both IRA and employer-sponsored plans, others to just one. (Any exceptions apply just to the 10% penalty; regular taxation will still apply.)
The chart below lists the possible exceptions. If you find yourself in any of these situations, take the time to know all the details before you make a withdrawal. Most exceptions are restricted to certain groups, but Substantially Equal Periodic Payments are available to everyone; they’re explained in IRS Code 72(t), but they’re complicated and can trigger the penalty if not done properly. For all the details, visit www.72t.net.
Note: The very first exception listed is also available to everyone, but it’s a large price to pay to avoid an IRS penalty.
Medical expenses that exceed 7.5% of adjusted gross income
?
IRS levy
?
Active reservists
?
Distributions from inherited accounts
?
Higher education, for self or qualified relatives
?
“First-time” home buyer, up to $10,000 per account owner (can be used for qualified relatives, or for yourself if you didn’t own a home in the previous two years)
?
Health insurance if unemployed
?
Age 55
?
Age 50 for public safety employees
?
457 plans
?
Dividends from employee stock ownership plans
?
Qualified Domestic Relations Order
?
Totally insane prices on flat-screen TVs at an after-Christmas sale
Contributions to a Roth IRA can be withdrawn tax- and penalty-free at any time, while earnings will be subject to the age 59-1/2 rule (as well as the five-year rule, which is a whole other complicated ball of wax). A Roth 401(k) is a different matter; all withdrawals are a proportional mix of contributions and earnings, with any taxes and penalties being assessed against the earnings only.
When You Gotta Take It Owners of traditional IRAs as well as traditional and Roth employer plans must begin taking annual required minimum distributions (RMDs) the year they turn 70-1/2. Alternately, they can wait until the following year but take two distributions in that year. Otherwise, they’ll pay a 50% penalty. Yes, even a Roth 401(k) has RMDs, but they can be avoided by transferring the money to a Roth IRA — the only account not subject to forced liquidation.
Surprisingly, beneficiaries of inherited retirement accounts must also take RMDs beginning in the year following the death of the original owner. This is true regardless of age — even if the account is a Roth IRA. The only exception: a surviving spouse who elects to make the inherited account her own (i.e., has it re-titled in her name) or rolls over the inherited account to her own existing account.
While non-spouse beneficiaries can roll an inherited 401(k) to an inherited IRA, they can’t avoid the RMDs. The account must remain titled something along the lines of “Joe Smith, deceased, IRA for the benefit of Joe Smith Jr. as beneficiary.”
Bequeathing It If you’re interested in passing on wealth to your family, you probably want as little to go to taxes and lawyers as possible. Start by naming living, breathing human beings on your account beneficiary forms. Doing this means the account bypasses your will and probate (which can cost time and money), and the beneficiary or beneficiaries can “stretch” the account over their lifetimes. If the form is blank, or the listed beneficiaries are themselves deceased, the money will go to the estate. In that case, the account may have to be liquidated within five years, and it will lose all the tax advantages of an IRA or 401(k).
Keep in mind that the beneficiary form often trumps other legal documents, such as wills and prenuptial agreements. If your beneficiary form says your IRA should be split between your son and daughter, but your will says it should just go to your daughter (because your son has turned out to be an irresponsible spendthrift — or a banker), the account may end up being split. And to minimize the risk of lost or messed-up beneficiary forms (it does happen!), keep copies in your own records.
It’s important to name primary beneficiaries as well as contingent beneficiaries (the people who will inherit your accounts if the primaries are deceased, or if they’d rather the contingent beneficiaries get the money). If you’ve inherited an IRA, make sure you name new beneficiaries.
Protecting It Finally, here are three other considerations for protecting your retirement accounts, during this life and beyond:
Creditors and bankruptcy. The money in your employer-sponsored retirement account most likely can’t be lost to bankruptcies, creditors, or lawsuits. IRAs receive bankruptcy protection up to $1 million. However, the amount of protection from other creditors varies by state.
IRA fees paid with non-IRA money. Many IRA providers charge an annual account fee, which is automatically taken from your account assets. However, you can instead send a check to the custodian and leave more money in the IRA to grow. This also applies to annual “wrap” fees, though not to commissions and mutual fund expenses.
Estate taxes. Retirement accounts, including Roths, are included in a gross estate for tax purposes. Recent laws increased the federal estate tax exemption to $5 million per person and $10 million per couple, but the limits drop in 2013. Twenty states also impose estate taxes, with exemptions as low as $338,333. If your estate is or will be worth a few million dollars or more, see a local, qualified estate-planning attorney.
