“In New York, it takes a long time to close because it’s an attorney state,” he said, referring to the intense regulatory backdrop to the state. Consequently, a process that elsewhere may take a month from signing to close typically takes two to three months in New York, he explained. “It’s a journey,” he said … [Read more…]
While the dream of homeownership might seem elusive on a tight budget, the availability of low income home loans offers a beacon of hope.
These specialized loans come in handy, particularly when the obstacles of saving for a down payment loom large—a common hurdle if you’re already strapped with rent payments.
So if you’re wondering how to bridge the financial gap between renting and owning, read on to explore the various low income home loan programs that could unlock the door to your future home.
Verify your home buying eligibility. Start here
In this article (Skip to…)
Can I buy a house with low income?
Yes, you can buy a house with a low income by qualifying for housing assistance programs and special mortgage loans. That’s because there is no minimum income requirement to buy a house.
However, your ability to do so will depend on a variety of factors specific to your financial situation. A mortgage lender will examine your credit score, debt-to-income ratio, and down payment to determine if you qualify.
Check your mortgage eligibility. Start here
What are low income home loans?
The path to homeownership can be fraught with challenges, particularly for those with limited financial resources. Enter low income home loans—a specialized type of mortgage designed to level the playing field for buyers facing financial barriers.
Low-income mortgage programs focus on addressing the common challenges that low-income earners encounter, such as managing debt, maintaining less-than-stellar credit scores, and struggling to save for a significant down payment.
Verify your home buying eligibility. Start here
Minimal down payment requirements: One of the most daunting aspects of buying a home is accumulating a large down payment. Low income home loans often require smaller down payments, making it easier for buyers to make the initial leap.
Lenient credit criteria: Having a perfect credit score is not always feasible, especially when living on a limited income. These loans often have more flexible credit requirements, allowing for a broader range of credit histories.
Reduced costs at closing: High closing costs can be another hurdle. Low income home loan programs may offer reduced or even waived closing costs in certain circumstances.
Competitive mortgage interest rates: High interest rates can quickly make a mortgage unaffordable. Low income home loans often feature competitive interest rates, reducing long-term costs.
Lower mortgage insurance premiums: Some programs offer reduced premiums for mortgage insurance, further lowering monthly payments.
Interestingly enough, some of these programs often have income caps, essentially barring applicants who have incomes that are considered too high. This ensures that the programs benefit those who need them most.
Requirements for low income home loans
Your ability to qualify for a loan is not solely based on your income. Lenders will assess your debt-to-income (DTI) ratio, a key metric that represents your monthly debts as a percentage of your monthly income. Generally, a DTI under 35% is viewed as favorable, making you a more appealing candidate for a mortgage.
If saving a down payment is your chief concern, don’t worry; there are plenty of options that require minimal, or sometimes zero, down payments. Despite common misconceptions, a 20% down payment is not a universal requirement.
Additional Assistance
Beyond the loan itself, there are various homebuyer assistance programs that can help with the down payment and closing costs. Some of these are structured as grants that don’t require repayment, making it easier to achieve the dream of owning a home.
Navigating the complexities of mortgages and home buying can be intimidating, but low income home loans and assistance programs offer a lifeline to those who dream of owning their own home. These financial products and services are tailored to alleviate the most common obstacles, offering a viable path to homeownership for those who may have thought it was out of reach.
Low income home loans
Low income home buyers have plenty of loan options and special assistance programs to help with a home purchase. Here’s what you can expect.
Check your mortgage eligibility. Start here
Loan Type
Credit Score
Down Payment
Unique Requirements
HomeReady
Generally 620
As low as 3%
Income limits based on area, homebuyer education course required
Home Possible
Generally 660
As low as 3%
Must be primary residence, income limits may apply, can include 1-4 unit properties
Must be a qualifying service member, veteran, or eligible spouse; primary residence only
USDA Loans
Usually 640
No down payment required
Must be in a qualifying rural area, income limits apply, primary residence only
HomeReady and Home Possible mortgages
Fannie Mae’s HomeReady program and Freddie Mac’s Home Possible loan are geared toward lower-income home buyers. You need only 3% down to qualify, and there is no minimum “required contribution” from the borrower. That means the money can come from a gift, grant, or loan from an acceptable source.
Even better, the home seller can pay closing costs worth up to 3% of the purchase price. Instead of negotiating a lower sales price, try asking the seller to cover your closing costs.
Private mortgage insurance (PMI) may also be discounted for these low income home loans. You’re likely to get a lower PMI rate than borrowers with standard conventional mortgages, which could save you a lot of money from month to month.
“This is the biggest benefit,” says Jon Meyer, The Mortgage Reports loan expert and licensed mortgage loan originator. “The PMI is offered at a lower rate than with a standard conventional loan.”
Finally, Home Possible and HomeReady might make special allowances for applicants with low incomes. For instance, HomeReady lets you add income from a renter on your mortgage application, as long as they’ve lived with you for at least a year prior. This can help boost your qualifying income and make it easier to get financing.
You might qualify for HomeReady or Home Possible if your household income is below local income limits and you have a credit score between 620 and 660.
FHA loans
FHA loans offer flexible approval requirements for repeat and first-time home buyers alike. This program, which the Federal Housing Administration backs, relaxes borrowers’ standards to get a mortgage. This can open up the home-buying process to more renters.
You might be able to get an FHA home loan with a debt-to-income ratio (DTI) up to 45% or a credit score as low as 580 while paying only 3.5% down
Select FHA lenders even allow credit scores as low as 500, provided the buyer can make a 10% down payment
Thanks to these perks and others, the FHA loan is one of the most popular low-down-payment mortgages on the market.
Check your FHA loan eligibility. Start here
VA loans
Veterans Affairs-backed VA loans provide military homebuyers with a number of advantages.
No down payment requirement. You can finance 100% of the purchase price. You can also refinance 100% of your home’s value using a VA loan
No mortgage insurance. But you will pay a one-time VA Funding Fee. You can wrap it into the loan amount.
No minimum credit score. Although lenders are allowed to add their own minimums. Those that do often require a FICO score of at least 580 to 620.
Sellers can pay up to 4% of the purchase price in closing costs. So if you find a motivated seller, you could potentially get into a home with nothing out of pocket
If you’re a veteran, active-duty service member, or surviving spouse, the VA mortgage program should be your first stop.
Check your VA loan eligibility. Start here
USDA loans
If you’re not buying in a large city, you may qualify for a USDA home loan. Officially called the Single-Family Housing Guaranteed Loan Program, the USDA loan was created to help moderate- and low-income borrowers buy homes in rural areas.
With a USDA loan, you can buy a home with no money down. The only catch is that you must buy in a USDA-approved rural area (though these are more widespread than you might think). You can find out if the property you’re buying is located in a USDA-eligible rural area and whether you meet local income limits using the USDA’s eligibility maps.
Your monthly payments might be cheaper, too. That’s because interest and mortgage insurance rates are typically lower for USDA loans than for FHA or conforming loans.
There are two types of USDA loans.
The Guaranteed Program is for buyers with incomes up to 115% of their Area Median Income (AMI)
The Direct Program is for those with incomes between 50% and 80% of the AMI
Standard USDA-guaranteed loans are available from many mainstream lenders. But the Direct program requires borrowers to work directly with the U.S. Department of Agriculture.
