LOS ANGELES — The average long-term U.S. mortgage rate rose this week to its highest level since mid March, driving up borrowing costs for prospective homebuyers facing a housing market that’s constrained by a dearth of homes for sale.
Mortgage buyer Freddie Mac said Thursday that the average rate on the benchmark 30-year home loan rose to 6.57% from 6.39% last week. The average rate a year ago was 5.10%.
High rates can add hundreds of dollars a month in costs for homebuyers, limiting how much buyers can afford in a market that remains unaffordable to many Americans after years of soaring home prices and limited housing inventory.
The median monthly payment listed on applications for home purchase loans in April rose to $2,112, up nearly 12% from a year ago and a 0.9% increase from March, the Mortgage Bankers Association said Thursday.
The average rate on a 30-year home loan has risen two weeks in a row, echoing moves in the 10-year Treasury yield, which lenders use as a guide to pricing loans.
The 10-year Treasury yield has been mostly rising of late, climbing to 3.79% in afternoon trading Thursday. Two weeks ago, it was at 3.39%.
The move up in bond yields comes as investors react to stronger-than-expected economic data and the implications that could have on whether the Federal Reserve will raise interest rates again next month.
Bond traders are also factoring in the possibility that the U.S. government may default on its debt as the White House and GOP leadership wrangle over a deal to raise the federal government’s debt ceiling so it can avoid an unprecedented default as soon as June 1.
“The U.S. economy is showing continued resilience which, combined with debt ceiling concerns, led to higher mortgage rates this week,” said Sam Khater, Freddie Mac’s chief economist.
Jitters over the possibility that the government ends up defaulting on its debt could cause creditors to ask for higher interest rates on U.S. Treasury bonds, which could lead to a “significant increase” in borrowing costs, including mortgages, said Jiayi Xu, an economist at Realtor.com.
“Resolving the debt impasse sooner, rather than later, would mitigate potential adverse effects on the housing market, which is already contending with high prices and elevated mortgage rates,” Xu said.
Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with interest rates influence rates on home loans.
The Fed has raised its benchmark interest rate 10 times in 14 months. At its last meeting of policymakers, the central bank signaled that it could finally pause its yearlong campaign of rate hikes, though a pause would likely only nudge mortgage rates slightly lower.
Low mortgage rates helped fuel the housing market for much of the past decade, easing the way for borrowers to finance ever-higher home prices. That trend began to reverse a little over a year ago, when the Fed started to hike its key short-term rate in a bid to slow the economy and cool the highest inflation in four decades.
The spring homebuying season got off to a lackluster start this year as prospective buyers grappled with higher borrowing costs and a near record-low inventory of homes on the market.
Sales of previously occupied U.S. homes fell 23.2% in the 12 months ended in April, marking nine straight months of annual sales declines of 20% or more, according to the National Association of Realtors. The national median home price fell to $388,800 last month — down 1.7% from a year earlier and the biggest year-over-year drop since January 2012.
The modest pullback in home prices reflects heated competition among buyers, especially those vying for the most affordable homes. At least one-third of the homes sold last month went for more than their list price, according to the NAR.
The average rate on 15-year fixed-rate mortgages, popular with those refinancing their homes, rose to 5.97% this week from 5.75% last week. A year ago, it averaged 4.31%, Freddie Mac said.
If you have a mortgage, you may be unknowingly participating in a mortgage-backed security (MBS). That is, your humble home loan may be part of a pool of mortgages that has been packaged and sold to income-oriented investors on the secondary market.
Being part of an MBS won’t change much (if anything) about how you repay your home loan, but it’s helpful to understand how these investment products work and how they impact the mortgage and housing industries.
Key takeaways
A mortgage-backed security is an investment product that consists of thousands of individual mortgages.
Investors can purchase MBSs on the secondary market from the banks that issued the loans.
When MBS prices fall, residential mortgage rates tend to rise – and vice versa.
What is a mortgage-backed security?
A mortgage-backed security (MBS) is a type of financial asset, somewhat like a bond (or a bond fund). It’s created out of a portfolio, or collection, of residential mortgages.
When a company or government issues a traditional bond, they are essentially borrowing money from investors (the people buying the bond). As with any loan, interest payments are made and then principal is paid back at maturity. However, with a mortgage-backed security, interest payments to investors come from the thousands of mortgages that underlie the bond — specifically, the repayments in interest and principal the mortgage-holders make each month.
Mortgage-backed securities offer key benefits to the players in the mortgage market, including banks, investors and even mortgage borrowers themselves. However, investing in an MBS has pros and cons.
How do mortgage-backed securities work?
While we all grew up with the idea that banks make loans and then hold those loans until they mature, the reality is that there’s a high chance that your lender is selling the loan into what’s known as the secondary mortgage market. Here, aggregators buy and sell mortgages, finding the right kind of mortgages for the security they want to create and sell on to investors. This is the most common reason a borrower’s mortgage loan servicer changes after securing a mortgage loan.
Mortgage-backed securities consist of a group of mortgages that have been organized and securitized to pay out interest like a bond. MBSs are created by companies called aggregators, including government-sponsored entities such as Fannie Mae or Freddie Mac. They buy loans from lenders, including big banks, and structure them into a mortgage-backed security.
Think of a mortgage-backed security like a giant pie with thousands of mortgages thrown into it. The creators of the MBS may cut this pie into potentially millions of slices — each perhaps with a little piece of each mortgage — to give investors the kind of return and risk they demand. Mortgage-backed securities typically pay out to investors on a monthly basis, like the mortgages underlying them.
Types of mortgage-backed securities
Mortgage-backed securities may have many features depending on what the market demands. The creators of MBSs think of their pool of mortgages as streams of cash flow that might run for 10, 15 or 30 years — the typical length of mortgages. But the bond’s underlying loans may be refinanced, and investors are repaid their principal and lose the cash flow over time.
By thinking of the characteristics of the mortgage as a stream of risks and cash flows, the aggregators can create bonds that have certain levels of risks or other characteristics. These securities can be based on both home mortgages (residential mortgage-backed securities) or on loans to businesses on commercial property (commercial mortgage-backed securities).
There are different types of mortgage-backed securities based on their structure and complexity:
Pass-through securities: In this type of mortgage-backed security, a trust holds many mortgages and allocates mortgage payments to its various investors depending on what share of the securities they own. This structure is relatively straightforward.
Collateralized mortgage obligation (CMO): This type of MBS is a legal structure backed by the mortgages it owns, but it has a twist. From a given pool of mortgages, a CMO can create different classes of securities that have different risks and returns (like different size slices, if we use our pie metaphor again). For example, it can create a “safer” class of bonds that are paid before other classes of bonds. The last and riskiest class is paid out only if all the other classes receive their payments.
Stripped mortgage-backed securities (SMBS): This kind of security basically splits the mortgage payment into two parts, the principal repayment and the interest payment. Investors can then buy either the security paying the principal (which pays out less at the start but grows) or the one paying interest (which pays out more but declines over time). These structures allow investors to invest in mortgage-backed securities with certain risks and rewards. For example, an investor could buy a relatively safe slice of a CMO and have a high chance of being repaid, but at the cost of a lower overall return.
How do mortgage-backed securities affect mortgage rates?
The cost of mortgage-backed securities has a direct impact on residential mortgage rates. This is because mortgage companies lose money when they issue loans while the market is down.
When the prices of mortgage-backed securities drop, mortgage providers generally increase interest rates. Conversely, mortgage providers lower interest rates when the price of MBSs goes up.
So, what causes mortgage-backed securities to rise or fall? Everything from stock market gains to higher energy prices and even unemployment numbers have the ability to influence the prices. A variety of factors that affect the course of mortgage-backed securities, and lenders are constantly monitoring it.
Mortgage-backed securities and the housing market
Why do mortgage-backed securities make sense for the players in the mortgage industry? Mortgage-backed securities actually make the industry more efficient, meaning it’s cheaper for each party to access the market and get its benefits:
Lenders: By selling their mortgages, lenders save on maintenance costs, and receive money they can then loan out to other borrowers, allowing them to more efficiently use their capital. They often require borrowers to meet conforming loan standards so that they can sell mortgages to aggregators. They can also sell the loans they might not want to keep, while retaining those they prefer.
Aggregators: Aggregators package mortgages into MBSs and earn fees for doing so. They may give mortgage-backed securities features that appeal to certain investors. A steady supply of conforming loans allows aggregators to structure MBSs cheaply.
Borrowers: Because aggregators demand so many conforming loans, they increase the supply of these loans and push down mortgage rates. So, borrowers may be able to enjoy greater access to capital and lower mortgage rates than they otherwise would.
Of course, easier access to financing is beneficial for the housing construction industry: Developers can build and sell more houses to consumers who are able to borrow more cheaply.