Remember: Get help if you need it. If you’re going to make a significant change to your retirement accounts, you might want a little professional help to make sure you’re doing everything right. IRAHelp.com features a listing of advisors in your area who have taken extra training about IRAs and 401(k)s. Also, the fee-only financial advisors at the Garrett Planning Network charge by the hour (among other methods), which makes it easier to get your questions answered without having to turn over your entire financial life.
Annuities can help solve the biggest challenge of retirement.
When you save up for retirement, the two largest risks are intertwined. First, you risk not being able to pay your bills if you don’t properly calculate your annual spending. Second, you risk running out of money late in life if you don’t properly anticipate your lifespan.
A financial advisor can help you calculate how much retirement income you’ll need to generate once you stop working. Find an advisor today.
To help address these issues in tandem, insurance companies sell a product called fixed-index annuities or FIAs. These are designed to provide a baseline of growth-oriented income for the rest of your life. But, as Morningstar researchers recently pointed out, FIAs only work if you use them properly. Otherwise, they turn into money losers compared with more standard options such as fixed-income annuities or index fund portfolios.
What Is a Fixed-Index Annuity?
A fixed-index annuity is a contract you make with an insurance company. In exchange for money upfront the company will give you structured payments over time. Some contracts specify a duration for these payments, making them each month for 10 or 20 years, for example. More often people buy retirement assets called “lifetime annuities,” which start payments when you retire and continue for the rest of your life.
Fixed-income annuities make this payment based on a guarantee. When you buy the contract, the company agrees up front to a certain monthly payment. For example, you might buy a contract for $2,500 per month for the rest of your life beginning in retirement.
A fixed-index annuity is less determined. These contracts guarantee payment, but the amount is not static. Instead, the payments are based on the performance of an underlying index such as the S&P 500 or the Russell 2000. You cannot lose the underlying principal in your contract, and most will come with a guaranteed minimum monthly payment. Otherwise, your income from a fixed-index annuity will increase or decrease based on the performance of its index.
This makes fixed-index annuities a risk/reward tradeoff. If the index does well, this product can pay significantly more than fixed-income annuities, and can even act as a hedge against inflation. If the underlying index does poorly, however, you can potentially make much less money in the long run. This risk is significantly mitigated if you invest in a mainstream index like the S&P 500, but is not trivial if you invest in a higher-risk field.
The Key To Fixed-Index Annuities Is Proper Use
Risk and reward is a very delicate balance in retirement. On the one hand, you want your money to keep growing during these years. On the other hand, you don’t have new income to replace losses, so you want your money to remain safe.
Recently, Morningstar examined where fixed-index annuities fall in that balance. They compared the overall performance of an FIA with a guaranteed lifetime withdrawal benefit rider (GLWB) against standard fixed-income annuities and portfolio investments.
“Overall,” wrote analyst Spencer Look, “I found that FIAs with a GLWB improve projected retirement outcomes, but only if they are used properly.” Specifically, this product can result in stronger payments, fewer shortfalls and more money left over in your estate for the right investor.
But what constitutes proper use? Morningstar found two critical elements:
1. Early Investment
More than anything else, Look found that investors need to buy their FIA at least 10 years before they begin to make withdrawals. For a typical retiree, this means investing by or before age 55.
Why? The annuity needs time to grow. The more time the index has for cumulative growth, the more it will pay. Investors who need income more quickly than this typically see better results with single premium immediate annuities, meaning a fixed-income annuity that you purchase with a lump-sum upfront.
2. Lifetime Investment
This asset also is best for retirees who will hold it throughout their lives.
Exiting an annuity early is known as “lapsing.” When that happens, you collect back the money you put in (often minus a penalty fee) and the contract stops making payments.
Much of the reason to buy this product is that it makes payments for the rest of your life. Over those years and decades, Morningstar found that you will often make more money with an FIA than if you had invested in a fixed-income annuity or a simple stock portfolio.
But if you exit early, you miss out on those future gains. In this case, you often make less money overall than if you had invested in a lump-sum annuity or a stock portfolio.
Longevity Risk Protection
In particular, Morningstar found that a fixed-index annuity can help protect people from running out of money in retirement. “This is because,” wrote Look in his analysis, “an FIA with a GLWB is an insurance product that mitigates against market risk and longevity risk.”
Retirement savers who put their money into portfolios, such as stocks, bonds or index funds, can often get stronger growth than with more careful products like an annuity. But that money is finite, so they risk running out of it.