You typically need a credit score of 640 or higher to qualify.
Check your USDA loan eligibility. Start here
Low income home loan programs
Aside from mortgages that are designed to help people with low incomes buy a home, there are also a number of other programs that offer help to make homeownership more accessible.
Verify your home buying eligibility. Start here
Program
Description
Who Is Eligible
Hud Homes
Discounted homes sold by the Department of Housing and Urban Development.
Low- to moderate-income families, with preference for those who will make it their primary residence. May include single-family homes.
Housing Choice Voucher Program
Vouchers to subsidize the cost of housing in the private market.
Low-income families; must meet income and other criteria set by state and local housing programs.
Good Neighbor Next Door
Significant discounts on homes for teachers, firefighters, police officers, and EMTs.
Must commit to living in the property as a primary residence for at least 36 months. Includes single-family homes.
HFA Loans
Loans offered by state Housing Finance Agencies with reduced interest rates and down payment assistance.
First-time or repeat buyers with low to moderate incomes must meet income requirements. Often, it must be a primary residence.
Down Payment Assistance
Grants or loans to cover the down payment and sometimes closing costs.
Typically for low- to moderate-income families, though criteria can vary by program. Often for single-family homes.
State or Local Assistance
Various grants, loans, or tax credits are offered at the state or local level.
Eligibility varies but usually targets low- to moderate-income families. May include single-family homes.
Mortgage Credit Certificates
Tax credit to reduce federal income tax liability.
First-time homebuyers who meet income requirements; must be primary residence.
Manufactured and Mobile Homes
Loans or grants specifically for manufactured or mobile homes.
Low- to moderate-income families; must meet criteria set by specific housing programs. Usually must be primary residence.
Hud Homes
When the FHA forecloses on homes, those properties are often put up for sale as HUD Homes. And, you can generally purchase one at a steep discount. To qualify for a HUD Home, it will need to be your primary residence for at least 12 months. Additionally, you must not have purchased another HUD in the past 24 months.
Keep in mind that HUD Homes are sold as-is. Many are fixer-uppers. Moreover, HUD Homes are purchased through a bidding process. You’ll need a real estate agent or mortgage broker licensed with HUD to bid on an FHA property.
You can find HUD Homes on the official HUD website, hudhomestore.com. There, you’ll see all HUD real estate owned (REO) single-family properties in your area.
Good Neighbor Next Door
The Good Neighbor Next Door program offers unique benefits for nurses, first responders, and teachers. If you’re eligible, you can buy HUD foreclosure homes at a 50% discount. Use an FHA mortgage, and you only need $100 for a down payment.
You can find the homes on the U.S. Department of Housing and Urban Development website. You’ll also need a HUD-licensed real estate agent to put your offer in for you.
If your offer is accepted and you qualify for financing, you get the home. The 50% discount makes homeownership a lot more affordable. However, be aware that this discount is actually a second mortgage. But it has no interest and requires no payments. Live in the home for three years, and the second mortgage is forgiven entirely.
HFA home loans
Not to be confused with FHA loans, HFA loans are offered in partnership with state and local Housing Finance Authorities.
Many HFA loans are conventional mortgages backed by Fannie Mae and Freddie Mac. They may require as little as 3% down, and many HFA programs can be used with down payment assistance to reduce the upfront cost of home buying.
Borrowers who qualify for an HFA loan might also be in line for discounted mortgage rates and mortgage insurance premiums. To qualify, you’ll typically need a credit score of at least 620. But eligibility requirements vary by program.
Find and contact your state’s public housing finance agency or authority to learn more and see if you qualify. Also, be aware that this type of loan program will require additional approval steps that may make loan closing take longer.
Down payment assistance programs (DPAs)
Down payment assistance is exactly what it sounds like. It provides help with down payments on home purchases and often closing costs. Government agencies, nonprofits, and other sources commonly offer down payment and closing cost assistance. They are usually in the form of a grant or loan (though the loans may be forgiven if you stay in the house for five to ten years).
Most DPA programs target low-income home buyers and have guidelines that make qualifying easier. Some, however, provide assistance to people who buy in “underserved” or “redevelopment” areas, regardless of income. Many DPA programs offer assistance worth tens of thousands of dollars.
Talk to a lender about your options. Start here
Mortgage Credit Certificates (MCCs)
Mortgage credit certificates (MCCs) can stretch your home-buying power. If you meet income requirements, you could get a tax credit equal to some percentage of your mortgage interest. Lenders are allowed to add this credit to your qualifying income when underwriting your mortgage. This allows you to qualify for a higher mortgage amount than you otherwise could.
There are numerous states, counties, and cities that issue mortgage credit certificates, and their regulations and amounts vary greatly. Check with your local housing finance authority to find out whether MCCs are available where you live.
Housing Choice Voucher Program
The Housing Choice Voucher homeownership program (HCV) provides both rental and home buying assistance to eligible low-income households. Also known as Section 8, this program allows low-income home buyers to use housing vouchers to purchase their own homes.
Because local public housing agencies run these voucher programs, eligibility varies depending on location. Still, you’ll likely need to meet the following requirements:
Program-specific income and employment conditions
Being a first-time home buyer
Completing a pre-assistance homeownership and counseling program
Keep in mind that not all states offer voucher programs, and some programs have waiting lists. Also, these programs could limit how much you can sell the home for later on. To find out if your area offers a participating program, use the HUD locator web tool.
Manufactured and mobile homes
A manufactured home usually costs less than a traditional, site-built home. When placed on approved foundations and taxed as real estate, manufactured homes can be financed with mainstream mortgage programs.
Many programs require slightly higher down payments or more restrictive terms for manufactured homes. HomeReady, for example, increases the minimum down payment from 3% to 5% if you finance a manufactured home. Other programs require the home to be brand new.
Additionally, there are often requirements regarding the year the home was built and the property’s foundation. These guidelines will vary between lenders. Mobile homes that are not classified as real estate can be purchased with personal loans like the FHA’s Title 2 program. These are not mortgages because the homes are not considered real estate.
Check your mortgage options. Start here
Tips for buying a house with low income
Whether you’re buying a new home or your first home, these tips can help you achieve your homeownership goals.
Verify your home buying eligibility. Start here
Improve your credit history
Improving your FICO score is the best way to increase your chances of loan approval and qualify for lower mortgage rates.
The credit score needed to purchase a home varies depending on the type of loan you apply for. Conventional loans typically require a score of at least 620, while FHA loans often require at least 580.
Start by pulling free credit reports from annualcreditreport.com to determine your current score. Next, consider a few of the common methods for increasing credit scores. The amount of work that you’ll need to do will depend on your personal financial situation.
As an example, if your credit score is low because you’re using too much of your available credit, you may benefit from a debt consolidation loan to tame your high-interest account balances and improve your credit utilization.
On the other hand, if your credit history reveals missed payments, you’ll need to show at least 12 months of regular, on-time payments to improve your score.
Save for a down payment
The average first-time home buyer puts just 13% down on a new home. Yet, many loan programs require as little as 3% down or no down payment at all.
Remember that you still have to pay closing costs, which are typically around 2% to 5% of your mortgage loan amount. If you put less than 20% down, you’ll almost certainly have to pay for mortgage insurance.
