mortgage refinance

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Deciding between a home equity loan vs. refinance? Both options give homeowners the chance to access their home’s valuable equity with the flexibility to use that cash however they please. 

Additionally, refinancing allows homeowners to lock in a lower interest rate or change the length of their loan term.

If you’re trying to figure out whether a refinance or a home equity loan is right for you, consider your needs as well as the advantages and risks of both loan options.

What Is a Home Equity Loan?

As a homeowner, you have several options for taking advantage of the built-up equity in your home — one of those being a home equity loan. A home equity loan is a type of loan that allows homeowners to borrow against the equity in their homes. 

Lenders typically pay out a home equity loan in a lump sum payment. The biggest advantage of a home equity loan is its flexibility. The funds can be spent on anything from medical bills, home renovations, and even travel. 

Since home equity loans are secured by your home, lenders may give a lower interest rate than they would for personal loans or credit cards. However, defaulting on your loan puts you at risk of foreclosure.  

How Does a Home Equity Loan Work?

Lender requirements vary, but you generally need:

  • At least 15% to 20% equity in your home
  • Good credit
  • Low debt-to-income ratio
  • Steady source of income

Once you’re approved for a home equity loan, your lender will give you documents stating the amount you can borrow (up to 85% of the home’s value), the interest rate, and associated fees. 

These fees vary from lender to lender, so it’s a good idea to shop around and compare. 

After the funds are disbursed, you will need to repay the loan’s principal amount and fixed-rate interest in fixed monthly payments. Depending on the lender, repayment on your home equity loan can be as long as 30 years. 

While a shorter term allows you to repay the loan faster, it means higher monthly payments compared to a 30-year term. 

What Does It Mean to Refinance?

If you refinance a mortgage, you’re replacing your current loan with a new one, usually with a new principal amount and a different interest rate. There are several reasons why a homeowner would choose to refinance their mortgage, such as lowering their interest rate, shortening the term of the loan, or taking out equity in their home in the form of cash. 

Here are two common types of refinancing:

Rate-and-term refinance: This is a type of mortgage refinance that allows homeowners to change the term and interest rate of their current mortgage by replacing it with a new loan. Homeowners generally choose this option if they are looking to lower their interest rate, reduce their monthly payments, change the loan type or change the term length.  

Cash-out refinance: With a cash-out refinance, homeowners take out a new mortgage on their home, up to 80% of the value of your home, for more than what is owed. This difference is paid out at closing and can be used on almost anything. However, this new loan is larger and comes with its own terms. 

How Does Refinancing Work?

Refinancing a mortgage is similar to the process you went through with your original mortgage. You must apply and qualify for the loan before approval. The lender will assess your financial situation and determine your interest rate based on your risk level. 

It’s also important to keep an eye on closing costs, which can range from 2% to 5% of the loan amount.

Let’s say you’re looking to take out some equity in your home and decide to use a cash-out refinance. You purchased a $300,000 house many years ago and took out a mortgage for $200,000. Your current balance with your lender is $100,000.

If the property value remained the same, you would have at least $200,000 in equity. 

You could potentially be approved for $225,000 and use $100,000 to pay the remaining principal. This leaves $125,000 in cash to use as you please. 

Comparing Home Equity Loan vs. Refinance

If you’re comparing a home equity loan vs. a cash-out refinance, both options allow homeowners to leverage their home equity to borrow more money. 

A cash-out refinance replaces an existing loan with a new loan, meaning you only have one loan and one payment to worry about. A home equity loan, also known as a second mortgage, is another loan that must be paid alongside your original mortgage. 

Cash-out refinances are also considered first-lien loans, and typically come with lower interest rates. First-lien debt holders are repaid before all other debt holders in the event of a foreclosure or bankruptcy. A higher interest rate on a home equity loan may be offset by lower closing costs.

If you want to take out some equity but you’re stuck deciding between a home equity loan vs. refinance, a cash-out refinance is an excellent option if you can lock in a lower interest rate. A home equity loan may be worth considering if you want to take out a large portion of equity or if you can’t find a lower interest rate when refinancing. 

Home Equity Loan vs. Refinance? Ask an Expert at Total Mortgage

When deciding between a home equity loan vs. refinance, both options give homeowners quick access to cash by leveraging their home’s equity. Yet, one option may make more sense than the other depending on your needs and financial situation. 