Investors like mortgage-backed securities, too, because these bonds may offer certain kinds of risk exposure that the investors, mainly big institutional players, want to have. Even the banks themselves may invest in MBSs, diversifying their portfolios.
While the lender may sell the loan, it may also retain the right to service the mortgage, meaning it earns a small fee for collecting the monthly payment and generally managing the account. So, you may continue to pay your lender each month for your mortgage, but the real owner of your mortgage may be the investors who hold the mortgage-backed security containing your loan.
Pros and cons of investing in MBSs
No investment is without risk. MBS have their advantages and disadvantages.
For instance, mortgage-backed securities typically pay out to investors on a monthly basis, like the mortgages behind the securities. But, unlike a typical bond where you receive interest payments over the bond’s life and then receive your principal when it matures, an MBS may often pay both principal and interest over the life of the security, so there won’t be a lump-sum payment at the end of the MBS’ life.
Here are some of the other advantages and disadvantages of investing in MBSs.
Pros
Pay a fixed interest rate
Typically have higher yields than U.S. Treasuries
Less correlated to stocks than other higher-yielding fixed income securities, such as corporate bonds
Cons
If a borrower defaults on their mortgage, the investor will ultimately lose money
The borrower may refinance or pay down their loan faster than expected, which can have a negative impact on returns
Higher interest rate risk because the cost of MBSs can drop as soon as interest rates increase
History of mortgage-backed securities
The first modern-day mortgage-backed security was issued in 1970 by the Government National Mortgage Association, better known as Ginnie Mae. These mortgage-backed securities were actually backed by the U.S. government and were enticing because of their guaranteed income stream.
Ginnie Mae began providing mortgage-backed securities in an effort to bring in extra funds, which were then used to purchase more home loans and expand affordable housing. Shortly after, government-sponsored enterprises Fannie Mae and Freddie Mac also began offering their version of MBSs.
The first private MBS was not issued until 1977, when Lew Ranieri of the now-defunct investment group Salomon Brothers developed the first residential MBS that was backed by mortgage providers, rather than a federal agency. Ranieri’s MBSs were offered in 5- and 10-year bonds, which was attractive to investors who could see returns more quickly.
Over the years, mortgage-backed securities have evolved and grown significantly. As of May 2023, financial institutions have issued $493.9 billion in mortgage-backed securities.
Mortgage-backed securities today
While mortgage-backed securities were notoriously at the center of the global financial crisis in 2008 and 2009, they continue to be an important part of the economy today because they serve real needs and provide tangible benefits to players across the mortgage and housing industries.
Not only does securitization of mortgages provide increased liquidity for investors, lenders and borrowers, it also offers a way to support the housing market, which is one of the largest engines of economic growth in the U.S. A strong housing market often bolsters a strong economy and helps employ many workers.
Mortgage Market
Bankrate insights
As of 2021, 65% of total home mortgage debt was securitized into mortgage-backed securities.
Bottom line on mortgage backed securities
While you might not deal with a mortgage-backed security in your daily life, your mortgage may be part of one. And if so, it’s a cog in the machinery that keeps the financial system running and helps borrowers access capital more cheaply. It can be useful to understand that the MBS market ultimately has a powerful influence over qualifications for mortgages, resulting in who gets a loan — and for how much.
Loyalty? Not in the mortgage business. That is, if you actually want to save money on your home loan.
A few years back, an HSBC survey revealed that 52% of U.S. homeowners “switched providers” (sorry, they’re British) when obtaining subsequent mortgages.
This was mainly driven (53%) by the desire to get a better deal, aka a lower mortgage rate with fewer closing costs.
That survey also found that 46% of consumers investigated a mortgage switcheroo, again either to save money or to lock in a new low rate due to rising interest rates.
Other reasons homeowners decided to go with another mortgage company were because they moved and purchased a new property.
Or due to their current mortgage deal was expiring. I think they mean an adjustable-rate mortgage resetting.
Is It Bad to Switch Mortgage Lenders?
A new report from Black Knight claims that loan servicers retained just 18% of the estimated 2.8 million homeowners who refinanced a mortgage in the fourth quarter of 2020, the lowest share on record.
Interestingly, those who refinanced to improve their rate and/or term were retained at a higher rate (23%) versus those pulling cash out as part of the transaction (11%).
This could be due to cash out refinances being harder to come by lately, and thus offered by fewer lenders. Or it just feeling more complex to the homeowner.
But here’s the biggie – among higher-credit quality rate and term refinances, borrowers who switched mortgage lenders received more than an eighth of a percent lower rate than those who refinanced and remained with their current lender/servicer.
In other words, you might get a lower mortgage rate if you switch mortgage lenders, instead of remaining loyal.
So is it bad to switch mortgage lenders? Not if you want to save money! Of course, your old lender might not feel the same way.
Mortgages Are Mostly a Commodity
Home loans aren’t all that different from one another
This is why lenders are increasingly coming up with unique ways to sell you one
The vast majority are 30-year fixed products whose only difference might be the interest rate or fees involved
And the majority just follow the underwriting guidelines of Fannie Mae, Freddie Mac, or HUD
It’s really no surprise that a lot of consumers don’t stay with their original mortgage lenders and/or loan servicers.
Aside from some existing lenders sometimes talking borrowers out of a refinance, the product is mostly the same no matter where you get it.
That makes customer retention difficult, especially when other lenders are aggressively marketing to homeowners.
These days, the majority of home loans are backed by the agency guidelines of Fannie Mae, Freddie Mac, or the government via FHA loans and VA loans. I think it’s something like 90% of mortgages.
This means mortgage loans are pretty homogeneous, despite what channel they’re originated in, or which institution provides the financing.
You could get the same exact home loan from a local credit union, a big bank, an online mortgage banker, or a mortgage broker.
And who really cares where you get your mortgage as long as the company is competent enough to close the thing, and honest in terms of rate and fees?
It’s not like you’re going to walk around and brag about your cool mortgage from X bank after the fact. It’s certainly not a status symbol, or a conspicuous transaction.
I’m pretty sure I’ve never had a conversation about someone’s branded mortgage before.
And I doubt an “influencer” is going to post about theirs on Instagram. Well, I take that back, they might…because someone paid them.
Mortgage Advertising Is Following the Insurance Model
Like mortgages, most forms of insurance are similarly boring and unoriginal
But that doesn’t stop mega insurers like Geico from advertising to you 24/7
Other insurers create catchy new names for run-of-the-mill coverage that isn’t really unique
Mortgage lenders are beginning to do that too in a bid to separate themselves from the crowd
This is exactly why insurance companies use celebrity endorsements and smart marketing gimmicks to get you to switch, or conversely, to stick around.
Car insurance isn’t cool or exciting and never will be, nor are mortgages, as much as I want them to be.
Ultimately, we’re all being sold the same thing, it’s just that some companies try to differentiate themselves by slapping clever names onto their products.
For example, Quicken Loan’s Rocket Mortgage is about reinventing the mortgage process, not the mortgage itself.
You’re still probably going to get a 30-year fixed home loan or some other ordinary mortgage that you would get anywhere else.
It’s just the way you get it that might change. Instead of meeting face-to-face with a banker, you might upload documents on your smartphone and authorize the release of documents electronically.
This could make the experience a lot easier and more pleasant, but it doesn’t mean you’re necessarily getting anything different.
Because everyone is basically offering their customers same thing, it comes down to price, customer service, and now perhaps clever marketing.
The one exception is portfolio home loan programs, which are actually unique to the mortgage lender providing them. These are loans kept on the originating bank’s books that contain distinct underwriting guidelines.
We’re starting to see more of them, though most lenders remain fairly cautious with the mortgage crisis still a not-too-distant memory, despite taking place a decade ago.
For example, a lot of the zero down mortgages you see are unique to the companies offering them, the latest one I came across from Ideal Credit Union.
And some of the so-called fintech disruptors like SoFi Mortgage are actually providing unique offerings like a 5/1 ARM with an interest-only option and jumbo loans as high as $3 million with just 10% down.
Be Careful Not to Pay More for the Same Exact Mortgage
While it’s important to use a mortgage lender you can trust
Such as one that can actually close your home loan competently without major delays
It doesn’t really matter what “brand” the mortgage it is after it funds
And there’s a good chance it’ll be resold to a different company shortly after closing anyway
Those exceptions aside, many of us have very similar mortgages that are only unique in terms of where they originated from.
As noted, most of today’s mortgages are conforming loans, meaning they meet the guidelines of Fannie and Freddie. Or they’re simply backed by the government via the FHA, VA, or USDA.
And just about all of them are 30-year fixed-rate loans that function exactly the same.
That’s why you have to ask yourself – if the company isn’t offering anything different, why pay more?
Might as well bargain shop and find the best mortgage rate with the lowest closing costs, instead of simply going with a household name because of a funny commercial.