In addition, you may need cash reserves in your savings account. This assures lenders that you can make your monthly mortgage payments should you suffer a financial setback. However, don’t let the down payment scare you away from homeownership. Many buyers qualify without even knowing it.
Pay down debts
Paying down debts will lower your debt-to-income ratio and improve your odds of mortgage approval. This is especially true for those with high-interest credit card debt.
You’ll likely qualify for lower rates when you have:
A low debt-to-income ratio (DTI)
High credit score
3% to 5% down payment
Stable income for the past two consecutive years
Use a first-time home buyer program
First-time buyer programs offer flexible guidelines for qualified buyers. Plus, these special programs exist in every state to help low-income households achieve homeownership.
Unlike traditional conventional loans, the government backs many first-time buyer mortgages. This allows mortgage lenders to offer loans with better rates and lower credit score requirements than they normally would be able to.
Verify your low income home loan eligibility. Start here
Model your budget
Owning a home requires more than qualifying for a loan and making monthly mortgage payments. Homeowners are responsible for a variety of ongoing costs, including:
Homeowners insurance
Property taxes
Mortgage insurance (in many cases)
Utility bills
Ongoing home maintenance
Home improvements
Appliance repair and replacement
Home buyers who have experience paying these ongoing costs of homeownership will be better prepared for the big day when they get the keys to their dream home.
Plus, sticking to this model budget in the months and years before purchasing a home and then saving the money you would spend on housing costs, such as insurance premiums and utilities, is a great way to build cash reserves and save for a down payment.
Use a co-signer
If you’re on the edge of qualifying for your own loan, using a co-signer may be an option.
Essentially, when you buy a house with a co-signer, you and your co-signer are both responsible for making the monthly payments. You’ll both also build and share in the home’s equity. Purchasing a home with a co-signer is quite common among unmarried couples, friends, and family members.
FAQ: Low income home loans
Verify your home buying eligibility. Start here
How do you buy a house with low income?
To buy a house with a low income, you have to know which mortgage program will accept your application. A few popular options include: FHA loans (allowing low income and as little as 3.5 percent down with a 580 credit score); USDA loans (for low-income buyers in rural and suburban areas); VA loans (a zero-down option for veterans and service members); and HomeReady or Home Possible (conforming loans for low-income buyers with just 3 percent down).
I make $25K a year; can I buy a house?
Mortgage experts recommend spending no more than 28 percent of your gross monthly income on a housing payment. So if you make $25K per year, you can likely afford around $580 per month for a house payment. Assuming a fixed interest rate of 6 percent and a 3 percent down payment, that might buy you a house worth about $100,000. But that’s only a rough estimate. Talk with a mortgage lender to get the exact numbers for your situation.
How do I qualify for a low-income mortgage?
Whether or not you qualify for a low income home loan depends on the program. For example, you might qualify for an FHA mortgage with just 3.5 percent down and a 580 credit score. Or, if your house is in a qualified area and you’re below local income caps, you might be able to get a zero-down USDA mortgage. Veterans can qualify for a low-income mortgage using a VA loan. Or, you can apply for the mortgage with a co-borrower and qualify based on combined incomes.
What programs are available for first-time home buyers?
Low income home loans can help first-time home buyers overcome hurdles like low credit or income, smaller down payments, or high levels of debt. A few good programs for first-time home buyers include Freddie Mac’s Home Possible mortgage, Fannie Mae’s HomeReady mortgage, the Conventional 97 mortgage, and government-backed loans like FHA, USDA, and VA. First-time home buyers can also apply for down payment assistance grants through their state or local housing department.
Can the government help me buy a house?
There are a number of ways the government can help you buy a house. Perhaps the most direct way to get help is by applying for down payment assistance. This is a grant or low-interest loan to help you make a down payment. You can also buy a house using a government-backed mortgage, like the FHA or USDA. With these programs, the government essentially insures the loan, so you can buy with a lower income, credit score, or down payment than you could otherwise.
How do I buy a house without proof of income?
You can no longer buy a house without proof of income. You have to prove you can pay the loan back somehow. But there are modern alternatives to stated-income loans. For instance, you can show “proof of income” through bank statements, assets, or retirement accounts instead of W2 tax forms (the traditional method). Many people who want to buy a house without proof of income these days find a bank statement loan to be a good option.
How do you rent to own?
A lease option or rent-to-own home isn’t exactly what it sounds like. You don’t simply rent until the house is paid off. Instead, you usually pay a higher rent for a set period of time. That excess rent then goes toward a down payment when you buy the house at a later date. Rent-to-own might help you buy a house if you don’t have a lot of cash on hand right now or if you need to improve your credit score before applying for a mortgage. However, rent-to-own requires seller cooperation and comes with unique risks.
Can I rent-to-own with no down payment?
Rent-to-own does not mean you can buy a house with no down payment. When you rent-to-own, you’re paying extra rent each month that will go toward your down payment later on. And usually, rent-to-own contracts include an option fee that’s a lot like a down payment. The option fee is smaller. Think 1 percent of the purchase price instead of 3 to 20 percent. And that fee eventually goes toward your purchase. But it’s still a few thousand dollars you must pay upfront to secure the right to buy the home later on.
Can I get a grant to buy a house?
Qualified buyers can get a grant to buy a house. These are called down payment assistance grants. They won’t pay for the whole house, but they can help cover your down payment to make a mortgage more affordable. You’re most likely to qualify for a grant to buy a house if you have a low to moderate income and live in a target area.
What type of low income home loan is the easiest to qualify for?
FHA loans are generally the easiest low income home loan to qualify for. The federal government insures these loans, which means lenders can relax their qualifying rules. It’s possible for a home buyer with a credit score of 500 to get approved for an FHA loan, but most FHA lenders look for scores of 580 or better. And a FICO score of 580 lets you make the FHA’s minimum down payment of 3.5 percent.
How can I get a home loan with low monthly payments?
To get the lowest possible monthly payment, choose a 30-year loan term, find a cheaper home, put more money down, and make sure you have excellent credit before applying for your mortgage. If you can afford a 20 percent down payment, you can avoid PMI premiums, which lower your monthly payments even more. Veterans can get VA loans that require no PMI, regardless of their down payment size.
What’s the lowest amount you can put on a house?
Some home buyers can put no money down with a VA or USDA loan. Conventional loans will require at least 3 percent down, and FHA loans will require at least 3.5 percent down. Down payment assistance grants and loans could help you cover some or all of this down payment.
How much house can I afford if I make $30K a year?
If you make $30,000 a year, you could probably spend about $110,000 on a house, assuming you get a 30-year fixed-rate mortgage at 6 percent. This is a rough estimate. Your unique financial situation may be different. Getting a pre-approval from a lender is the only way to find your actual price range.
What are today’s mortgage rates for low income home loans?
Many low-income mortgage programs have lower interest rates than “standard” mortgage loans. So you might get a great deal.
However, interest rates vary depending on the borrower, the loan program, and the lender.
To find out where you stand, you’ll need to compare loan offers from several lenders and then choose your best deal.
Time to make a move? Let us find the right mortgage for you
As 2023 ended, independent mortgage banks could be forgiven for saying “good riddance.” Last year accelerated a trend of skyrocketing mortgage rates, making it harder for families to buy a home and collapsing the market for refinances.