Are you looking to refinance or take out a home equity loan? Consider Total Mortgage for a quick, personalized mortgage experience. We work with borrowers across the country. 

Find a Total Mortgage expert near you.

Source: totalmortgage.com

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A less-than-stellar credit score doesn’t automatically disqualify you from refinancing your mortgage. Fortunately, there are several options to refinance your mortgage with a bad credit score. 

Here’s what you need to know about lender credit standards and the steps you can take to refinance with a lower credit score.

What Credit Score Is Needed to Refinance?

Every lender has a different set of criteria for credit scores and refinancing. To refinance a conventional mortgage, most lenders look for a credit score of at least 620. 

Some government programs may require a credit score of at least 580 and some may have no minimum at all. 

For example, most Federal Housing Administration (FHA) loans require a credit score of at least 580. The Department of Veterans Affairs (VA) doesn’t set a minimum credit score.

As a general rule of thumb, the higher your credit score, the more likely you are to qualify for a mortgage refinance. 

However, your credit score isn’t the only determining factor. If you have a higher debt-to-income (DTI) ratio and loan-to-value (LTV) ratio and minimal cash on hand, the credit score requirement may increase. 

How to Refinance a Mortgage with a Bad Credit Score

It may be possible to refinance your mortgage with a bad credit score, without needing to improve your credit profile first. You should explore all of your refinancing options to find the one that makes the most sense for your situation. 

1. Chat with Your Existing Mortgage Lender

Talk with your lender about your refinance options with a bad credit score. If you’ve made timely mortgage payments, your lender may be able to work with you even with a bad credit score.

Your lender could offer you a portfolio refinance, which is originated and kept by the lender rather than being sold on the secondary market. Because of this, portfolio refinance loans oftentimes have relaxed qualification standards. 

It’s still a good idea to speak with multiple lenders, apply and compare quotes, even if your current mortgage lender says you’re eligible to refinance. 

2. Use a Cosigner

Another option is to use a friend or family member as a cosigner on your mortgage refinance loan. Your cosigner must be at least 18 years old, have a valid Social Security number, and meet all minimum requirements for the loan.

Keep in mind that the cosigner is taking a major risk and is legally responsible for your debt if you stop making payments. This could also hurt your cosigner’s credit score. 

3. FHA Refinance Programs

The FHA offers several refinance options for homeowners with bad credit. An FHA loan is a mortgage that is backed by the U.S. government and issued by a bank or other approved lender. 

Here are some options:

  • FHA rate-and-term refinance: The FHA rate-and-term refinance requires a credit check and a minimum credit score between 500 and 580, depending on your LTV ratio. You also need to prove that you’ve made 12 consecutive monthly mortgage payments on time.
  • FHA streamline refinance: An FHA streamline refinance has two options: credit qualifying and non-credit qualifying. A non-credit qualifying streamline refinance doesn’t have a minimum credit score but you may pay a higher interest rate. With a credit qualifying streamline refinance, the lender will run a credit check and verify your DTI ratio.
  • FHA cash-out refinance: You can borrow up to 80% of your home’s value with a credit score as low as 500, but some lenders may require a higher score.
  • FHA 203(k) refinance: This is a type of refinancing that enables homeowners to combine renovation expenses into the total amount of the new mortgage. The FHA accepts credit scores as low as 580, although some lenders might require a score of 620 or higher to qualify for a 203(k) refinance loan.

4. VA Refinance

Servicemembers, veterans, or qualifying spouses may qualify for a VA loan backed by the federal government and issued by private lenders. The VA has no minimum credit score requirement, but the lender may require a credit score of 620 or higher. 

There are two VA refinance options:

  • VA streamline refinance: If you’re eligible, you can refinance with bad credit with an Interest Rate Reduction Refinance Loan (IRRRL). The IRRRL must be used to refinance your existing VA-backed home loan and while the VA doesn’t require a new credit check, the lender may be different.
  • VA cash-out refinance: You can use the VA cash-out refinance to tap your home’s equity, but you must meet the VA’s — and the lender’s — credit and income requirements.

5.  USDA Streamlined Assist Refinance

The USDA’s Streamlined Assist program gives current USDA direct and guaranteed home loan borrowers with low or no equity the ability to refinance for a lower interest rate and lower monthly payments. No credit review is required, but you must have made at least 12 consecutive mortgage payments and meet income eligibility standards. 