At the end of the day, as long as they get you to the finish line, you’ll probably never think about your mortgage company again. Just make sure they’re reputable first…
Chances are your mortgage will be sold off in a matter of months anyway, so the company you get it from likely won’t even service it.
In fact, your final correspondence might be a notice of your home loan changing hands…
Most mortgage lenders offer both home purchase loans and refinances. But Direct Access Funding is all about the refis.
In fact, the Southern California based lender refers to itself as a the “refinance division” of its parent company.
Seeing that most refinances are driven by the desire to obtain a lower mortgage rate, there’s a good chance their pricing is competitive.
They say they’ve got the best refinancing rates period and quality customer service to boot, which their reviews seem to back up.
So if you’re an existing homeowner looking for a better mortgage, they could be worth looking into. Let’s dig into the details.
Direct Access Funding Fast Facts
A direct-to-consumer mortgage lender that offers home refinance loans
Founded in 1998, headquartered in Irvine, California
The refinance division of Absolute Home Mortgage Corporation
Licensed to do business in 15 states and the District of Columbia
Their parent company funded $2 billion in home loans last year
Claim to offer the best mortgage refinance rates
As the name implies, Direct Access Funding is a direct-to-consumer mortgage lender based in Irvine, California, which is in the heart of Orange County.
Instead of a physical branch network, they work remotely with customers from a central call center to help you process and close your loan.
The company is located near many other mortgage lenders, including CashCall Mortgage, ClearPath Lending, loanDepot, and Watermark Home Loans.
As noted, they dabble only in mortgage refinancing, meaning their target market is existing homeowners as opposed to home buyers.
They are actually a division of Absolute Home Mortgage Corporation based out of Fairfield, New Jersey, which originated about $2 billion in home loans last year.
They’re currently licensed to do business in 15 states and the District of Columbia.
Those states include Arizona, California Colorado, Connecticut, Delaware, Florida, Illinois, Maryland, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, and Virginia.
How to Apply with Direct Access Funding
To get started, you can call them on the phone or simply visit their website and begin on your own.
Your best move might be to get in touch with a licensed loan officer first to discuss mortgage rates, lender fees, and overall eligibility.
Once you get the information you need to proceed, you can fill out their digital mortgage application online.
It allows you to complete the form 1003 electronically, eSign disclosures, and upload supporting documents via a secure portal.
Once your loan is submitted, you’ll be able to manage your loan online from start to finish.
It’s unclear if the processing and underwriting of your loan is completed in-house or at their parent company’s headquarters.
Regardless, their goal is to make refinancing stress-free and they employ the latest technology and solutions to make that happen.
Because they focus on existing homeowners only, the process should be faster than traditional banks and lenders.
Loan Programs Offered by Direct Access Funding
Rate and term refinances
Cash out refinances
Streamline refinances
No cost refinances
Conforming loans backed by Fannie Mae and Freddie Mac
FHA loans
Fixed-rate mortgages in various loan terms
Direct Access Funding seems to be solely focused on mortgage refinances for existing homeowners.
This includes rate and term refinances, cash out refinances, and streamline refinances.
They can also structure your loan as a no cost refinance through the use of lender credits so nothing needs to be paid out of pocket.
In terms of loan types, I believe they only originate conforming loans backed by Fannie Mae and Freddie Mac, along with FHA loans.
It’s unclear if they offer VA loans or jumbo loans as well.
You can get a fixed-rate mortgage such as a 30-year fixed or a 15-year fixed, and possibly an adjustable-rate mortgage too.
They lend on primary residences, second homes, and investment properties, including condos/townhomes.
All in all, their product menu isn’t vast but should cover most of the population.
Direct Access Funding Mortgage Rates
While they claim to have the “best” mortgage rates for a refinance loan, they don’t list their rates online. At least not on their website.
However, you might find them on third-party websites alongside other lenders in mortgage rate tables.
My assumption is their rates are very competitive since they’re a branchless, refinance-only lender.
And because refis are generally pursued to save money, they will need to beat your existing rate to earn your business.
But do take the time to compare their quote to other lenders to be sure. And also ask about any lender fees, such as a loan origination fee or application fee.
I’d classify them as a low-cost mortgage lender because of their lightweight business model (lack of branches and advertising), which is a good thing if you’re looking for lowest possible rate/fee.
Direct Access Funding Reviews
On Experience.com, Direct Access Funding has an impressive 4.91-star rating out of a possible 5 from over 1,000 customer reviews.
You are able to filter the reviews by loan officer to see how certain individuals have performed in the past. If a certain person stands out, be sure to ask for them when calling in.
Over at Google, they have an even better 4.9-star rating from nearly 200 reviews, which is pretty close to perfection.
Lastly, they’ve got a 4.9 rating on Bankrate from 15 reviews, with 100% of reviewers indicating they’d recommend the company to others.
Their parent company Absolute Home Mortgage Corp. is an accredited company with the Better Business Bureau (since 2013) and currently holds an ‘A+’ rating based on complaint history.
All of these reviews give them some legitimacy, even if they’re not a household name like some of the larger lenders out there.
In closing, Direct Access Funding seems to be a streamlined refinance shop that could be a good fit for an existing homeowner looking for a lower mortgage rate or cash out.
They’re probably best suited for those with plain vanilla loan scenarios (e.g. W-2 employee, conforming loan amount, single-family residence).
If that’s you, they might be able to beat your existing mortgage rate and save you money each month.
But those with more complex loan scenarios (self-employed borrowers, investors, jumbos) may want to look elsewhere.
Direct Access Funding Pros and Cons
The Pros
Can apply for a home loan online in minutes without a human
Offer a digital mortgage application (paperless process)
Say they offer the best refinance rates
Excellent reviews from past customers
Parent company is accredited, A+ BBB rating
The Cons
Not licensed in all states
No branch locations
Only offer refinancing products (not home purchase loans)
Let’s talk mortgage basics: “What is the loan-to-value ratio?”
If you’re currently shopping for a home or already going through the mortgage loan process, chances are you’ve heard the phrase loan-to-value ratio get thrown around on more than one occasion.
You may have also encountered the acronym “LTV” while perusing mortgage advertisements or playing around on mortgage rate comparison websites.
Regardless of what’s going on in the housing market, you should know all about this very important term when applying for a home loan.
Why? Because it can greatly affect mortgage rate pricing, refinance options, and overall loan eligibility.
How to Calculate the Loan-to-Value Ratio (LTV)
It’s actually one of the easiest calculations you can make
Simply divide the loan amount by the appraised value or purchase price
And you’ll wind up with a percentage known as your LTV
The tricky part might be agreeing on a sales price and getting the home to appraise at value
Simply put, the loan-to-value ratio, or “LTV ratio” as it’s more commonly known in the industry, is the mortgage loan amount divided by the lower of the purchase price or appraised value of the property.
If we’re talking existing mortgages (in the case of refinance loans), it’s the outstanding loan balance divided by the appraised value.
When calculating it, you will wind up with a percentage. That number is your LTV. And the lower the better here folks!
It’s actually very easy to calculate (no algebra required) and takes just one step. You don’t even need a mortgage calculator. In fact, you might be able to run the numbers in your head. Honest!
Let’s calculate a typical LTV ratio:
Property value: $500,000 Loan amount: $350,000 Loan-to-value ratio (LTV): 70%
In the above example, we would divide $350,000 by $500,000 to come up with a loan-to-value ratio of 70%.
Using a basic household calculator, not a so-called “LTV calculator,” simply enter in 350,000, then hit the divide symbol, then enter 500,000. You should see “0.7,” which translates to 70% LTV. That’s it, all done!
This means our hypothetical borrower has a loan for 70 percent of the purchase price or appraised value, with the remaining 30 percent the home equity portion, or actual ownership in the property.
LTV ratios are extremely important when it comes to mortgage rate pricing because they represent how much skin you have in the game, which is a key risk factor used by lenders.
A Lower LTV Ratio Means More Ownership, Better Mortgage Rate
The lower your loan-to-value ratio the more home equity or down payment you have
Which is another way of saying ownership or skin in the game
A low LTV equates to a lower mortgage rate because you’re viewed as less risky
It means the bank is risking less since you are more invested in the underlying property
Essentially, the lower the loan-to-value ratio, the better, as it means you have more ownership (home equity) in the property.
Someone with more ownership is less likely to fall behind on payments or foreclose, seeing that they have a greater equity stake, aka financial interest to keep paying the mortgage each month.
They’ve also got more options if they do struggle with payments, as they could just sell the property without taking a loss (or the bank losing money).
Not only that, but banks and mortgage lenders also set up pricing adjustment tiers based solely on the LTV ratio.
Those with lower LTV ratios will enjoy the lowest interest rates available, while those with high LTVs will be subject to higher mortgage rates and/or closing costs.