But there was also reason for optimism heading into 2024. A year-end bond rally brought mortgage rates down from 8% to 7%. And most IMBs have now downsized expenses to fit reduced loan and revenue volumes caused by the collapse of the refi market.
This recap of 2023 is just one of the subjects addressed in the “CHLA 2023 IMB Report,” just released by the Community Home Lenders of America (CHLA). As the only national association that exclusively represents IMBs, CHLA has for almost a decade released this report annually, with a primary goal of educating Congress and federal officials about the critical role IMBs play in ensuring access to mortgage credit for first-time, minority, and other underserved homebuyers.
This year’s report leads off with key takeaways for federal mortgage policy makers. Number one on the list is CHLA’s call for the Federal Reserve (and the GSEs) to buy mortgages, to reduce historically excessive spreads between mortgage rates and 10-year Treasuries — a key to homeownership affordability.
Another takeaway is CHLA’s request for action on our “Consumer Mortgage Bill of Rights.” Consumers should be protected from the abusive practice of trigger leads, where a consumer is bombarded with texts, phone calls, and emails just because they are initiating a mortgage application. Consumers should be served only by mortgage loan originators that are fully licensed and qualified. And quasi-monopolistic pricing should be scrutinized – like FICO credit scores, whose costs have increased by 500% in just 13 months.
Another key takeaway is just how important IMBs have become for the mortgage and home buying process since the 2008 housing crisis. In fact, IMBs now originate 81% of all new mortgages. And IMBs dominate the most critical programs for first-time, minority, and underserved borrowers – originating 90% of FHA and VA loans.
CHLA’s IMB Report cites a myriad of statistics and reports confirming that IMBs outperform banks in lending to minority and underserved borrowers. For example, a 2022 Urban Institute report concluded that “banks substantially underperformed nonbanks in serving borrowers and neighborhoods of color.“
Fortunately, when it comes to mortgage policies that help IMBs and the consumers they serve 2023 was a good year. The year started with an FHA premium cut, and with excessive VA loan fees expiring. The year ended with Fannie and Freddie starting to replace loan repurchase demands, which hurt both lenders and borrowers, with an indemnification option.
Going into 2024, our IMB Report lays out a detailed policy agenda that prioritizes access to mortgage credit to address significant affordability challenges for borrowers facing high mortgage rates.
The final objective of CHLA’s report is to rebut false, but persistent, myths about IMBs. Many people would be surprised to learn that mortgage borrowers have substantially more consumer protections when they get a mortgage loan through an IMB than when they get a mortgage loan through a bank.
Every IMB is subject to supervision from the Consumer Financial Protection Bureau (CFPB) – while 97% of banks are exempt from CFPB supervision. Every mortgage loan originator that works for an IMB is licensed (SAFE Act test, independent background check, and continuing education) – while bank loan originators are exempt from all these requirements.
The other pervasive – but completely false – myth is that IMBs are risky. This canard is pulled out whenever there is a crisis – like COVID or the Silicon Valley Bank demise last March. But these prophesies of doom are always proved wrong, as they ignore the realities of the IMB business model.
As this year’s IMB Report explains, IMBs overwhelmingly originate federal agency mortgage loans, then sell them to diversified investors through securitization or sell them to aggregators. As a result, even if there are mortgage loan losses or declining mortgage asset values, IMBs are very much insulated.
The simple truth is that if an IMB loan originator goes out of business – which some did last year – the only real impact is that the lender is no longer around to originate new loans. And, for IMB mortgage servicers, there is virtually no taxpayer or systemic risk, except for a handful of mega-servicers.
360training.com, Inc. (360), an online regulated training provider, acquired Mortgage Educators and Compliance (MEC), a mortgage lending training company, both companies announced this week.
Established in 1997, 360 specializes in comprehensive online training solutions for individuals and businesses across industries – including financial services, real estate, healthcare and environmental health and safety.
The acquisition represents 360’s commitment to enhancing the scope of education available to financial service professionals within real estate and mortgage, according to 360.
The financial terms of the transaction were not disclosed.
“This collaboration allows us to broaden our educational portfolio and provide an even more comprehensive suite of specialized training programs tailored to meet the evolving needs of financial services professionals,” said 360’s CEO, Tom Anderson, in a statement.
360 plans to expand its course catalog, incorporating a diverse range of mortgage lending training modules covering topics such as lending regulations, underwriting practices and loan origination.
“By combining expertise and resources, we aim to elevate our ability to equip individuals and businesses within the lending sector with specialized knowledge and tools, empowering them to navigate the intricate landscape of financial services with confidence and excellence,” said Samantha Montalbano, COO of 360training.
Approved by the Nationwide Multistate Licensing System (NMLS) since 2009, MEC specializes in online mortgage and financial services professional development.
MEC prides itself as a “one-stop online resource for all things mortgage training and education.”
The firm offers state-specific mortgage loan originator license courses that satisfy national and state-specific requirements as well as tailored courses for existings LOs entering a new state, according to the website.
It was late 2022 and Mike was feeling the pressure. Mortgage rates had climbed close to the 7% range and he was determined to remain competitive on pricing with rival loan officers in North Carolina.
But there was a problem: pricing exceptions, in which the lender takes the hit, were becoming scarce at his company. So he did what a lot of retail loan officers in the industry were doing — Mike would reclassify a self-generated lead as a corporate-generated lead, thus slashing his compensation from 125 basis points down to as low as 50 bps, giving him a low enough rate to win the client and eventually close the deal. His manager and company bosses knew that he and other LOs were lying about where the lead source came from, he said.
The lower comp rate stung. After Mike paid his loan officer assistant, he was clearing just 40 bps. Still, it was better than nothing. After all, tens of thousands of loan officers had already exited the industry because they couldn’t generate enough business.
“At this time, I didn’t really think of it as an ethical issue,” Mike, whose last name is being withheld for fear of retaliation, told HousingWire in an interview in late November. “But it started to wear on me to where it was like, okay, I’m getting price-shopped left and right. I’m feeling the pressure to cut my pay, because when I do it, and my agent partners, they see that I do that, and then they’ll tell people they refer to me. ‘Hey, he can dig deeper if he really has to.’”
Mike continued: “Well, doesn’t that smack of bad faith if I’m not offering them my best price from jump? I would get people saying to me, ‘I’m not going to go in with you. I don’t feel comfortable with you, because you tried to get me to go for a higher pricing first, and then only offered a better deal once I told you I had another offer.”
Mike said he left that lender in early 2023 as a result of the ‘bucket game’ and refuses to manipulate where lead sources are coming from at his current shop.
“It’s a race to the bottom,” he said of the practice.
Over the past two months, HousingWire has interviewed more than a dozen loan officers, mortgage executives, attorneys and also reviewed several companies’ loan officer contracts and text messages between recruiters and prospects to shed light on the growing issue of pricing bucket manipulation, which critics say distorts market pricing and could represent a violation of fair lending laws.
It’s unknown how many retail lenders are engaged in the practice of falsifying lead sources to lower loan officer pay, but industry practitioners say it’s widespread, and in most cases, reclassifying leads into different pricing buckets before they lock is not permitted by the Consumer Financial Protection Bureau’s rules under Regulation Z.