How to Improve Your Credit Score to Refinance a Mortgage

There are several things you can do to improve your credit score before refinancing your mortgage. 

Raising your credit score by just 20 points can potentially lower your monthly mortgage payments and save you thousands on interest. 

Here are a few options:

  • Check your credit report: You can check your credit report for free once per year with the three major credit bureaus — Experian, Equifax, and TransUnion — to see what’s keeping your credit score so low. You can also check for errors, unauthorized charges, and fraud, which could be lowering your credit score. If you find any issues, you can dispute them with the credit bureau.
  • Pay down debt: Your DTI is another factor that lenders will consider. Try to keep your DTI under 43%.
  • Make payments on time: Your credit score is heavily influenced by your payment history. A single missed payment can significantly lower your credit score. Payment history accounts for 35% of your FICO credit score.
  • Save money: Build your savings to make a larger down payment or keep the extra cash reserves to potentially lower your level of risk to lenders.  

Explore Your Refinance Options with Total Mortgage

Even if you have a low credit score, this doesn’t mean that you are disqualified from refinancing your loan. Consult with a Total Mortgage advisor to explore all your mortgage refinance options. 

Find an expert near you or apply for a refinance loan online!

Source: totalmortgage.com

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A number of important mortgage rates rose over the last seven days. The average 15-year fixed and 30-year fixed mortgage rates both grew fairly quickly. We also saw an increase in the average rate of 5/1 adjustable-rate mortgages.

On the heels of cooling inflation, the Federal Reserve announced on May 3 a 25-basis-point increase to its benchmark short-term interest rate. The Fed’s May meeting marks what could be the last increase we see for the time being. The central bank has signaled that it may soon be time to pause on rate hikes. Depending on incoming inflation data, the next step would be to hold rates where they are for an extended period of time in order to bring inflation down to its 2% target.

As long as inflation continues to trend downward, experts say a pause in rate hikes from the Fed could bring some stability to today’s volatile mortgage rate market.

Mortgages hit a 20-year high in late 2022, but now the macroeconomic environment is changing again. Rates dipped significantly in January before climbing back up in February. Throughout March and April, rates fluctuated in the 6% range.

“Ultimately, more certainty about the Fed’s actions will help to smooth out some of the volatility we have seen with mortgage rates,” says Odeta Kushi, deputy chief economist at First American Financial Corporation.

While rates don’t directly track changes to the federal funds rate, they do respond to inflation. Overall, inflation remains high but has been slowly but consistently falling every month since it peaked in June 2022.

After raising rates dramatically in 2022, the Fed opted for smaller, 25-basis-point rate increases in its first three meetings of 2023. The decision to hike by 0.25% on May 3 suggests that inflation is cooling and the central bank may soon be able to pause its rate hiking regime. While the central bank is unlikely to cut rates any time soon, positive signaling from the Fed and cooling inflation may ease some of the upward pressure on mortgage rates.

“If inflation keeps coming down, that will be the biggest driver, outside of the Fed, that’s really going to help bring rates down to a better level and improve affordability for home buyers,” says Scott Haymore, head of capital markets and mortgage pricing at TD Bank.

However, mortgage rates remain well above where they were a year ago. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices in some regions to ease, but that’s only part of the home affordability equation.

“Even though home prices in many parts of the country have fallen since the start of the year, high rates make buying prohibitively expensive for many,” says Jacob Channel, senior economist at loan marketplace LendingTree. It’s still difficult for many buyers, particularly those looking for their first home, to afford a monthly payment.

What does this mean for homebuyers this year? Mortgage rates are likely to decrease slightly in 2023, although they’re highly unlikely to return to the rock-bottom levels of 2020 and 2021. However, rate volatility may continue for some time. “Expect mortgage rates to yo-yo up and down in the first half of the year, at least until there is a consensus about when the Fed will conclude raising interest rates,” says Greg McBride, CFA and chief financial analyst at Bankrate. (Like CNET Money, Bankrate is owned by Red Ventures.) McBride expects rates to fall more consistently as the year progresses. “Thirty-year fixed mortgage rates will end the year near 5.25%,” he predicts.