For example, if you’re being “hit” by the lender for having a less-than-stellar credit score, that adjustment will grow larger as the loan-to-value ratio increases (higher LTV ratio = greater risk).
So if your mortgage rate is bumped a quarter percent higher for a loan-to-value ratio of 80%, that same pricing hit may be increased to a half percentage point if the LTV ratio is a higher 90%.
This can certainly raise your interest rate in a hurry, so you’ll want to look at all possible scenarios with regard to down payment and loan amount to keep your LTV ratio as low as possible.
More importantly, just maintain an excellent credit score and you’ll have plenty of loan options, regardless of your chosen down payment or available home equity.
80% LTV Is a Very Important Threshold!
Keep your mortgage at/below 80% LTV if you want to save money
You won’t have to pay private mortgage insurance (PMI)
And it should result in a lower mortgage interest rate with fewer pricing adjustments
You’ll also enjoy greater lender choice as most banks will lend up to 80% LTV
Most borrowers (who have the means) elect to put 20% down when buying a home, as it allows them to avoid mortgage insurance and the much higher pricing adjustments often associated with LTVs above 80%.
Fewer adjustments mean you can secure a lower interest rate on your mortgage. And if you can avoid PMI at the same time, it’s a win-win for your monthly housing payment!
You may also find it easier to get approved, as virtually all banks and mortgage lenders will accept LTVs of 80% or less.
But you don’t necessarily need to put 20% down to enjoy the benefits of a low-LTV mortgage.
Also Get to Know the Combined Loan-to-Value Ratio (CLTV)
Looking at the above example again, if you were to raise the first mortgage amount to $400,000 and add a second mortgage of $50,000, the combined loan-to-value ratio, or CLTV as its known, would be 90%.
Banks and mortgage lenders have both LTV and CLTV limits, meaning they won’t allow homeowners to borrow more than say 80, 90, or 100 percent of the property value.
These limits came down after the Great Recession but are creeping back up again…
Let’s do the math here; again, no mortgage calculator required!
You would have a first mortgage at 80% LTV, and a second mortgage for an additional 10% LTV, making the CLTV 90%. Simply add up both numbers.
Sometimes borrowers elect to break up home loans into a first and second mortgage, known as combo mortgages.
This keeps the loan-to-value ratio below key levels, thereby reducing the interest rate and/or helping the homeowner avoid private mortgage insurance.
Tip: The undrawn portion of a home equity line of credit (HELOC) typically isn’t included in the CLTV calculation.
Max LTV by Home Loan Type
FHA loans go as high as 96.5% LTV (3.5% down payment)
Conforming loans (Fannie/Freddie) go as high as 97% LTV (3% down)
USDA and VA loans go to a full 100% LTV (zero down)
Jumbos, cash-out refis, and investment properties are much more restrictive
And there is no maximum LTV in many cases for streamline refinances
There are certain LTV limits based on home loan type, with conventional loans (non-government) typically being more restrictive than government loans.
And mortgage refinance programs often less accommodating than home purchase loans.
At the moment, you can get an FHA loan as high as 96.5% LTV, which is just 3.5% down payment.
You can get a conventional loan as high as 97% LTV, which at just 3% down is higher than it used to be.
In recent history, the maximum was 95% LTV, but now Fannie Mae and Freddie Mac are competing directly with the FHA.
[See FHA vs. conventional for more on that.]
You can get either a VA loan or USDA loan at 100% LTV (which represents no money down).
These are the most flexible loan programs LTV-wise, but they are also only available to veterans or those living in rural areas, respectively. So not everyone will qualify for these types of mortgage loans.
There are also proprietary home buying programs from various private mortgage lenders that allow for 100% LTV financing if you take the time to shop around.
If it’s a jumbo home loan, a cash-out refinance, or an investment property, the loan-to-value will be a lot more limited, potentially capped at just 70-80% LTV, depending on all the attributes.
And finally, those underwater or upside down borrowers you hear about; they owe more on their mortgage than the property is currently worth.
This can happen due to negative amortization and/or home price depreciation.
A quick underwater loan-to-value ratio example:
Property value: $400,000 Loan amount: $500,000 Loan-to-value ratio (LTV): 125%
As you can see, the underwater borrower has a LTV ratio greater than 100% (this equates to negative equity), which is a major issue from a risk standpoint.
For the record, you get 1.25 by dividing 500 by 400.
The problem with homeowners in these situations is that they have little incentive to stick around, even with a modified mortgage payment, as they’re so far in the red that there’s little hope of recouping home value losses.
However, the popular Home Affordable Refinance Program (HARP) allowed millions of underwater homeowners to refinance to lower rates with no LTV limit. And many of these folks are probably now back in the black.
Today, this type of program still exists, but is a permanent option known as a high-LTV refinance, or HIRO for short.
So there are options to refinance and get a lower interest rate, as long as your loan is owned by Fannie Mae or Freddie Mac, no matter the mortgage balance relative to the property value.
Same goes for FHA loans and VA mortgages thanks to the FHA streamline refinance and the VA IRRRL option.
Despite being far behind new homeowners entering the market in terms of building home equity, many of these formerly-underwater borrowers now have lots of equity thanks to rising home prices and several years of paying down their mortgages.
That’s why you have to consider the long-game in real estate and never give up, even when times get tough. This also illustrates why home buying shouldn’t be a quick or hasty decision.
A Lower Loan-to-Value Can Save You Money!
A lower LTV generally results in a better interest rate
Which means cheaper monthly mortgage payments
It puts more of your hard-earned dollars toward the principal balance each month
Potentially saving you thousands of dollars over the life of the loan!
As noted, a lower LTV will likely result in big savings thanks to a lower interest rate.
Additionally, you may be able to avoid costly private mortgage insurance, enjoy expanded loan program eligibility, and have an easier time getting approved for a mortgage.
If your LTV is higher than you’d like it to be, there are some creative options to lower it.
Borrowers Can Reduce Their LTV in a Variety of Ways
Come in with a larger down payment if it’s a home purchase loan
Ask for gift funds to increase your down payment
Or break your mortgage up into two separate loans (combo loan)
Make extra payments or a lump sum payment for a refinance to get the LTV down before you apply
Or simply wait for natural amortization and home price appreciation to lower your LTV over time
If we’re talking about a home purchase, simply bring in more down payment money and the LTV will be lower. Easier said than done, sure, but possible for some.
Perhaps someone will gift you the money or act as a co-borrower?
Alternatively, you can look into breaking up your financing into two loans, with both a first and second mortgage.
If it’s a mortgage refinance, simply pay down the mortgage balance a bit more before you apply, whether on schedule or by making extra mortgage payments.
This can be especially helpful if you’re super close to a certain LTV threshold, or just above the conforming loan limit.
Speaking of, pay close attention to your LTV – if it’s just above 80% or some other meaningful tier, think about adjusting your loan amount down (your loan officer should advise you here!).
Lastly, there’s another way existing homeowners can get their LTV down and it requires no effort whatsoever.
You don’t have to do anything except sit back and watch your property value increase over time, thereby lowering your LTV in the process. Of course, the opposite can happen too if home values drop!
But as noted, real estate should be treated with a long time horizon, so be sure you have the ability to ride the ups and downs and make moves when it’s most favorable to you.
The Sunshine State is a great place to call home. Whether you’re an individual or small business owner, rest assured there are many banks available to help you meet your financial goals.
While some banks have brick-and-mortar locations in Miami, Tampa, Jacksonville, Orlando, and other parts of the state, others are online-only, meaning you’ll need to use an online portal or mobile banking app to manage your accounts.
15 Best Banks in Florida
We’ve done all the research and compiled this list of the best banks in Florida so you can make the most informed decision for your unique situation.
1. Huntington Bank
Huntington Bank has been around since 1866 and primarily services Southwest Florida. Its solo Florida branch can be found in Naples but you can bank from anywhere, thanks to a robust digital banking program.
Huntington’s checking accounts come with many benefits, such as 24-hour grace overdraft fee relief, platinum debit cards, mobile pay, and early pay. You can make deposits to them directly or through an ATM or mobile device.
If you’re looking for the ideal savings account, you may choose from several money market accounts, IRAs and other retirement accounts, and certificates of deposit. Huntington serves small business owners in Florida as well through business checking accounts, business credit cards, business loans, insurance products, and more.
2. Chime
Chime isn’t a traditional bank or credit union. However, it’s a mobile banking app you can take advantage of in Florida. It made its debut in 2013 and offers online banking services through Bancorp Bank, N.A. and Stride Bank.
With the Chime Checking account, you can enjoy early direct deposit, automated savings tools, free debit card replacement, and access to over 60,000 fee free ATMs across the county. If you opt for the Chime High-Yield Savings account, you’ll lock in a competitive interest rate and won’t have to pay monthly fees or meet a minimum balance requirement. Plus, there is no cap on how much interest you may earn.