It’s also unclear whether the CFPB is policing the practice; HousingWire could find no record of enforcement actions taken, and the agency’s audits are not public record.
Evolution of the LO Comp rule
In the wake of the housing crash in 2008, the CFPB created new rules that reshaped how loan officers were compensated. The architects of the new rules wanted to prevent loan officers from taking advantage of borrowers, which was a common occurrence in the days leading up to the Great Recession.
Under an updated Regulation Z, lenders could no longer pay loan officers differently based on terms of loans other than the amount of credit extended. In theory, this means loan officers provide the same service and pricing on loans, reducing the risk of steering.
“LOs also can’t get paid on proxies, and they define proxies to be pretty straightforward: some factor that correlates to terms over a significant number of transactions, and the LOs have the ability to change that factor,” said Troy Garris, co-managing partner at Garris Horn LLP.
But the CFPB did allow loan officers to be compensated differently based on lead sources, which do not fall under the category of terms or proxies and are neither a right or an obligation.
For example, when an existing customer calls the lender’s call center for a new mortgage or refinance, and the lender redirects the loan to the LO, “the LO gets paid less because it was sourced from the company, and it is less work for the LO,” said Colgate Selden, a founding member of the CFPB and an attorney at SeldenLindeke LLP. When it’s an outside lead, “the LOs generated the lead themselves; they are spending time marketing to new borrowers, so they get paid more.”
Attorneys told HousingWire that in the current marketplace, violations of LO Comp rules can arise when lenders and LOs alter compensation by changing the lead source after the initial contact with the borrower to lower their rate and secure the deals. Regulation Z generally does not allow LOs to change which lead source was used.
But, in today’s competitive market, “I do think there’s an incentive, especially on the LO side, to find ways to do something different – and probably also for companies to decide to take more risk,” said Garris. “We believe this is happening because people are frequently asking if there’s a rule change.”
How the ‘bucket game’ works
LOs who spoke to HousingWire said managers often told them they wouldn’t get pricing exceptions on deals, so if they wanted to gain an edge it would have to come out of their pay. Three loan officers at three different retail lenders described it as a feature of their lender’s business model.
“You feel out a prospective client during the initial conversation, get a sense of whether they know how everything works, if they’ve spoken to another lender, if they’re going to shop you, right? And you quote them the best possible rate you could give them that day, knowing that you’ll put them in a bucket just before lock,” said one Wisconsin-based LO. “It doesn’t really matter what you quote them in the initial conversation as long as you can get it below competitors around lock time…either through a pricing exception or the bucket [manipulation].”
One top-producing California-based loan officer said she was excited when a top 35 mortgage lender tried to recruit her with the promise of multiple pricing buckets. Having the buckets would provide her flexibility that her current lender didn’t offer, she thought at the time.
“What the [recruiting] company told me explicitly was the loan originator, when they go to lock the loan, they check a box – is it self, branch or corp gen? And you only get to check one box, but it’s the loan officer’s choosing, not the branch,” she said. “So the loan originator is choosing, not the branch that says I’m going to give you a lead and this is the comp for it. Not the corporate advertisement or online group that says you’re getting this lead from us and here’s documentation that it occurred and now you’re going to get less comp. It’s the ultimate in legalized fraud. Because it’s not true.”
These days, many lenders have pricing buckets for corporate-generated leads, branch leads, builder leads, marketing service agreement (MSAs) leads, internet leads from aggregators and more. In and of itself, it’s legal, provided the lead really did come from the source and it’s diligently tracked by the lender.
Loan officers and mortgage executives interviewed by HousingWire said some lenders justify the practice of manipulating the buckets by telling LOs it’s legal and they’ve been audited by the CFPB, which has not found any wrongdoing. Several executives accused of the practice declined to comment on the record about pricing bucket manipulation, though they all said they track leads as required and are in full compliance with the law.
Selden, the former CFPB attorney, said that LOs are telling borrowers who complain about high mortgage rates that companies are “running a special offer.” Borrowers are directed to the company’s website, where, by indicating the LO name, they supposedly qualify for a special deal with a lower rate. In reality, at lenders without adequate controls to prevent lead source manipulation, this shifts the source from self-generated to an in-house lead.
LOs interviewed by HousingWire said that in some cases they would be able to change the lead referral source themselves, and in other cases they’d need a manager to alter the lead source in the loan origination system.
While many instances of price bucket manipulation were directed by managers, LOs would also self-select, said Mike.
“Most of the time you don’t have a loan estimate from a competitor, you’re just afraid that you’re going to lose it because you’re so embarrassed about the rate. And that’s why a lot of my comrades… were going to the corporate-generated lead bucket before they even confirmed that they had to. Partly because you wanted to lead with your best price.”
Steve vonBerg, an attorney at law firm Orrick in Washington, D.C., worked as a loan officer and underwriter for seven years. He emphasized the potential trouble for lenders and LOs inaccurately classifying the lead source.
“Often, a [CFPB] examiner would see if the lead channel changed later in the process. That could be legitimate: the borrower starts working with an LO, and it’s a self-sourced lead for that LO, but then decides to buy a home in a different state in the middle of the process; the second LO that it has to be transferred to has now an internal-company referral, and so the lead source would legitimately change,” vonBerg said. “But, if there isn’t a legitimate reason for the lead source changing midstream, that would be fairly easy for an examiner to identify.”
“It’s wrong”
Victor Ciardelli is frustrated by the bucket game. Deeply frustrated. The Guaranteed Rate founder and CEO says he is losing money and loan officers to rivals because of a business practice that he says is flagrantly illegal, pervasive, and does not appear to be slowing down anytime soon.
Some rival retail lenders, he says, are creating up to a dozen pricing buckets for their loan officers. The tiered nature of the bucket comp structure in many cases — self generated being the highest at up to 150 bps, 100 bps for another ‘bucket,’ 80 bps for another, down to 60 bps, 40 bps and sometimes all the way to zero — proves that it is a deliberate business strategy, he said.
“It wasn’t intended that the loan officer at the time that they’re talking to the consumer and quoting them a rate, that the loan officer can put the consumer in any bucket they want,” he said in an interview with HousingWire. “But that is exactly what’s happening. What’s exactly happening is the fact that there’s all these different pricing buckets for a lot of these different companies out there. And that the loan officer is allowed to go in and offer the consumer whatever rate based on what the loan officer wants.”
He argued that LOs are maximizing their personal income per borrower.
“It’s no different than what happened prior to Dodd-Frank, where it was the wild, wild West and people were playing games with customers on rates and fees,” said Ciardelli. “It’s the same thing today. There’s no difference except the fact that there’s a law in place that tells the mortgage company and the individual loan officer. And the loan officers know that they’re violating the law. It’s greed.”
Ciardelli says the rival CEOs — he declined to name individuals and said it’s an industry-wide problem — are establishing these buckets and know “full well that the bucket is put in place in order to lie about where the lead source is coming from.”
They have an obligation to know where the leads are coming from, that the loan officers are putting them in the appropriate bucket and that they are being tracked, he said.