Rather than worrying about market mortgage rates, homebuyers should focus on what they can control: getting the best rate they can for their situation.

“The most important thing is that they find the right home. The second most important thing is obviously to find the most efficient way to finance it,” says Melissa Cohn, regional vice president of William Raveis Mortgage.

Take steps to improve your credit score and save for a down payment to increase your odds of qualifying for the lowest rate available. Also, be sure to compare the rates and fees from multiple lenders to get the best deal. Looking at the annual percentage rate, or APR, will show you the total cost of borrowing and help you compare apples to apples.

30-year fixed-rate mortgages

The 30-year fixed-mortgage rate average is 6.99%, which is a growth of 15 basis points from one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one — but usually a higher interest rate. Although you’ll pay more interest over time — you’re paying off your loan over a longer timeframe — if you’re looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 6.38%, which is an increase of 25 basis points from the same time last week. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a bigger monthly payment. But a 15-year loan will usually be the better deal, if you can afford the monthly payments. These include usually being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 5.85%, an addition of 6 basis points from the same time last week. For the first five years, you’ll usually get a lower interest rate with a 5/1 ARM compared to a 30-year fixed mortgage. However, changes in the market might cause your interest rate to increase after that time, as detailed in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an ARM might be a good option. But if that’s not the case, you may be on the hook for a much higher interest rate if the market rates shift.

Mortgage rate trends

Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022. Now, mortgage rates are roughly twice what they were a year ago, pushed up by persistently high inflation. That high inflation prompted the Fed to raise its target federal funds rate seven times in 2022. By raising rates, the Fed makes it more expensive to borrow money and more appealing to keep money in savings, suppressing demand for goods and services.

Mortgage interest rates don’t move in lockstep with the Fed’s actions in the same way that, say, rates for a home equity line of credit do. But they do respond to inflation. As a result, cooling inflation data and positive signals from the Fed will influence mortgage rate movement more than the most recent 25-basis-point rate hike.

We use data collected by Bankrate to track rate changes over time. This table summarizes the average rates offered by lenders across the US:

Average mortgage interest rates

Product Rate Last week Change
30-year fixed 6.99% 6.84% +0.15
15-year fixed 6.38% 6.13% +0.25
30-year jumbo mortgage rate 7.04% 6.87% +0.17
30-year mortgage refinance rate 7.09% 6.98% +0.11

Rates as of May 19, 2023.

How to shop for the best mortgage rate

You can get a personalized mortgage rate by reaching out to your local mortgage broker or using an online calculator. Make sure to consider your current financial situation and your goals when looking for a mortgage.

Things that affect the interest rate you might get on your mortgage include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a good credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.

The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider other costs such as fees, closing costs, taxes and discount points. Be sure to talk to several different lenders — like local and national banks, credit unions and online lenders — and comparison-shop to find the best mortgage for you.

How does the loan term impact my mortgage?

When picking a mortgage, it’s important to consider the loan term, or payment schedule. The most common loan terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Another important distinction is between fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are stable for the duration of the loan. For adjustable-rate mortgages, interest rates are stable for a certain number of years (most frequently five, seven or 10 years), then the rate adjusts annually based on the current interest rate in the market.

When deciding between a fixed-rate and adjustable-rate mortgage, you should think about the length of time you plan to live in your home. For people who plan on living long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable in the long term. If you don’t plan to keep your new house for more than three to 10 years, however, an adjustable-rate mortgage might give you a better deal. There is no best loan term as a rule of thumb; it all depends on your goals and your current financial situation. Be sure to do your research and think about your own priorities when choosing a mortgage.

Source: cnet.com

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A key component of any financial plan includes securing and protecting your credit scores by minimizing the threat of identity theft. It can often take dozens or hundreds of hours to clean up your credit after your identity has been stolen. However, the real financial threat is much greater. Take an example of a mortgage refinance.

Let’s say your credit has been badly damaged by identity theft and during the process of cleaning up the mess, mortgage rates move to historic lows (much like we’ve seen during the first quarter of 2010).

However, you can’t refinance to the lower rate because of your damaged credit. In this scenario, you could lose tens of thousands of dollars in the missed opportunity to lower your mortgage rate.