3. Revolut
Revolut is another non-traditional banking opinion that serves Floridians from the U.K. With Revolut, you can access your paycheck up to two days early and won’t be charged fees for withdrawals at 55,000 ATMs across the nation.
If you consider yourself an avid traveler, you’re sure to appreciate its travel perks, such as currency exchange, overseas health insurance, delayed baggage and flight insurance, and the ability to make purchases in numerous currencies.
With the Smart Delay feature, you’ll get to hang out in airport lounges if your flight is delayed. Additionally, Revolut offers budgeting and analytics tools so you can keep your finances in check as well as cash back when you make purchases at select retailers.
4. Ally Bank
Ally Bank is an online bank with rates that are about 10 times the national average. Even though there are no Ally branches in Florida, it’s a solid pick if you’d like your money to grow quickly. Unlike most brick-and-mortar financial institutions in the Sunshine State, Ally doesn’t charge monthly fees or impose minimum balance requirements.
You can open an Ally account with any deposit amount. In addition to a savings account, you may take advantage of an interest bearing checking account and credit cards with rewards like cash back and travel points. We can’t forget Ally’s retirement and investment services, which include self-directed trading, robo portfolios, IRAs, stocks, commission-free ETFs, and even cryptocurrency.
5. Regions Bank
Regions Bank is a regional bank with more than 300 branches and 500 ATMs in Florida. If you’re an avid traveler, rest accrued the bank also has many locations in the Midwest, South, and Texas. Regions stands out from other, larger financial institutions for its checking account rewards program and LifeGreen Savings account, which is free of monthly maintenance fees and service fees.
In addition to the LifeGreen Savings account, you may opt for a Regions Savings account. This account offers a discount on a safe deposit box, a minor account for children under 18, and the Now Savings account, which is specifically for those with a Regions prepaid Visa card.
Furthermore, Regions offers CDs with terms that range from seven days and 72 months. Other perks include a robust mobile app and 24/7 customer service through an online secure messaging system.
6. Bank of America
Bank of America is a large bank with nearly 500 branches throughout the Sunshine State and no shortage of ATMs across the country. Thanks to its handy mobile app, you can cash checks, pay bills, and manage your accounts while you’re on the go. Speaking of accounts, there’s something for everyone at Bank of America.
The Bank of America Advantage Banking account is a checking account with three features: SafeBalance, Advantage Plus, and Advantage Relationship. With SafeBalance, which is ideal for students, you don’t have to worry about overdraft fees.
Advantage Plus offers several ways to waive monthly fees and Advantage Relationship rewards you with interest and other perks for higher balances. In addition, Bank of America boasts credit cards with generous sign on bonuses for new checking account customers, a variety of mortgages, and investment management services.
7. Chase Bank
Chase Bank is a part of JPMorgan Chase and has more than 400 branches in Florida. With Chase, you can expect a large ATM network of over 16,000 ATMs across the country and a number of online and mobile banking tools. If you decide to become a Chase customer, you’ll have access to two savings accounts: the Chase Savings account and the Chase Premier Savings account.
While Chase Savings comes with a low monthly fee, the Chase Premier Savings is a solid pick if you’re looking for a competitive interest rate on a large balance. When it comes to checking accounts, Chase offers several options, like the Chase Total Checking account and the Chase Sapphire Checking account with perks like attractive interest rates and no ATM fees.
Note that the Chase Sapphire Checking account is only available for Sapphire members with an average balance of $75,000 average balance.
8. Fifth Third Bank
Fifth Third Bank is a national bank that was recognized by J.D. Power for the great banking experience it provides in Florida. It has numerous branches in Bradenton, Lakeland, Apopka, Orlando, and other cities throughout the state.
You can open a checking or online savings account without having to worry about an opening deposit requirement and won’t be charged a monthly fee for any checking account.
If you do face a fee for a savings account, there are several ways to get it waived. Fifth Third also offers an extensive ATM network, which will give you access to more than 50,000 ATMs across the country.
Additionally, if you get paid via direct deposit in a Fifth Third account, you may access your paycheck up to two days early. For questions and concerns, you can reach out to Fifth Third’s customer service team 6-days a week.
9. TIAA Bank
TIAA Bank is the largest regional bank in the Sunshine State. You can find its financial centers in Jacksonville, Clearwater, Boca Raton, Coral Gables, Fort Lauderdale, Naples, and Fort Myers.
In addition to a personalized banking experience, this Florida bank provides a checking account featuring low fees and no transaction limits, a savings account with no monthly account fees and competitive rates, and three different types of CDs.
Plus, the bank is digitally savvy and provides online banking tools so you can keep tabs on your accounts, set a budget and savings goals, make transfers, pay bills, and send money with Zelle. If you’re interested in investing, TIAA Bank will give you the opportunity to invest in precious metals and foreign currencies.
10. Capital One
Capital One is a national bank that’s known for its flagship 360 Checking account. With a 360 Checking account, you can enjoy an attractive interest rate, access to more than 70,000 fee-free ATMs across the U.S., and 24/7 mobile banking.
You also won’t be on the hook for any monthly fees and Capital One will automatically decline any transitions that overdraw your balance for no extra charge.
Even though Capital One does not have any physical branches in Florida, you can apply for and manage your accounts online. Other benefits of Capital One include early paycheck, which can allow you to receive your incoming funds up to two days early, free financial coaching sessions, and a well-designed mobile app.
11. Raymond James Bank
Raymond James Bank is based in Florida. It’s an affiliate of Raymond James, which is a financial company with headquarters and one branch location in St. Petersburg. Through its Enhanced Savings Program, you’ll be able to earn interest on certain cash if you link your brokerage account to a high-yield Raymond James bank account.
You can also receive yields that are higher than traditional checking or savings accounts without bank fees or holding periods. Raymond James also offers a plethora of mortgage products, such as fixed rate and adjustable rate mortgages, interest-only mortgages, jumbo mortgages, pledged securities mortgages, construction mortgages, and home equity lines.
12. PNC Bank
PNC Bank is one of the largest traditional banks in the U.S. with nearly 200 branches in Florida. It offers the PNC Standard Savings account, a children’s savings account, and Virtual Wallet, which pairs a traditional checking and savings account. If you decide on the Virtual Wallet, you can enjoy a generous sign-up bonus and no fees.
When it comes to CDs, you can choose from a plethora of options including fixed rate CDs, ready access CDs, fixed rate IRA CDs, callable CDs, variable CDs, and stepped rate CDs. Additionally, the bank goes the extra mile with free budgeting tools and competitive interest rates for account holders that meet certain criteria. As an added bonus, PNC has a reputation for stellar customer service.
13. Discover Bank
Discover Bank is known for its credit cards. However, it’s an online bank with other banking products for Florida residents. Not only does Discover offer cash back on debit card purchases, it doesn’t charge monthly maintenance fees, insufficient funds fees, or overdraft fees.
While there are no branch locations in Florida, Discover has an intuitive mobile banking app and is part of a large ATM network of more than 60,000 fee free ATMs. In addition to checking accounts and savings accounts, you can turn to Discover for credit cards with various rewards and loans, like personal loans, student loans, home equity loans, and mortgage refinancing.
14. Wells Fargo
Wells Fargo is a major financial institution with more than 600 branches and thousands of ATMs throughout Florida. At Wells, you’ll find a full suite of banking products and services, such as checking accounts, savings accounts, certificates of deposit (CDs), credit cards, personal loans, and home loans.
You can choose from a basic, no-frills free checking account or opt for an interest checking account or a checking account for a teen or young adult. There are also a few saving account options, like a goal-based savings account and a high-interest savings account.
While you can visit a local branch if you prefer an in-person banking experience, you may also take advantage of online and mobile banking. In addition, Wells offers other conveniences like Zelle money transfers and online bill pay.
15. My eBanc
My eBanc is an online savings bank that serves customers in Florida and other parts of the U.S. It’s part of Banco Bradesco, a large bank in Latin America, which is an FDIC insured institution chartered in Florida. As a My eBanc customer, you’ll have access to several products that can help you save money and achieve various financial goals.
The SuperSaver Money Market account requires a $5,000 minimum deposit but offers perks such as a competitive interest rate, unlimited deposits, money management tools, and mobile check deposit. Other popular accounts you might consider include the eRelationship Savings account and Advantage Checking account. My eBanc also offers online time deposits with terms between 6 months and 36 months.
Types of Banks in Florida
The ideal bank depends on your particular banking preferences. In the Sunshine State, most banks are either national banks, regional banks, community banks, or online banks. Let’s take a closer look at how each banking option works.
National Banks
National banks are common in larger cities throughout Florida. If you’re looking for a wide range of banking products, you’re sure to find them at national banks, such as Wells Fargo, PNC Bank, and Wells Fargo.