“The loan officer may take a hit on that loan, and may make less on that loan, but the company themselves doesn’t take the hit, their margin stays the same. So the company CEO is happy, because they’re like, ‘I’m giving my loan officers all this flexibility to go out and be competitive and win deals. And they’re going to win more deals than anybody else out there, because they’re going to be able to slot the individual borrower into these different lead channels. So the individual CEO is making all the money. They’re the ones killing it.”
Ciardelli says he asked about the bucket pricing game and attorneys all told him no, it’s not legal, he said.
“I’ll play by whatever the law is…But when the rules are set up to be a certain way and people are not following the rules, then that’s a problem.”
Two other executives at large retail lenders also said they’ve lost loan officers to competitors who are sanctioning, if not directing, the manipulation of pricing buckets.
“The LOs get told this is legal, it’s just pricing flexibility so they can compete, and they have a compliance team that monitors it,” said one executive at a regional lender in the South. “Obviously that’s not true… What’s happening is they [the lenders] are pricing high and basically forcing the LOs to cut from say 150 [basis points down to 50 [basis points] on some loans because otherwise they just won’t do enough business. It’s a feature, not a bug, as they say. We asked our attorneys if we could do this and they told us absolutely not.”
The Mortgage Bankers Association (MBA) is aware of the issue. The organization asked an outside attorney from Orrick Herrington & Sutcliffe LLP to study the permissibility of the practice. In a letter sent to members in February 2023, Orrick advised MBA members that changing the lead source of a loan after beginning work on the application in order to make a competitive pricing concession “is not permissible.”
The letter has had little meaningful impact, sources told HousingWire. If anything, the practice has increased over the last year.
Fair lending concerns
Another repercussion in the market is that savvy borrowers gain access to lower rates when lead sources are manipulated. Less educated applicants could be quoted higher rates for the same loan, raising concerns about fair lending practices.
But this argument prompts a broader discussion on the efficacy of the LO comp rule, with divergent opinions on the matter.
“I used to be an MLO for seven years. I was in the industry in the 2000s until it melted down, and then I ended up going to law school because I had lost my job. I originated hundreds of loans myself, and personally, I think overall the rule is a good rule,” vonBerg said.
vonBerg elaborated: “Under the old regime, LOs were not incentivized to offer their consumers the best loan and best pricing for them. They were incentivized to give them the loans and pricing where they would make more money. Although it has some issues that should be corrected, I think the LO comp rule makes a lot of sense, in that it removes a gigantic conflict of interest.”
Not everyone shares this viewpoint.
“The LO comp rulewas designed to prevent steering to high-cost loans. And really, those things don’t exist anymore. We can’t put borrowers in homes that they can’t afford,” said Brian Levy, Of Counsel at Katten and Temple, LLP.
According to Levy, the rule creates “a tremendous amount of anxiety for the mortgage lending industry that doesn’t benefit consumers in any meaningful way.”
“The industry is frustrated. They’re unable to easily reduce prices. For example, in the past, before the rule was around, LOs were able to take less as a commission, just like any other salesperson – a car salesperson – to make the deal work. That’s illegal now for loan officers. The mortgage company can make that decision [of lowering their margins and reducing rate], but the loan officer cannot.”
Levy noted that some consider the LO comp rule to be a de facto fair lending rule.
“But we already have fair lending rules. The idea that if the loan officer is discounting their fees, they would end up discounting on a discriminatory basis would already be problematic under existing law, so you don’t need the LO comp rule to make that illegal. It’s already illegal to discriminate in pricing. That said, it’s not illegal for people to negotiate just like you can negotiate a car price.”
The CFPB has also taken issue with other forms of pricing concessions over the last year. In the summer of 2022, the agency reported that pricing exceptions, in which the lender offers a discount, had harmed protected classes, who were less likely to be offered discounts.
Where’s the CFPB?
Multiple sources said the CFPB audits about 20% of mortgage lenders per year, and because of the prevalence of this practice, would undoubtedly have come across lead bucket pricing manipulation by now.
Why there hasn’t been any enforcement to date or whether there’s a future enforcement action is just on the horizon is hard to know.
The CFPB, which is undertaking a broad review of the LO Comp rule, declined to make anyone available to speak on the issue.
“We cannot comment on any ongoing enforcement or supervision matters,” said Raul Cisneros, a Bureau spokesperson. “Those who witness potential industry misconduct should consider reporting it by going here. Additionally, we always welcome stakeholder feedback on any of our rules, including the loan officer compensation rules.”
In early 2023, the CFPB initiated a review of Regulation Z‘s mortgage loan originator rules, which include certain provisions regarding compensation. However, industry experts do not foresee substantial changes or anticipate the CFPB addressing the issue of lead source manipulation.
“In fact, there haven’t been a lot of public enforcement actions by the CFPB in several years [on the LO comp rule]. But having said that, we used to complain that the CFPB was participating in regulation by enforcement, and now they seem to be regulating by supervisory highlights,” Kris Kully, a law firm Mayer Brown partner, said.
The CFPB’s latest move regarding the LO Comp Rule was to issue a supervisory highlight in the summer stating that compensating an LO differently based on whether a loan product was originated in-house or brokered to an outside lender is prohibited.
Industry practitioners said the lack of enforcement from regulators has allowed the pricing bucket manipulation practice to flourish, creating an uneven playing field.
“You have all these companies that all of a sudden are starting to get a free pass,” Ciardelli said. “They’re like, ‘I’m not having any audits. I’m not having anybody come and say anything to me. I mean, nothing’s really happening. I’m pretty much unscathed here.’ And year after year goes by, there’s no auditors, there’s no issues. And then they start to move the needle on how they’re running their business and decisions they’re making. And they have less fear of the government, less fear of the existing rules that are in place, because the rules that were set up are not being enforced.”
Another mortgage executive speculated that the pricing bucket games will come to an end not because of CFPB enforcement, but because loan officers and executives will battle it out in court.
“I’ve got calls from loan officers who feel like they’ve been pushed into a lower commission scale than they thought they were going to get to start with,” he said. “I hired somebody from a well-known lender. When they hired her, they told her, ‘Hey, these are what the rates are and this is what the commission is.’ When she got over there, the rates they were quoting were the lead-based rates, not the hundred-based points they were promising her… I don’t think the enforcement will come from the CFPB. I think it’ll come from some type of lawsuit like that.”
The lasting impact of LOs cutting their comp to win clients and close deals won’t be clear until mortgage rates meaningfully fall for a sustained period.
But many fear that the genie can’t be put back in the bottle.
“We’ve done this so much that they’ve built it into their pricing,” said Mike, the loan officer in North Carolina. “They are pricing things higher, assuming that we’re going to cut our pay, and protect their margins. So to me that’s the bigger issue for us selfishly, is we start doing that, and it’s going to become the norm. The pricing system and everything is going to assume that we’ll do that.”
He mused that RESPA guidelines prohibit an LO from buying a Realtor partner a Big Mac after a closing but lying about a lead source is not policed.
“Personally being an LO, the biggest issue to me is, they’re screwing with us and just… That’s how all these shops are finding a lifeline to keep their doors open. ‘We don’t have to pay them 100 bps, we can just pay them 50, and they’ll take it on the chin.’ And it’s like, yeah, we’ll take it on the chin. Many of us are using the heck out of our credit cards right now to survive. It’s not cool.”
Ameer Katifi wasn’t content to be a top loan officer for an established mortgage provider.