A fixed-index annuity offers a best-of-both-worlds approach. While FIAs don’t give the full return of their underlying index, they do tend to post stronger returns than a standard fixed-income annuity. Yet, they also come with lifetime payments and a minimum benefit guarantee, mitigating the risk of running out of cash in old age.
Bottom Line
Based on Morningstar’s analysis, investors who are looking for a lifetime retirement product should consider fixed-index annuities. They can offer a strong middle ground between the lower-return/higher-security of a fixed-income annuity and the higher-return/lower-security of a portfolio, but only if you use them correctly. Exiting the contract early can decrease or eliminate the benefits altogether.
Annuity Investing Tips
Annuities can be a strong product for the right investor, but they can often seem complicated. Don’t sweat it. With our step-by-step guide, you can learn the fundamentals of annuities so you can feel more confident about these financial products.
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
If you haven’t started your children or teens off with a kids checking account optimized for their needs, you’ll want to help your college student open a checking account before they begin school.
Opening a checking account for your child can teach them about money management and financial responsibility, along with providing them an easy way to make debit card purchases. It’s never too late to get started.
One advantage to helping your young adult open their first student checking account is they have more options than they might have when they were 16 or younger. Students over 18 can open a bank account with few restrictions.
But choosing a student checking account may give them access to higher interest rates and added features and benefits, along with fee-free checking, no monthly maintenance fees, and no minimum deposit to open an account.
12 Best Student Checking Accounts
Not surprisingly, many of the best student checking accounts come from banks that also offer some of the best checking accounts for any age. However, the products below – in most cases – are tailored for young adults from the ages of 18 to 24, with the features this age group desires most, including an intuitive mobile app and low or non-existent minimum deposit requirements.
1. Best for Students under 18: Capital One MONEY Teen
Most of the student bank accounts on our list exclude children under the age of 17 or 18. Capital One MONEY Teen checking is available to children ages 8 and up. It comes with all the benefits and security of a big bank, providing peace-of-mind. This includes access to Capital One branches and Capital One Cafes for in-person service. This account also serves as a great tool to teach your young adult the basics of banking.
Capital One MONEY Teen checking is a joint account with no monthly fee, no overdraft fees, and access to 70,000 ATMs with no fees. Plus, earn 0.10% on all balances, including those in checking.
You can link Capital One MONEY Teen checking to any other bank account through any bank or neobank, making it easy to transfer money to your teen while they are away at college. Plus, you can keep tabs on their spending with their linked account in the Capital One mobile app.
When they graduate, your teen can hold onto their MONEY account or transfer the funds into a top-rated Capital One 360 Checking account of their own.
2. Best for Working Students: Chime
Chime is not a bank. It’s a financial technology company and mobile app backed by Stride Bank, NA, and The Bancorp Bank. Many features make it perfect for working students. First, you can receive your paycheck up to two days earlier than you might at other banks with ACH deposit.
Plus, you can set up automatic transfers to your linked Chime Savings account, helping you to establish good financial habits early on. Simply set up Chime to transfer a percentage of your paycheck into your Savings Account every time you receive a direct deposit.
When you use your debit card for purchases, the “Save When You Spend” program rounds up your purchase and transfers the difference directly into savings. That small change can really add up, whether you’re saving for your first apartment after college, a new car, or your next tuition bill.
For working students looking to build their credit, Chime gives account holders access to a Credit Builder Secured Visa, with no annual fee, no credit check, and no security deposit required. Instead, the credit account is secured by your Chime checking account with monthly direct deposits.
Like many of the best student bank accounts on this list, Chime has no overdraft fee, no monthly service fee, no ATM fee for in-network ATMs, and no minimum balance requirements.
3. Best Account Opening Bonus: Chase College Checking
Chase Bank has been handing out student account opening bonuses like they hand out lollipops at their branches lately. College students ages 17 to 24 can snag a $100 bonus when they open an account online or at a local branch (students age 17 will need to visit a branch). You’ll just need to make 10 qualifying transactions within the first 60 days of opening the student bank account.
What’s a qualifying transaction? Virtually anything, according to the Chase website, including debit card purchases, online bill payments, Chase QuickDeposits, Zelle transfers, and ACH credits. Bank as you normally would, and you should easily earn that $100.
In addition to the generous sign-up bonus, Chase College Checking has no monthly fees for college students for up to five years, access to 16,000 ATMs and 4,700 branches across the U.S., and zero liability protection for unauthorized debit card purchases.