Regional Banks
Regional banks have branches in certain regions of the U.S. In most cases, these banks are mid sized and offer a good mix of personal banking and business banking products. A few examples of regional banks in Florida include Regions Bank and TIAA Bank.
Community Banks
Community banks serve customers in specific geographic areas. Also known as local banks, community banks are similar to credit unions in that they focus on personal customer service and community outreach. Community Bank of the South and Mainstreet Community Bank of Florida are two community banks in Florida.
Online Banks
Online banks don’t have physical locations in Florida but serve individuals and businesses with online banking services. Since they have less overhead costs than banks with brick-and-mortar locations, online banks tend to offer more competitive interest rates and minimal to no fees.
Bottom Line
If you live or work in Florida, there are many reputable banking options available to you. As you explore various banks and credit unions, consider their accounts and services, fees, interest rates, customer service, and perks. Good luck in your search for the best bank in Florida.
Frequently Asked Questions
What are the largest banks in Florida?
The largest banks in the Sunshine State include Bank of America, Wells Fargo, and Fifth Third Bank. These banks have many branches throughout the state.
Should I choose an online bank?
If you’re comfortable with the internet or mobile apps, online banking from a place like Ally Bank and CIT Bank can be a smart choice. This is particularly if you can find the products you need with competitive interest rates and low fees.
What is the best bank for in person service?
Florida offers many great options if you prefer an in-person banking experience. You might want to consider Regions Bank, TIAA Bank, or Raymond James Bank.
How do I open a bank account in Florida?
Most banks allow you to open a deposit account online, from the comfort of your own home or office. Be prepared to make a minimum opening deposit and provide basic personal information, like your name and Social Security number.
Do Florida banks charge fees?
In most cases, larger brick and mortar banks require customers to pay fees like monthly service fees, wire transfer fees, overdraft fees, excessive withdrawal fees, ATM fees, and late payment fees. You might be able to get them waived, depending on the bank and the type of account you open.
What is the best local bank in Florida?
There are many local banks in the Sunshine State that each come with their own benefits and drawbacks. Several options you might want to explore include Florida Shores Bank, Seaside Bank and Trust, and One Florida Bank.
What is the difference between a bank and a credit union?
Anyone can become a customer at a bank. If you want to take advantage of the products and services at a credit union, you’ll need to meet certain criteria and join it.
Today we’ll explore one of the nation’s largest loan servicers that happens to be a major mortgage lender as well, “Lakeview Loan Servicing.”
As their name implies, they service mortgage loans, meaning they collect monthly payments from customers after the loan funds.
These days, a lot of mortgage lenders don’t do that, and instead focus on making new loans and selling them off quickly so they can fund even more.
But Lakeview has adopted a strategy some of the largest mortgage lenders in the country have, doing both.
This means aside from servicing loans, they also originate billions in mortgages annually. Let’s see if they could be a good fit for a new mortgage.
Lakeview Loan Servicing Fast Facts
Direct-to-consumer mortgage lender that offers home purchase and refinance loans
Founded in 2010, headquartered in Coral Gables, Florida
Funded $41 billion in home loans last year (a top-25 mortgage lender nationally)
The 4th largest loan servicer in the country
Licensed to lend in 48 states and the District of Columbia
Also operates a wholesale and correspondent lending business
As noted, Lakeview Loan Servicing operates as both a loan servicer and a direct-to-consumer mortgage lender. This is similar to a NewRez or a Rocket Mortgage.
They are currently the nation’s fourth largest loan servicer in the country, and help more than 1.4 million customers manage their home loans annually.
The company also recently became the largest servicer of Ginnie Mae mortgages, aka FHA loans and VA loans.
To clarify, they own the servicing rights to all these mortgages, and actually partner with subservicers like LoanCare to process payments, manage escrow, etc.
At the same time, they mustered an impressive $40.7 billion in home loan origination last year, landing them in the top-25 lender list.
They did a near-equal amount of home purchase loans and mortgage refinances, so they could be a worthwhile choice for both a new home buyer or an existing homeowner.
My guess is they tap into their massive loan servicing portfolio to find new refinance candidates. So if they service your loan, they may have reached out.
As I always say, when a lender reaches out, reach out to other lenders! That way you can comparison shop.
At the moment, they are licensed in 48 states and D.C., with Hawaii and New York the exceptions.
How to Apply for a Mortgage with Lakeview Loan Servicing
If you’re a current loan servicing customer, you may have received solicitations from Lakeview Loan Servicing to refinance your loan.
But they’re also a big originator of home purchase loans, so home buyers with no prior relationship could also choose them as their lender.
They say they’ve got more than 100 loan officers in four locations across the country to serve home buyers and refinancers.
And both loan processing and underwriting are done in-house to ensure fast turn times. Those who need to get pre-approved for a mortgage can do so in as little as 24 hours.
To get started, you can visit their website or call them directly. If you go online, you can create an account and submit a new mortgage request.
At that point, a licensed loan officer will get in touch to discuss loan pricing and eligibility.
They offer a digital mortgage application powered by ICE Mortgage Technology that allows you to complete most tasks electronically.
And once your loan is submitted, you’ll be able to manage it and check status via the online borrower portal.
Once the loan funds, it’ll be serviced by them as well via one of their subservicing partners.
Lakeview Home Rewards
One perk to using them for a home purchase loan is the “Lakeview Home Rewards” program.
In short, it’s a real estate agent referral program and mortgage lender all rolled into one.
Once you sign up, you’ll be matched with a top local real estate agent and a dedicated mortgage loan officer from Lakeview.
After your loan funds, you’ll receive up to $6,500 cash back, depending on the home’s purchase price.
Those who sell and buy a home using the service can receive up to $13,000 in rebates once both transactions close.
Note that these rewards aren’t offered in some states (AK, IA, LA, and MO) and are limited in others.
They say they only work with “premier brokerages across the United States,” and pick the top real estate agents from those companies.
This includes real estate agents with at least five years of experience who maintain a 90%+ satisfaction rating.
If you aren’t already working with an agent, this program could be a money-saver and provide the convenience of an end-to-end home buying process.
Loan Programs Offered by Lakeview Loan Servicing
Home purchase loans
Refinance loans: rate and term, cash out, streamline
Conforming loans backed by Fannie Mae and Freddie Mac
Jumbo loans
FHA loans
VA loans
USDA loans
Home equity loans
Lakeview Loan Servicing offers home purchase loans and mortgage refinance loans, meaning they serve both existing homeowners and prospective home buyers.
If you already own a home, you can refinance to obtain a lower mortgage rate and/or get cash out. Streamline options are offered as well.
All the major loan types are available, including conforming loans backed by Fannie Mae and Freddie Mac, and government-backed loans like FHA, VA, and USDA loans.
It’s also possible to get a jumbo home loan, and even a second mortgage in the way of a home equity loan.
They seem to offer mostly fixed-rate mortgages, including the 30-year fixed, 15-year fixed, and other less common loan terms.
I’m not sure if they also originate adjustable-rate mortgages, which aren’t very popular at the moment.
But they should have enough options to suit most home buyers and homeowners out there.
Lakeview Loan Servicing Rates
They say they offer low interest rates, but that’s about it. You won’t find their daily mortgage rates listed online to compare to other lenders.
As such, you’ll need to call them up and get in touch with a loan officer to obtain the latest pricing.
Be sure to inquire about lender fees when you do that to get the full picture. It’s unclear if they charge a loan origination fee or other fees for processing, underwriting, and so on.
My guess is they’re a middle-of-the-road lender in terms of pricing, though that’s just an assumption.
At the end of the day, they might be priced lower than the big banks and national brands, but perhaps higher than the low-cost mortgage lenders out there.
But you won’t know until you call and speak to a human.
Lakeview Loan Servicing Reviews
On Zillow, they have a 4.84-star rating out of 5 from about 400 reviews. A decent number of recent reviews indicated the interest rate was lower than expected.
Their Zillow rating might be the best representation of their home lending division, while other reviews you come across could be more related to their servicing business.
For example, over at Google it’s more of a mixed bag, with a much lower 2.5-star rating from over 600 reviews. The caveat is this may include both lender customers and servicing customers.
This is one of the problems with operating as both types of companies under the same brand. Take the time to read the reviews to see if they relate to new loans or existing, serviced loans.
While they aren’t accredited with the Better Business Bureau (BBB), they do have an ‘A+’ rating based on complaint history.
In summary, Lakeview Loan Servicing could be a good choice for a home purchase loan due to their rebate program, and potentially good for refinancers if the rates are low.
The only question marks are pricing and customer service, the latter of which might be muddled because they are also a loan servicer.