He wanted to strike out on his own, to start a new company and “build a legacy for myself.”
And he wanted his business to be like a family, where everyone gets treated how they want to be treated, with state-of-the-art technology in a supportive environment.
So in January, the 31-year-old Irvine native launched Trusted Mortgage Capital, a mortgage brokerage and loan origination business in Laguna Hills.
Depending on how you look at it, he either had lousy timing or is getting in on the ground floor of the next boom.
On the one hand, soaring interest rates throttled the mortgage business, causing home loan volume to plunge 71% in the first half of 2023 from the 2021 peak. But on the other hand, a wave of mortgage layoffs created a large pool of unemployed talent for Trusted Mortgage to tap.
“It’s all about the mindset you have going on. Even though the business went down by 70%, there’s still a lot of business out there,” said Katifi, Trusted Mortgage’s chief executive.
“In this type of environment, it’s really you building out your engine and sharpening your skill to be the best you’ve ever been,” he said. “And the best time to grow is when it’s slow. Once it’s busy, once the rates are low again, then it will be really hard to capture good talent.”
Trusted Mortgage Capital already scored big in one arena. Even though it’s just a year old, it ranked No. 1 in the small business category of the Orange County Register’s Top Workplaces program.
The selection is based on employee survey responses rating the company.
In one response, an anonymous employee said he or she loves the job because “of the potential to grow.”
The 40-employee company already is licensed to work in 17 states. As of October, license applications were pending in five others.
The firm is both a lender — originating its own home loans to borrowers — and a mortgage broker, acting like a matchmaker connecting customers to other lenders.
During the first 10 months of the year, Trusted Mortgage already had issued 81 loans totaling almost $30 million. That doesn’t include income from the mortgage brokerage side of the business.
Katifi said his company was on track to become profitable by the end of 2023.
The firm has just seven salaried employees and at least 19 loan officers who work on commission. Of those, three to five earn both a salary and commission.
The remaining 14 loan officers are independent contractors, depending solely on commissions. And the company is looking to hire more.
Half of the company’s 6,100-square-foot office is for future growth. The other half, with about 30 cubicles, is festooned with motivational posters, with slogans like, “The only time SUCCESS comes before WORK is in the dictionary.”
Liz Meza, Trusted Mortgage’s compliance manager, said loan officers can earn $3,500 to $50,000 a month.
What makes Trusted Mortgage unique, however, is the free package of services the company provides its loan officers, including marketing, loan processing, technology and lead generation.
“A lot of mortgage lenders and a lot of mortgage brokers have the independent model, which means you have to provide your own marketing, pay for your own processing, pay for everything yourself,” Katifi said. “The difference about us is we provide all that for our branch managers (and) our loan officers … so they don’t need any money out of pocket to be able to work as a mortgage loan originator.”
Katifi said Trusted Mortgage is big on marketing and big on training. New employees start out as junior loan officers, working under the tutelage of a senior loan officer for six months.
They get a week of training at the United Wholesale Mortgage’s headquarters in Pontiac, Mich., and the company gets them licensed.
There are weekly sales and training meetings as well.
“I’m constantly adapting to changes in the industry. I’m constantly updating our approach on how they should approach the clients,” Katifi said. “And just creating a fun environment where people want to come to the office where they don’t watch the clock.”
The company provides lunch every Friday, stages potlucks and celebrates all the major holidays. There are awards ceremonies recognizing the top producers.
The big question is how long can a new company hang on during one of the slowest housing markets on record.
Katifi feels confident that loan volume will pick up as soon as mortgage rates start to subside. A lot of borrowers have high-interest home equity loans. Once rates moderate, they will want to refinance, combining those second mortgages with their firsts.
“We’re not going anywhere,” Katifi said. “Diamonds form under pressure. We’ve got the marketing down. We’ve got the operations down. … There’s still people (who are) going to be buying and selling homes, having to move and needing to get second mortgages for some unexpected expenses.
“So we are here for a long time.”
Trusted Mortgage Capital
Founded: 2022
Headquarters: Laguna Hills
Industry: credit and finance
OC employees: 40
Website: trustedmortgagecapital.com/
Quote: “In this type of environment, it’s really you building out your engine and sharpening your skill to be the best you’ve ever been.” — Ameer Katifi, CEO of Trusted Mortgage Capital
Time to improve one’s business Carter said owners should take this down time to examine their operations – “digging into those operations and really creating a better process for your people,” she said “Leaning into that to help your loan officers. It’s about creating better processes for everyone who’s out there on the streets originating, … [Read more…]
The nation’s largest home builder, D.R. Horton, also has its own affiliated mortgage lender known as “DHI Mortgage.”
Recently, new home sales have surged in popularity due to the mortgage rate lock-in effect.
Essentially, existing homeowners aren’t selling their properties because they’ve got ultra-low fixed interest rates on their home loans.
At the same time, mortgage rates have surged higher, resulting in big financing incentives from home builders to move their newly-built home inventory.
Let’s take a hard look at what DHI Mortgage has to offer and whether an in-house lender is the way to go.
DHI Mortgage Fast Facts
Full service mortgage lender offering home purchase loans and refis
Founded in 1997, headquartered in Austin, Texas
Parent company D.R. Horton is the nation’s largest home builder
Publicly traded company (NYSE: DHI)
Also operate DHI Title and D.R. Horton Home Insurance Agency
Aim to be a one-stop shop for newly-built home buyers
Funded roughly $20 billion in home loans during 2022
Most active in the states of Texas, Florida, and California
Licensed to do business in 34 states
DHI Mortgage is a full-service mortgage lender owned by parent company D.R. Horton.
They were founded in 1997 and are headquartered in Austin, Texas.
D.R. Horton is the largest home builder in the United States, slightly bigger than competitor Lennar, which also has a captive mortgage company called Lennar Mortgage.
The home builder got its start back in 1978 when Don R. Horton built his first home in Fort Worth, Texas.
Since then, the company has grown into a near-$35 billion dollar company that is publicly-traded on the New York Stock Exchange (NYSE: DHI).
The company’s shares are owned by legendary investor Warren Buffett, who sees strength in home building given the lack of existing home supply.
Aside from operating their in-house mortgage lender DHI Mortgage, they also run an affiliated title company and insurance agency.
This means home shoppers can use DHI Title for their title insurance needs and D.R. Horton Home Insurance Agency for their homeowners insurance, assuming it’s competitively priced.
The goal is to create a one-stop shopping experience for home buyers and streamline what is often a daunting process.
Last year, they funded about $20 billion in homes, with nearly 30% of overall volume coming their home state of Texas, per HMDA data.
They are also quite active in Florida, California, Arizona, Georgia, Nevada, and The Carolinas.
How to Apply with DHI Mortgage
While you can get pre-qualified for a mortgage online via the DHI Mortgage website, they say to get in touch with your mortgage loan originator to submit a full loan application.
It’s unclear if this means you can still apply electronically after speaking with a loan officer, or if you have to apply in-person.
They do have branch locations and sales offices at their home builder developments, which could facilitate this process.
Unfortunately, their website is a bit limited when it comes to information, so you’ll probably need to speak with a human before proceeding to an application.
Their online system, powered by fintech company Blend, does seem to allow for online refinance applications along with the pre-qualifications.