Chase Overdraft Assist covers purchases that exceed your account balance. You’ll pay no overdraft fee if you’re overdrawn by $50 or less at the end of the next business day.
4. Best for Yield: Ally Interest Checking
Ally Bank is the first bank on our list not designed specifically for students, but the vast array of features in this interest bearing checking account makes it ideal for young adults.
Ally Bank offers an APY of 0.25% on checking account balances and 4.00% APY on balances in a linked Ally Bank savings account. Neither account has any monthly fees.
Ally offers several features to help those on a tight budget manage their money. You can organize your money into spending and saving buckets, which can help you see exactly where your money goes each month. Ally will also review your bank accounts and help you find opportunities to save, and shuttle that extra money into your high yield Ally savings account.
Customers who have deposited $100 or more into their Ally checking account, or $250 via direct deposit, gain access to Ally’s CoverDraft service after 30 days. This protection covers up to $100 or $250 in charges that would overwise overdraft your account. Some purchases, including Zelle transfers, or ATM withdrawals, may be declined if they would put your account into overdraft.
Ally has no monthly maintenance fee, no overdraft fees, no ATM fee for in-network ATM transactions and no minimum balance requirement.
5. Best for Referrals to Earn Extra Cash: GO2bank
GO2bank, the digital bank associated with the top financial technology company Green Dot, offers an easy, straightforward money account with overdraft protection up to $200 with eligible direct deposits. The linked savings account pays a high 4.5% APY, with no fees for qualifying customers and no minimum balance requirement.
You can get regular ACH deposits from your job or side gigs up to two days earlier than most traditional banks. If you receive government benefits, such as Social Security, you can receive those deposits up to four days early.
Your GO2bank account will have a monthly service fee that costs $5 per month, unless you have a qualifying direct deposit that month. You will also pay fees for transfers from a linked debit card from another bank or fintech, mobile check deposits, and cash deposits.
If you are the type of person with friends who come to you for advice, you can earn $50 for each friend you refer to GO2bank who signs up with direct deposit. Your friend will also earn $50. You can use this offer for up to 30 friends, yielding $1,500 annually. This makes a GO2bank account great for social media influencers or college students with a large friend group.
6. Best for Full-Service Banking: Bank of America Advantage SafeBalance Banking
Bank of America Advantage checking accounts offer options for people in various stages of their financial life. College students might be best to start out with Bank of America Advantage SafeBalance banking, a straightforward money account with no overdraft fee and no checks.
The account has no monthly fee for students under the age of 25 or customers under the age of 18. Preferred Rewards customers also receive free checking. There is a $25 minimum deposit to open an account.
New Bank of America customers can earn a $100 account opening bonus when they open an account and set up direct deposits of $1,000 or more within 90 days.
7. Best for Comprehensive Money Management: PNC Virtual Wallet Student
Money Magazine named the PNC Virtual Wallet on its best banks for students list three years running. PNC Bank divides this mobile account into three separate accounts for everyday spending, “reserve,” or short-term savings, and “growth” for long-term savings.
The account has no monthly service fee for students for up to six years, along with all the benefits of a regular PNC Virtual Wallet. Additionally, students receive a courtesy refund of your first overdraft fee on your Spend account, one free incoming domestic or international wire transfer per statement period, and free paper statements if you opt in to receive them.
Once six years have passed or you are no longer a student, your account converts into a regular PNC Virtual Wallet, which may have associated monthly fees. Check the PNC website at that time to determine the fees and how you can waive them.
Your PNC Virtual Student Wallet pays a 0.01% APY on money in your Reserve account, and .02% on account balances up to $2,499 in your Growth account, with .03% APY on balances over $2,500. These may not be the best rates available, but the reputation of PNC Bank, along with the money management features in a Virtual Wallet Student account, make this an account worth considering for students just learning to budget.
8. Best for Establishing Savings Habits.: Wells Fargo Clear Access Banking
As one of the Big Four banks in the U.S., Wells Fargo offers a reliable and safe place to store your money, plus access to thousands of branches nationwide.
The Wells Fargo Clear Access banking account is great for teens and college students, since it’s available for account holders ages 13 to 24. Anyone under the age of 18 will need to open their account in a branch and anyone younger than 17 must have an adult aged 18+ as a joint account holder. The account has no monthly maintenance fee for anyone 24 or younger. A $25 minimum opening deposit is required.
Wells Fargo Clear Access banking is a simple, straightforward money account with no checks and personalized service at Wells Fargo branches. There are no overdraft fees with the account, but also no overdraft protection. Transactions that exceed the account or minimum balance amount will be declined, which helps put teens and young adults in charge of their money.