Lakeview Loan Servicing Pros and Cons
The Pros
Can apply for a home loan online in minutes
Digital mortgage application powered by ICE Mortgage Technology
Lots of home loan programs to choose from including second mortgages
Lakeview Home Rewards offers up to $6,500 cash back
A+ BBB rating
They’ll service your loan after closing
Free mortgage calculator and mortgage glossary online
The Cons
Not licensed in Hawaii or New York
No physical branches
Do not publicize mortgage rates or lender fees
Lots of mixed reviews (which may be due to servicing)
It’s the first of the month, and with that comes fear and uncertainty that both homeowners and renters won’t be able to make payments due to loss of income related to the coronavirus.
While it’s not clear how bad things will get just yet, CNBC interviewed FHFA director Mark Calabria to get some preliminary numbers, which he himself called “very rough” and subject to change quickly.
Two Million Missed Mortgage Payments by May
300,000 missed payments for Fannie/Freddie owned loans in April
700,000 missed payments for overall market in April
Jumps up to 1M and 2M respectively by May
Expected to be worse for government loans backed by FHA/VA
He currently estimates that roughly 300,000 home loans backed by Fannie Mae and Freddie Mac could go delinquent in April, which is just over 1% of their book.
For the overall mortgage market, he said that translates to roughly 700,000 delinquent home loans.
By May, those numbers jump up to one million and a little more than two million missed payments, respectively.
He sees more stress in FHA/VA loans due to their lower credit score requirements, higher DTI ratios, and so on.
While it sounds pretty dire, Calabria was quick to point out that it only represents somewhere between 3-5% of the market, and that he’s “not seeing worst-case scenarios.”
This is counter to a comment made by MBA chief economist Mike Franantoni, who warned that if a quarter of U.S. homeowners (~12.5 million households) sought six months of mortgage forbearance, loan servicers could owe between $75 and $100 billion to investors.
Meanwhile, Mark Zandi, chief economist for Moody’s Analytics, said up to 15 million Americans could default if the lockdown goes through summer.
That would likely crush many loan servicers who lack the liquidity to face a barrage of missed payments, but the hope is it doesn’t come to that. Or the Fed steps in to help.
Calabria noted that if borrowers only miss 2-3 months of payments, most loan servicers should be OK, but if it goes beyond that time frame, a lot of firms will face liquidity problems.
Top retail mortgage lender Quicken Loans also services about 1.8 million home loans, and CEO Jay Farner said the company’s balance sheet is “strong enough” to pay holders of bonds backed by its mortgages in the event many default.
However, most forbearance requests have apparently come from homeowners who’ve never been late, which he says as a good sign they’ll get back on track once normal employment resumes.
Additionally, he pointed out that 70-80% of calls were from homeowners not yet facing hardship, who apparently just wanted to know their options.
He did reiterate that, “If you can pay your mortgage, please do so.”
The CARES Act Allows Borrowers to Miss 6-12 Mortgage Payments
Homeowners with a federally-backed mortgage can request forbearance for 180 days (and an additional 180 days)
Applies to FHA/VA/USDA and Fannie Mae/Freddie Mac loans
Simply requires borrowers to request assistance from their loan servicer and say they are facing a hardship related to COVID-19
Lenders may not charge fees, penalties, or interest beyond what would have been due had borrower remained current
The passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows homeowners with a federally-backed residential mortgage to request forbearance for up to 180 days, or six months.
This includes FHA loans, USDA loans, VA loans, and home loans purchased or securitized by Fannie Mae or Freddie Mac.
That’s most of the mortgage market, aside from jumbo loans and portfolio loans kept on banks’ books.
It also grants them the ability to request an additional 180 days of forbearance if needed, or to cancel it at any time.
During the forbearance period, lenders may not charge fees, penalties, or interest beyond what would have been due had the borrower made all contractual payments on time and in full.
It’s still unclear what happens after the forbearance period ends. Does the loan servicer assess the borrower’s ability to get current or simply add the missed mortgage payments to the end of the loan term? Who knows.
Update: You can now get up to 15 months of mortgage forbearance.
Can Anyone Get Mortgage Forbearance Under CARES Act?
The CARES Act doesn’t define what a “financial hardship” is
Nor are loan servicers allowed to require additional documentation to grant mortgage forbearance
Both Calabria and Treasury Secretary Steven Mnuchin have urged homeowners to pay their mortgages if they can
But at the moment it appears anyone can qualify without proof of hardship
All a homeowner has to do to get mortgage forbearance is submit a request to their loan servicer that they are “experiencing a financial hardship due, directly or indirectly, to the COVID-19 national emergency,” regardless of delinquency status.
Other than that attestation from the homeowner, a loan servicer may not require additional documentation to grant mortgage payment forbearance.
This means you don’t have to prove loss of income or unemployment to qualify, something Calabria acknowledged while saying “we’re operating on the honor system.”
In other words, it should be very easy to get six to 12 months of mortgage payments put on hold with little more than a request, without the typical hoops to jump through.
While great for homeowners in need, it could be a disaster for loan servicers and the mortgage industry in general, assuming millions take part in the relief effort.
Read more: What’s the Last Day to Apply for Mortgage Forbearance Under the CARES Act?
If you live or work in Delaware, it’s important to find the right bank for your unique goals. Fortunately, there are plenty of options at your disposal.
In addition to its beautiful beaches, affordable housing, and historical landmarks, the First State is home to many reputable banks that are member FDIC for your peace of mind and ideal for your personal or business finances.
13 Best Banks in Delaware
While some have local branches throughout the state, others are online only. To make your search for the ideal financial institution a bit easier, we’ve done the heavy lifting for you and listed the best banks in Delaware below.
1. The Bank of Delmarva
The Bank of Delmarva is a small community bank with branches in Ocean City, Salisbury, and Sussex County. Its lineup of personal banking accounts and services includes the best checking accounts, savings accounts, money market accounts, CDs, and IRAs.
If you’re a small business owner, rest assured that it offers business loans, commercial products, and merchant services. Compared to other banks in the state, it offers low fees and competitive interest rates. Plus, it’s earned stellar reviews for its customer service. We can’t forget the intuitive mobile app you can use to manage your banking while you’re out and about.
2. Chime
Chime is a digital bank redefining traditional banking norms. With no physical branches, Chime stands out by providing a simple yet intuitive suite of financial products, all managed from their highly rated mobile app. The bank offers a fee-free1 checking account, a savings account, and a secured credit card.
The checking account, with no minimum balance and no overdraft fees, is particularly impressive. Its standout feature, SpotMe5, allows qualifying users to overdraw by up to $200 without fees. Meanwhile, the savings account is made appealing with an automatic savings feature, making it simple to save without thinking.
Notably, Chime gives the benefit of receiving paychecks up to two days early2 with direct deposit setup, a major plus for budgeting and financial planning. Its secured credit card is also a boon, helping users build credit over time through responsible usage and consistent payments.
3. TD Bank
TD Bank is a solid pick for a national bank with a handful of locations in the First State. With TD Bank, you can expect a plethora of products and services, no fees on international transactions, and a highly rated mobile banking app.
From personal and business checking accounts and savings accounts to personal loans, IRAs, and mortgages, TD Bank truly offers it all. If you open an account, you might qualify for a generous bonus. Also, if you’re a student or young adult, you won’t have to worry about monthly maintenance fees or service fees. You might also be able to waive these fees if you maintain a high balance in your accounts.
4. M&T Bank
M&T Bank has many locations in Delaware in cities like Wilmington and New Castle. Even if you don’t live in an area with a physical M&T location, you can enjoy digital banking and conveniences like Zelle transfers and mobile deposits. When it comes to checking accounts, M&T Bank offers four options.
The EZ Choice Checking is your best bet for a basic, free checking account while MyWay Banking is a checkless account that doesn’t charge overdraft fees. MyChoice Plus is an interest-bearing account, just like MyChoice Premium, which offers competitive rates on loans and other products.
In addition to these noteworthy checking accounts, you’re sure to appreciate M&T’s large ATM network and no monthly fees.
5. Artisans’ Bank
Artisans’ Bank has served Delaware since 1861. Today, it has 12 branch locations in the First State as well as two commercial lending offices. Artisans’ list of personal banking products includes checking accounts, savings accounts, money market accounts, debit cards, and branded credit cards with cash back rewards.
The bank also serves small businesses in Delaware with small business banking products such as business bank accounts, business credit cards, and business loans. Even though Artisans’ is a local bank with a physical presence, it offers online banking services so you can manage your accounts online.
6. Capital One
Capital One is a large bank with a reputation for no minimum deposit requirements or monthly maintenance fees. While there are no Capital One branches in Delaware, the bank is worth considering if you prefer online banking. You can apply for and manage personal and business accounts online.
Speaking of accounts, its flagship account is the 360 Performance Savings that makes it a breeze to earn interest on your hard earned money. In addition to an impressive interest rate, there is no minimum balance required so you can open an account with any amount. Other perks there is a highly rated mobile app and free credit card monitoring.