The vast majority of identity theft still happens the old-fashioned way:

  • People You Know
  • Theft of a Wallet or Purse
  • Mail Theft and Dumpster Divers

People You Know

Unfortunately, victims of identity theft are most likely to have their identity stolen by somebody that they know. Roommates are the most common culprits. Roommates often will not have a personal connection to you and will not have any compunction about stealing your identity. While they live with you they have access to your mail, will learn where you keep personal documents, and may even have access to a wallet or purse you might accidentally leave out.

However, even homeowners are not immune to identity theft from people they know, including children, grandchildren, and friends of children and grandchildren. These family members do not start off intending to hurt you, but if they get into drugs, start hanging out with bad friends, or get into other trouble they often times will try to get money the easiest possible way; from you.

Keep Your Info Private

Whether you live with roommates, or if you have teenage or adult children or grandchildren staying with you, invest in a locking file cabinet and a safe. Even if you trust your children or grandchildren, you can’t always trust their friends. Any documents that have your Social Security number on them should go in your safe. Other critical papers like passports and birth certificates should also go in the safe. Use the safe to store credit cards you don’t often use. Finally, if you have written down any pin numbers or passwords, these should go in your safe. Documents with account numbers (bank statements and brokerage statements) can go into your locking file cabinet. Account numbers by themselves are not enough to steal you identity so these documents can have a slightly lower level of protection.

Theft of a Wallet or Purse

This is harder to control since most often these types of thefts happen when you inadvertently leave your purse somewhere, or when a professional criminal lifts the contents out of your purse or lifts your wallet in a crowded area. The main vulnerability in these situations is that the criminal has your ID and most likely your credit cards. Precious hours can pass before you realize that your purse or wallet is missing. During these times, sophisticated criminals will have already stolen hundreds or thousands of dollars on your credit cards. The long term vulnerability is the possibility that the criminal will use your ID and credit cards to apply for other credit cards. However, this will be difficult if they don’t have your Social Security number (however, they will have your date of birth from your ID).

Simple to Ways to Protect Yourself

  • Never carry your Social Security card in your wallet or purse. Always leave it at home in your safe.
  • Make sure your Social Security number is not on your driver’s license or other ID.
  • Also, never carry more than one or two credit cards with you. If you have more than two credit cards, leave the rest at home in your safe. That way, if your wallet or purse is stolen, when you call and cancel the stolen credit cards you still have other credit cards in your safe that you can use.
  • Once you realize your wallet has been stolen, immediately call and cancel the stolen credit cards.
  • Next, call the police and file a report. Do this before you even get home if you can. As soon as you get home, notify the three credit bureaus (Equifax, Experian, and Transunion) that your wallet has been stolen and give them the information from the police report. This will enable them to add a 90 day freeze to your credit. You can extend this freeze later, but the main thing is you want to do is contain any damage that may happen on the day of the theft.

Mail Theft and Dumpster Divers

Many homeowners have a standard unlocked style mailbox in front of their home. These mailboxes make it easy for criminals to steal your mail. The main things criminals are looking for are boxes of checks being mailed to you from your bank, prescription medications, and credit cards mailed to you. Checks are the biggest vulnerability since criminals can start using these right away. Criminals who steal mail usually have the ability to make a passable fake ID to use when they try to use your checks.

Less common are criminals who go through your trash to find valuable information since going through your trash is pretty distasteful, even for identity criminals. Most criminals will only go through your trash if they already have other information about you.

Protection From Identity Theft

If you currently have an unlocked mailbox in front of your home, replace it with a locking mailbox. It is best to look for a mailbox with a capacity to take small packages like boxes of checks and prescription medication. Next, invest in a heavy duty cross-cut type shredder. I recommend shredding any credit card offers you get in the mail before throwing them in the trash. Basically, anything you get in the mail that has a form you can fill out to apply for something, shred it before throwing it away.

Check your credit regularly

Federal law requires that the three credit bureaus provide you one free credit report every year. The website the credit bureaus have created to meet the requirements of the law is www.annualcreditreport.com. I recommend checking your credit there each year. There are lots of advertisements for companies supposedly offering free credit reports but most of these are misleading and require you to sign up for some service before they give you your credit report. Stay away from these offers and keep with the government required service at www.annualcreditreport.com.

I also recommend signing up for a credit monitoring service. These services charge every month (usually between $10 and $15 per month). Sign up for these services directly with one of the credit bureaus. Credit monitoring services will notify you by e-mail whenever somebody has made a credit inquiry, or whenever a new account is opened. Also, they will e-mail you every month with a status report, even if there has been no activity.