You can link your Clear Access bank account to a Way2Save Savings account and earn a 0.15% APY. You can establish good money habits by setting up automatic savings. Wells Fargo will transfer $1 from your Clear Access account into your checking account each time you use online bill pay or use your debit card for a one-time purchase. You can also transfer as little as $25 per month or $1 per day into your account to see your savings grow even faster.
9. Best for Cash Back: Discover Cashback Debit
The Discover Cashback Debit account may not be marketed to teens and students, by name. But, it’s enticing to anyone looking for a standard checking account with no monthly service fees and 1% cashback on debit card purchases, up to $3,000 per month. It’s highly unlikely for most college students to max out that free money (unless they are putting housing, tuition, and car expenses on their card).
Discover Cashback! debit card offers many of the benefits you’d expect from these top-rated money accounts, including early direct deposit, 60,000+ no-fee ATMs, and overdraft protection from your linked Discover Savings with no fees. Discover charges no fees for insufficient funds, bank checks, regular checks, or expedited delivery of a replacement debit card.
These features make it one of the most convenient accounts you can hold. Plus, you don’t have to worry about “aging out” of the account and facing fees for a non-student bank account. Your Discover Cashback Debit account will be free no matter your age. Link it to a Discover Savings Account to earn 4.0% APY with no minimum deposit required.
10. Best for Unlimited Out-of-Network ATM Fee Reimbursement – Axos Bank Rewards Checking
Another bank account not marketed to students but meeting all their needs is the Axos Bank Rewards Checking account. This account has no monthly fees. It also reimburses ATM fees for out-of-network ATMs nationwide, which is great for students who travel domestically or who don’t have ATMs in their network on campus.
Pay no overdraft fee or non-sufficient funds fees with this account. Best of all, earn an APY of 0.40% on your checking balance if you receive monthly direct deposits of $1,500-plus. Young investors can ramp up their interest rate by 1% with an average daily balance of $2,500 in an Axos Invest Managed Portfolio Account, plus another 1% by holding $2,500 in a self-directed trading account. If you take out a loan through Axos, you can add another 0.60% to your APY.
College students likely won’t regret opening an Axos Bank account to take them through adulthood, especially with options for investing, low mortgage rates, car loans, and more.
Plus, earn a welcome bonus when you open an account and have direct deposits of at least $1,500 within a single calendar month during the first three months of account opening.
11. Best Credit Union: Alliant Credit Union Teen Checking
Alliant Credit Union offers a teen checking account for minors ages 13 to 17. The account is insured up to $250,000 per account holder by the National Credit Union Administration (NCUA). The adult account holder must be an Alliant Credit Union member. But it’s easy to join by depositing $5 into an Alliant Credit Union saving account. Alliant Savings earns an APY of 0.25%.
The teen checking account has no overdraft fees or non-sufficient funds fee. It also has no monthly fees or minimum balance requirements. Account holders gain access to 80,000+ fee free ATMs nationwide plus $20 per month in ATM fee reimbursement for out-of-network ATM use. This is an interest earning checking account which also pays 0.25% APY on all balances as long as you have at least one deposit, via ACH direct deposit, mobile check deposit, or transfer from another bank or credit union, each month.
12. Best for Young Shoppers: Varo Bank
Varo Bank is another account not necessarily marketed to college students but definitely optimized for their needs. The Varo Bank debit card delivers up to 6% cash back, with money deposited into your Varo account as soon as you accrue $5 in rewards.
Like many of the best student accounts on this list, Varo has no monthly fee, no minimum balance requirements, and no overdraft fee. If you need money before payday, you can use Varo Advance, an interest-fee program that allows you to borrow up to $250 and pay it back within 30 days. You will not pay fees to borrow less than $20. Borrowing up to $250 comes with fees that can be as high as $15, depending on the amount of cash advance you need.
Varo Bank uses the Allpoint network of ATMs, with fee free access to 55,000+ ATMs nationwide. Using other bank ATMs could result in charges up to $3 from Varo and fees charged by the other banks, as well.
It pays to open a linked Varo Bank savings to take advantage of a high 3% APY. Account holders with direct deposits equal to $1,000 per month and a positive balance in their Varo checking and savings can earn up to 4% APY.
One of the best things about a Varo account is it can grow with you. You won’t pay additional fees as an adult out of college, so you can keep the same bank account you started with for your entire life if you want.