7. Axos Bank
Axos Bank is a digital bank with competitive interest rates on checking and savings accounts, which are free of monthly fees and ATM fees. Even if you live in Delaware, you can perform your banking through Axos online or via the intuitive mobile app, which comes with mobile check deposits, fund transfers, and mobile bill pay.
The bank’s checking accounts offer rewards while the savings accounts stand out for their ATM cards. Speaking of ATMs, Axos Bank will reimburse you for ATM fees on many of its accounts. In addition to its personal banking products, Axos specializes in new mortgages, mortgage refinancing, HELOCs and home equity loans, car loans, personal loans, and managed investment portfolios.
8. Barclays Bank
Barclays Bank operates in Wilmington. It’s a global bank that serves all U.S. states with several banking products. Even though there is only one branch in Delaware, it offers an online portal and a highly rated mobile app so you can bank from anywhere.
As a customer, you’ll enjoy benefits like a high interest rate on high-yield savings accounts and CDs. If you do open a CD with Barclays, you’ll also reap the benefits of low withdrawal penalties. In addition, the bank’s customer service line is available seven days a week to answer any questions or concerns you might have.
9. Community Bank Delaware
Community Bank Delaware is exactly what it sounds like: a community bank based in Delaware. Since it’s locally owned and managed, it focuses on personalized customer service and community support.
At this bank, you’ll find checking accounts, personal savings accounts, time deposits, personal loans, personal credit cards, mortgages, and home equity loans. Community Bank also serves local small business owners with products to support their business operations, such as checking accounts, business savings accounts, business credit cards, and merchant services.
Additional banking solutions include online banking, wire transfers, cashiers checks, night depositary services, direct deposit, and safe deposit boxes.
10. PNC Bank
PNC Bank is a national bank with over 30 branches in cities such as Dover, Bear, Wilmington, and Newark. Its deposit accounts and other products are designed to meet all your banking needs. Virtual Wallet Spend is a combination checking and a long term savings account with a generous sign-up bonus and features like online bill pay, free mobile banking, and a debit card.
While there is a monthly maintenance fee, you can avoid this monthly fee if you maintain a direct deposit balance. PNC also offers loans, such as mortgages, home equity lines of credit, auto loans, personal loans, student loans, and refinancing products. With the PNC mobile app, you’ll be able to manage your accounts while you’re on the go.
11. Ally Bank
Ally Bank is an online bank with competitive rates on savings accounts, money market accounts, and CDs. Thanks to its low overhead costs, Ally doesn’t charge monthly maintenance fees or impose minimum balance requirements.
You can access your money and make cash transactions at more than 43,000 ATMs through the Allpoint network, which Ally has joined. If you have certain savings goals, you’ll love Ally’s “buckets” feature. With the buckets, you’ll be able to organize your funds and receive personalized recommendations that allow you to save.
12. Wells Fargo
Wells Fargo is one of the largest banks in the U.S. with no shortage of physical branches and ATMs throughout Delaware so you can easily deposit cash. Just like most large banks, Wells Fargo offers a full suite of banking products, such as checking accounts, savings accounts, credit cards, home loans, personal loans, and auto loans.
Investment and retirement accounts as well as wealth management services are available too. You can invest on your own or take advantage of a financial advisor that will help you come with a personalized financial plan. Whether you’re an individual or a small business owner, you’re bound to find what you’re looking for at Wells. If you open an account, you may be eligible for a cash sign on bonus.
13. WSFS Bank
WSFS Bank is a regional bank and a subsidiary of a financial services company called WSFS Financial Corporation. Based in Delaware and Greater Philadelphia, WSFS Bank is known as one of the oldest banks in the country.
It offers a wide range of personal banking services, like checking accounts, savings accounts, credit cards, loans, and wealth management. Its certificates of deposit (CDs) feature competitive interest rates you might not be able to find elsewhere and the WSFS Bank Philadelphia Union Visa® Debit Card comes with contactless pay and access to more than 670 ATMs in Delaware and Philadelphia.
At WSFS Bank, you can also take advantage of business banking services, like SVP management, cash management, and merchant services.
Delaware Banking Options
There are three main types of banks in Delaware, including national banks, community banks, and online banks. Here’s a brief overview of each one.
National Banks
National banks are large banks that can be seen throughout Delaware and other states. These banks typically offer a long list of products for individuals and business owners, such as checking accounts, savings accounts, retirement accounts, credit cards, and mortgages. Some examples include TD Bank, Wells Fargo, and PNC Bank.
Community Banks
Community banks are designed to serve local communities in Delaware. You’ll find that these banks prioritize personal customer service. Community Bank Delaware and the Bank of Delmarva are two community banks in the First State.
Online Banks
Online banks operate online and don’t have physical locations in Delaware. Since their overhead costs are lower than banks with brick-and-mortar branches, online banks usually provide lower fees and higher interest rates. Chime, Axos Bank, Ally, and UK-based Barclays Bank are great online banking options in Delaware.
Bottom Line
Delaware has plenty of banks and other financial institutions to help you meet your financial goals. Before you choose one, consider your priorities and weigh the pros and cons of all your options.
If you like an in-person banking experience, a community bank might make sense. On the flip side, if you prefer online and mobile banking, an online bank is likely the way to go. Good luck with your search for the best bank in Delaware.
Frequently Asked Questions
How do Delaware banks keep my money safe?
Most banks insure your deposits up to 250,000 with the FDIC or Federal Deposit Insurance Corporation. Other services like fraud protection can also give you some peace of mind for your linked accounts.
What are the most popular banks in Delaware?
The banks with the most branches in Delaware include PNC Bank, M&T Bank, and WSFS Bank. If in-person banking is important to you, these banks should definitely be on your radar.
Can I open a bank account in Delaware as a non-resident?
Yes. In most cases, you can open an interest earning account or business savings account even if you don’t live in Delaware. You’ll likely need an Individual Taxpayer Identification Number (ITIN).
Chime is a financial technology company, not a bank. Banking services and debit card provided by The Bancorp Bank N.A. or Stride Bank, N.A.; Members FDIC. Credit Builder card issued by Stride Bank, N.A.
1. Out-of-network ATM withdrawal fees may apply with Chime except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.
2. Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. Chime generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.
5. Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each at least once every 34 days. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.
Mortgage rates may be holding, but for how much longer? With 2022 predicted to be a transition year to pre-pandemic markets, it’s more important than ever to stay updated. Let’s cover the possible future of rates and more in this week’s Mortgage Monday update.
Rates Update
For the week ending Thursday, January 27, Freddie Mac reported general stability in nationwide mortgage rate averages. This was a welcome sight considering the upward trend we’ve seen throughout January; low rates mean continued buying and refinancing opportunities, but most experts – Freddie Mac included – think this won’t last for long.
Our prediction: mortgage rates will continue to increase, but gradually. And because of this ongoing increase, we could see a slight surge in activity from buyers who want to lock in financing before rates are too high.
If you’ve been on the fence, know that the window for record-low mortgage rates is closing. Get started or find your Total Mortgage loan officer for more information.
Federal Reserve Prepares for Rate Increases in March
Last week, the Federal Reserve announced that they will likely conclude their tapering of asset purchases and increase interest rates to combat inflation – all in the coming months and as soon as the Fed’s next meeting in March. By doing so, we could see significant mortgage rate increases that will bring us closer to pre-pandemic levels than ever before. No specific action date has been set as of today (January 31), but the Fed’s strong hinting at future rate increases is more than worth keeping an eye on.
In the meantime, contact your Total Mortgage loan officer for more information. If you haven’t financed or refinanced a home yet but plan to do so, now is the time to act sooner than later.
Older, But Still Important News
The Federal Housing Finance Agency (FHFA) announced upcoming fee increases for certain Fannie Mae and Freddie Mac home loans. Effective April 1, 2022, upfront fees for these options will have the following increases:
Upfront fees for high-balance loans will increase between 0.25 and 0.75 percent.
Upfront costs for second home loans (non-primary residence) will increase between 1.125 and 3.875 percent.
These increases will ultimately depend on each product’s loan-to-value ratio. “High-balance” loans qualify as any that go above the conforming baseline limit introduced on January 1 – more information on that below.
At the start of January, the borrowing limits for Conventional and Federal Housing Administration (FHA) loan options saw significant increases to help buyers combat rising market prices. The conforming limit for single-unit home loans is now $647,200 – an 18.05 percent increase from last year’s limit. To learn more about these changes and your new borrowing options, get in touch with your Total Mortgage loan officer.
In Closing
For now, mortgage rates are stable but will almost certainly rise in the weeks and months to come. Opportunities to refinance are still available but have already seen a decline because of January’s mortgage rate increases; so if you’ve been considering home financing in any shape or form, get started now before the transition to pre-pandemic markets continues!
As always, we’ll continue to keep you updated every Monday. Enjoy the rest of your week!