Taking these simple steps will help safeguard your good name and will protect the things you have worked so hard for!  Make sure to protect my ID.

Matt Prestwich is a freelance writer and an expert on identity theft. You can find more of Matt’s writing on his Fightclub Blog.  Matt is not endorsed or affiliated with LPL Financial.

Source: goodfinancialcents.com

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A row of houses

Image by Shutterstock/Illustration by Bankrate

When you set out to get a mortgage, you’ll find many options, from well-known banks to online lenders. Here are Bankrate’s picks for the best mortgage lenders, including borrower requirements — so you know which you might qualify for — and loan terms, so you can figure where you might get the best deal.

Best mortgage lenders

PNC Bank

PNC Bank mortgage review

Availability Available in all U.S. states
Loans offered Conventional, jumbo, FHA, VA, USDA
Credit requirements 620 for conventional, jumbo and FHA loans; 640 for USDA loans
Down payment minimum 3% for conventional loans; 3.5% for FHA loans
Where to find Branch locations and online

Cardinal Financial

Cardinal Financial mortgage review

Availability Available in all U.S. states
Loans offered Conventional, jumbo, FHA, VA, USDA
Credit requirements 580 for conventional and USDA loans; 550 for FHA and VA loans
Down payment minimum 3% for conventional loans; 10% for jumbo loans; 3.5% for FHA loans; none for VA and USDA loans
Where to find Branch locations and online

NBKC Bank

NBKC Bank mortgage review

Availability Available in all U.S. states
Loans offered Conventional, jumbo, FHA, VA
Credit requirements 620 for conventional, FHA and VA loans; 680 for jumbo loans
Down payment minimum 3% for conventional loans
Where to find Branch locations (limited) and online

U.S. Bank

U.S. Bank mortgage review

Availability Available in all U.S. states
Loans offered Conventional, jumbo, FHA, VA, USDA
Credit requirements 620 for conventional loans; 740 for jumbo loans
Down payment minimum 3% for conventional loans; 3.5% for FHA loans; none for VA and USDA loans
Where to find Branch locations and online

Valley Bank

Valley Bank mortgage review

Availability Available in all U.S. states
Loans offered Conventional, jumbo, FHA, VA, USDA
Credit requirements Undisclosed
Down payment minimum 3%-5% for conventional loans
Where to find Branch locations (limited) and online

Veterans United Home Loans

Veterans United Home Loans review

Availability Available in all U.S. states
Loans offered Conventional, jumbo, FHA, VA, USDA
Credit requirements 620 for conventional and VA loans
Down payment minimum 3% for conventional loans; 3.5% for FHA loans; none for VA and USDA loans
Where to find Branch locations and online

Summary: Best mortgage lenders of May 2023

Lender Credit requirements Down payment minimum Bankrate review
PNC Bank 620 for conventional, jumbo and FHA loans; 640 for USDA loans 3% for conventional loans; 3.5% for FHA loans PNC Bank mortgage review
Cardinal Financial 580 for conventional and USDA loans; 550 for FHA and VA loans 3% for conventional loans; 10% for jumbo loans; 3.5% for FHA loans; none for VA and USDA loans Cardinal Financial mortgage review
NBKC Bank 620 for conventional, FHA and VA loans; 680 for jumbo loans 3% for conventional loans NBKC Bank mortgage review
U.S. Bank 620 for conventional loans; 740 for jumbo loans 3% for conventional loans; 3.5% for FHA loans; none for VA and USDA loans U.S. Bank mortgage review
Valley Bank Undisclosed 3%-5% for conventional loans Valley Bank mortgage review
Veterans United Home Loans 620 for conventional and VA loans 3% for conventional loans; 3.5% for FHA loans; none for VA and USDA loans Veterans United Home Loans review

How to compare mortgage lenders

Your first step to finding the best mortgage lender is to comparison shop. Borrowers who do more upfront research tend to save more money than those who go with the first lender they find. It’s best to get quotes from three lenders, at minimum. Because rates fluctuate frequently, it’s best to get these quotes on the same day so you have an accurate basis of comparison.