If you visit their website, it’s also possible to search for a local loan originator by state, branch, or by name.
They say they have digital options for buyers, but don’t make clear what those are. My assumption is they do offer some sort of online loan submission process.
And likely the ability to complete tasks electronically, whether it’s satisfying loan conditions or checking loan status.
However, I would like to see more information in this department.
Loan Programs Offered by DHI Mortgage
Home purchase loans
Refinance loans
Conventional loans including Fannie/Freddie 3% down
FHA loans
VA loans
USDA loans
Fixed-rate and adjustable-rate options
Temporary buydowns
Affordable housing loans
DHI Mortgage offers the most popular loan options out there, whether it’s 3% down conforming loan backed by Fannie Mae or Freddie Mac or an FHA loan.
You can get both a home purchase loan or a mortgage refinance, though I doubt many existing homeowners would use them for a refinance unless mortgage rates were ultra-competitive.
The full menu of government-backed mortgages is offered, including FHA loans, VA loans, and USDA loans.
And both fixed-rate and adjustable-rate options are available, including the 30-year fixed, 15-year fixed, 7/1 ARM, and 5/1 ARM.
They also appear to offer jumbo loans that exceed the conforming loan limit in pricier regions of the country.
However, they don’t appear to offer any second mortgages, such as HELOCs or home equity loans.
But temporary buydowns, such as 2-1 buydown, are offered, as well as other affordable housing loans if buying in specific locations or with low-to-moderate income.
DHI Mortgage Rates
Speaking of mortgage rates, DHI Mortgage doesn’t have a page on their website dedicated to rates or lender fees for that matter.
So you’ll be a little bit in the dark there. Be sure to ask your loan originator what fees they charge, such as loan origination fees, application fees, processing and underwriting, etc.
The good news is I did see special interest rate offers on the D.R. Horton website, which is typical of home builders.
They often offer special incentives to their home buyers who also use their affiliated lender.
In this case, I saw a 5.50% fixed rate FHA loan offer, which was also available on VA and USDA loans.
And a 5.75% fixed rate conventional loan offer that only required a five percent down payment.
So chances are they can offer some pretty competitive rates if you buy a D.R. Horton property and use DHI Mortgage.
DHI Mortgage Home Buyers Club
Those with imperfect credit can take advantage of the “DHI Mortgage Home Buyers Club.”
It pairs in-house credit consultants with prospective home buyers to prepare them for homeownership.
While it doesn’t guarantee loan approval or improved credit scores, they will work with you to boost your overall credit profile.
They’ll also ask you to complete a HUD-approved homebuyer education course while your credit consultant comes up with a credit profile improvement strategy.
This might entail removing inaccurate items on your credit report, paying down high balances, and getting current on any past due accounts.
The goal is to clean up your credit history and improve chances of mortgage approval, and potentially snag a lower mortgage rate depending on credit score improvement.
DHI Mortgage Reviews
As always, I try to track down customer reviews online to see what past customers think of the lender in question.
And they don’t appear to be great, based on what I could find. Their headquarters in Austin has a 2.6/5 rating from about 40 Google reviews.
Over at WalletHub, it’s a similar 2.6/5 rating from just over 30 reviews, with some customers citing poor communication and delays.
You can also find reviews for individual loan officers if you go on Zillow and search by name or location.
DHI Mortgage currently has a ‘B+’ rating with the Better Business Bureau (BBB), which isn’t fantastic and likely due to customer complaints.
They also have a 1.14/5 rating on the BBB website based on customer reviews.
To sum things up, their website could do with improving and their mixed reviews raise some questions about customer service.
On the bright side, they offer a good amount of loan programs and might have financing specials that beat out the competition.
Ultimately, it would probably come down to price if deciding between them and a different lender.
Though I assume most DHI Mortgage customers are also likely D.R. Horton home buyers, so there will likely be a big push to stay in-house.
Just be sure to speak with other mortgage companies, independent mortgage brokers, and so on to weigh your options.
Convenience is great, but not at the price of higher closing costs and/or interest rates. So definitely shop around.
Lastly, note that DHI Mortgage sells most of the loans it originates, meaning it’s likely your loan will be sold and transferred to a new loan servicer shortly after closing.
DHI Mortgage Pros and Cons
The Good
Special financing incentives to D.R. Horton home buyers
Might be a quicker/easier home buying process using affiliated companies
Branch locations allow borrowers to work with in-person if preferred
DHI Mortgage Home Buyers Club helps credit challenged buyers
Free mortgage calculator and homebuyer education resources online
Lots of loan programs to choose from including fixed-rate loans and ARMs
The Perhaps Not
Only licensed in 34 states
No mention of mortgage rates or lender fees online
Clunky website with limited information
Don’t seem to able to apply for a home loan electronically
Do not offer second mortgages or home equity products
Finding out what really matters Gasper has long since experienced a reversal of fortune, now working at Madison Mortgage as a VP and mortgage loan originator. Earlier this year, he joined officials from United Wholesale Mortgage on the New York Stock Exchange trading floor to celebrate National Mortgage Brokers Day. He was invited to participate … [Read more…]
Many predicted that COVID-19 would cause real estate markets to crash. But now, after one full year of economic uncertainty, U.S. housing markets seem hotter than ever. What gives? On today’s State of the Market podcast, Aaron and Matt Amuchastegui discuss what’s driving rapidly rising property values. Tune in and get their thoughts on whether or not we’re in a bubble. Plus, you’ll hear about the insane cost of lumber right now, the political implications of population shifts, and more.
Listen to today’s show and learn:
The insane cost of lumber right now [2:29]
Americans willing to pay more for existing homes than new builds [3:50]
Manhattanites opt for Brooklyn over Florida [6:54]
The political implications of population shifts [8:51]
Forbearance rates continue to drop [12:15]
Businesses report major labor shortages [15:20]
A potential fix for the unemployment problem [20:20]
Blockchain’s place in the real estate industry [23:22]
Matt’s advice for today’s homebuyers [25:36]
Final thoughts [27:10]
Matt Amuchastegui
Matt Amuchastegui has had the pleasure of working in many different industries and positions throughout his career. He has learned the trades of residential home building carpentry, construction management, commercialized construction such as building highway bridges and steel buildings, has worked in inside sales, worked as a purchasing manager, mortgage loan originator, held his real estate license in both California and Arizona, and finally he is currently working as a Real Estate Broker in the great state of Oregon.
Matt has been able to apply many skills from all of his past jobs, as well as his education from the University of Oregon to what he is currently doing. Matt prides himself in customer service and strives to make sure everyone that he works with, upon the completion of their transaction, feels as though he provided them with the utmost care, attention and customer service. It is also imperative that when he was involved with management and scheduling, that he built solid relationships with the employees and other contractors to help keep them on schedule and within their budget. Business, at any level, in Matt’s opinion is about respect and relationships.
Matt has enjoyed helping people find their dream homes and has also really enjoyed the business side of negotiating sales contracts. Learning to value homes and determine how much they were currently worth and would possibly be worth in the future was also something that served to be an asset for him. Having the opportunity to work in all fields related to home acquisition, sales and management has helped Matt to be versatile in his ability to take on any task!
Related Links and Resources:
Thank You Rockstars! It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email. -Aaron Amuchastegui