Methodology: How We Select the Best Student Checking Accounts
To find the best student checking accounts, we evaluated the monthly maintenance fees, ATM fees, minimum deposit requirements, features, benefits, banking services provided, along with customer service and mobile app access at several of the biggest and most well-known banks and credit unions.
ATM Network
Most banks have ATM networks or partner ATM networks of 20,000 or more ATMs nationwide where you can use your debit card with no ATM fees. You might be surprised to learn that even online banks and financial technology companies that are not a bank provide access to thousands of ATMs nationwide through partner programs.
Nationwide availability (physical locations or mobile access)
College students often split time between their college campus and the home where they grew up. Finding a bank with physical locations in the areas they live or an online bank that provides a mobile banking app with fee free mobile banking from anywhere is important.
Fees and minimum requirements
Bank fees no longer have to be a way of life for today’s young adults. We chose financial institutions with no monthly maintenance fees or easy ways to waive maintenance fees.
Benefits such as high APY, cash-back rewards, or other additional perks
Student checking accounts today are more than just “bare bones” places to store your cash. Many student bank accounts offer perks, benefits, and high-yield savings or an interest bearing checking account to provide added value.
Overdraft fees
Cash management mistakes happen, especially when young adults first start learning to budget and manage their finances. Many banks have no overdraft fees and some offer overdraft protection to help out in a pinch.
How to Choose the Best Bank for College Students
We’ve offered 12 solid options to help you choose the best student checking account. Before you open a student bank account, it’s a good idea to think about what you need in your primary checking account and a linked savings.
The list below makes it easy to review your must-haves and nice-to-haves when you choose your first bank account as a college student.
Best student checking account interest rates
If you’re looking to earn interest on your standard checking account, many banks offer this feature. Review annual percentage yield (APY) figures for your top choices.
Remember, a higher savings interest rate might benefit you more, since money in your checking account tends to fluctuate based on paychecks, bills, and expenses. The best checking account may not pay interest, but can save you money in other ways.
Annual Percentage Yield (APY)
Likewise, you can put money in your pocket with an account with linked savings offering a high annual percentage yield (APY).
Mobile Check Deposit
If you get paid via paper checks, you’ll want to find an account with a mobile app that offers mobile check deposit. Find out how fast deposits clear, and if mobile banking services are fee free.
No Monthly Maintenance Fees
Many banks today make it easy to find a free checking account with no maintenance fees. If you have to pay a monthly maintenance fee, find out exactly what you’re getting for your money. Find out if the perks and benefits, such as a cash back debit card or reimbursement of ATM fees make the maintenance fees worthwhile.
Minimum Deposit and Minimum Balance Requirements
When you’re just getting started, cash may be tight. It’s important to find an account with no minimum deposit to open.
Banking Services Provided
Accounts should have customer service online, by phone or in branches, plus an easy-to-use mobile app and a debit card with no ATM fees.
FAQs About Student Checking Accounts
Read what people are asking about the best student checking accounts, including minimum deposit requirements and benefits of a student checking account.
What are the benefits of a student bank account?
A bank account tailored for students gives young adults a head start on their financial future and learning how to manage money. For students who work, they can receive direct deposits in their student account, pay bills online, and send money to friends and family using Zelle.
How to get a student checking account bonus?
Several student checking accounts, including Chase, provide sign-up bonuses. Make sure to read the fine print and complete the requirements, which may include setting up direct deposit or making a minimum opening deposit, to collect the bonus.
Can I open a student checking account without a deposit?
To open a student checking account without a minimum deposit amount, simply look for a bank account, like Varo, that has no minimum opening deposit.
Are there any downsides to opening a student checking account?
When you open a student checking account, you’ll want to make sure you won’t pay monthly maintenance fees. Some student checking accounts convert to a regular account once the student graduates, and there may be fees associated with the regular account.
Is there an age limit on a student checking account?
Most student checking accounts are open to students from the age of 18 to 24 without a joint account holder. Customers under the age of 18 may be able to open an account with a joint owner.
Can minors open student checking accounts?
Accounts like Capital One Money Teen are available to children ages 8 and up with a joint account holder. Some other accounts require students to be 18 or older.
What happens to your student checking account when you graduate?
Many of the student bank accounts on this list won’t change when you graduate college. Others offer the option to convert your account to one of the bank’s regular checking products. A Chase College Checking Account has no monthly fees for your first five years in college, but if you graduate or exceed that time frame, you might pay a $6 monthly maintenance fee unless you meet other requirements.