As you compare loan estimates, look at the APR (annual percentage rate) and interest rate quoted by each lender. Consider what’s important to you as far as experience, too. For some, how fast a lender can turn around a preapproval letter or close a loan is critical. If you have specific needs or financing preferences — for example, you want an FHA loan — you might also want focus on  the top mortgage lenders who specialize in those products.

Once you determine what your needs and preferences are, get started by comparing mortgage rates and finding a lender in your area through Bankrate.

Current mortgage rates

Bankrate regularly publishes mortgage rates for purchases and refinances, based on its latest lender surveys. They include: 

FAQ about mortgages

  • There are five main types of mortgage loans: conventional loans; jumbo loans; government-insured loans (FHA, VA and USDA loans); and fixed- and adjustable-rate mortgages. Conventional loans, offered by private financial institutions, are ideal for borrowers with strong credit scores. Jumbo loans are for higher-priced homes that exceed Federal Housing Finance Agency borrowing limits. FHA, VA and USDA loans are backed by the government and designed for borrowers with lower credit scores and low or no down payment, or military members (VA loans) or those buying in a rural area (USDA loans). Fixed-rate mortgages have the same interest rate for the life of the loan, while the rate on an adjustable-rate mortgage (ARM) can fluctuate.

  • Before applying for a mortgage, it’s important to bolster your credit score and savings and have a clear understanding of how much you can afford and what type of loan would best fit your needs. In addition, gather documentation about your finances so you’re prepared to complete a mortgage application when the time comes. Once you’ve taken these initial steps, begin comparing mortgage lenders based on factors such as annual percentage rate (APR), fees and your overall experience. It’s best to get rate quotes from at least three different lenders. When you know which lender you want to work with, get preapproved so you can start house-hunting with financing in hand.

  • The minimum down payment requirement varies based on loan type. If you qualify, you can obtain a 3 percent-down conventional loan, a 3.5 percent-down FHA loan or a no-down payment VA or USDA loan. If you want to avoid paying mortgage insurance, however, you’ll need to make a down payment of 20 percent.

Methodology

To determine the best mortgage lenders, Bankrate evaluates more than 85 lenders for factors relating to affordability, availability and customer experience, assigning each a Bankrate Score out of five stars. Based on this methodology, the best mortgage lenders generally have a Bankrate Score of 4.9 stars or higher. Note: The Bankrate Score considers a mortgage lender’s products and services only; it is not a reflection of a lender’s internal operations or practices.

Source: thesimpledollar.com

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Today we’ll check out Neighbors Bank, a company that refers to itself as a “hometown bank” that got its start all the way back in 1945 in Clarence, Missouri.

It originally served folks in the counties of Shelby, Macon, and Monroe before making a digital transformation in 2018, when a name change was made to align with its new look.

The company says it still operates under the same values, though instead of focusing solely on individuals and families in rural America, they provide home loans to borrowers nationwide.

Let’s more about them.

Neighbors Bank Fast Facts

  • A FDIC insured depository bank
  • Founded in 1945, headquartered in Columbia, Missouri
  • Offers home purchase loans, refinances, and formerly savings accounts
  • Licensed to do business in all 50 states and D.C.
  • Operate like an online bank despite having a brick-and-mortar location

As noted, and as their name implies, Neighbors Bank is a depository that holds money for its customers via savings accounts.

While they aren’t currently accepting new online savings accounts, they’ll be able to take your mortgage application, whether it’s for a home purchase or a mortgage refinance.

Despite being a brick-and-mortar bank with more than 70 years of history, they actually only operate one physical location in Columbia, Missouri.

This means you’ll be working remotely if you choose Neighbors Bank for your home loan needs.

But this can be a good thing as they’ve invested in the latest technology, including a digital mortgage process and a free smartphone app.

Another plus is the company is licensed to do business in all 50 states and the District of Columbia, so they’re available to all.

How to Apply for a Mortgage with Neighbors Bank

  • To get started simply call them or fill out a short form on their website
  • A loan consultant will get in touch to discuss eligibility and mortgage rates
  • When ready to apply they offer a digital mortgage experience that is mostly paperless
  • Once submitted you can track loan progress 24/7 and satisfy conditions via the online borrower portal

You’ve basically got two options to get the ball rolling – either pick up the phone and call them directly, or fill out a short lead form on their website.

If you do the latter, you’ll just need to answer a series of questions about yourself and your property (or soon-to-be property).

From there, a Neighbors Bank loan specialist will get in touch to discuss loan options, eligibility, and mortgage rates.

It’s also possible to get pre-qualified for a mortgage if you’re still shopping for a suitable home.

Assuming you like what you hear, you’ll be prompted to begin the online digital mortgage application, which appears to be powered by fintech company Blend.

It allows you to perform most tasks electronically, whether it’s filling out the app itself, scanning/uploading documents, or eSigning disclosures.

Their online orrower portal is also where you’ll sign in to monitor your progress 24/7 and tackle your to-do list as you make your way to the finish line.

All in all, they make it easy to apply for a home loan and get status updates thanks to their use of the latest technologies.

Loan Programs Offered by Neighbors Bank

  • Home purchase loans
  • Refinance loans: rate and term and cash out
  • Conventional loans backed by Fannie Mae and Freddie Mac
  • FHA loans
  • VA loans
  • USDA loans
  • Low down payment loans
  • Fixed-rate and adjustable-rate options available in a variety of loan terms

Neighbors Bank offers both home purchase financing and mortgage refinance loans, and says it specializes in low down payment loans.

This means they serve first-time home buyers, along with existing homeowners who are looking to save money (rate and term refinance) or those in need of money (cash out refinance).

You can get a conventional loan backed by Fannie Mae and Freddie Mac, or a government-backed loan, such as an FHA loan, USDA loan, or VA loan.

Those main loan types cover much of the population, though borrowers looking for specialty loans may not find what they’re looking for.

It’s unclear if they offer home renovation loans, including FHA 203k or Fannie Mae HomeStyle, but there’s a decent chance they do.

However, there’s no mention of jumbo loans on their website, so those with larger loan amounts may need to go elsewhere.

The same goes for second mortgages, which don’t appear to be available at Neighbors Bank.

The good news is you can get a fixed-rate or adjustable-rate mortgage in a variety of loan terms, whether it’s a 30-year fixed, a 5/1 ARM, or something in between.

Neighbors Bank Mortgage Rates

One slight downside to Neighbors Bank is the fact that they don’t publicize their mortgage interest rates on their own website.

While you might come across them on third-party websites, it’d be nice if they posted daily rates directly for prospective customers to see.

Still, this doesn’t mean their mortgage rates are any less competitive than other banks and lenders, but it does mean you’ll need to get in touch with someone to find out where they stand.

As noted, you may also come across them if shopping rates online, as they do seem to advertise quite a bit on websites like Zillow.

From my own experience, they appeared to offer low rates, but perhaps not the absolute lowest of the many lenders listed on Zillow.

As always, put in the time to comparison shop with Neighbors Bank and other lenders to ensure you receive the lowest interest rate on your mortgage.

And don’t forget about the lender fees! To that end, Neighbors Bank doesn’t mention what fees they charge, so it’s unclear if they charge a loan origination fee or other common fees like underwriting or processing fees.

Neighbors Bank Reviews

On Zillow, Neighbors Bank has a solid 4.76-star rating out of 5 from about 80 reviews, with many highlighting the ease of working with them, along with the attention to customer service.

And on Google, they have a 4.7-star rating out of 5 from more than 200 customer reviews.

Additionally, they’ve got a 4.3-star rating out of 5 on Trustpilot from about 30 reviews, which while not as strong as the other ratings sites, is still considered “excellent.”

The company also has nearly 500 customer reviews on its own website, with a 4.8 out of 5 customer satisfaction rating and 96% saying they’d recommend Neighbors Bank.

Lastly, it’s unclear if the company is Better Business Bureau accredited or what their rating is, as I was unable to find their listing on the BBB website.

In summary, Neighbors Bank appears to offer the latest technology combined with a human touch, noting that both friendly, personal service and mortgage expertise are critical to the process.

Assuming their mortgage rates and lender fees are also competitive, they could be a viable option for your home loan needs, whether it’s a new home purchase or a refinance.

Neighbors Bank Pros and Cons

The Good

  • Can apply for a mortgage online in minutes
  • Offer a digital home loan experience and online borrower portal
  • Plenty of home loan programs to choose from
  • Licensed to do business nationwide
  • Excellent reviews from past customers
  • Free smartphone app

The Perhaps Not

  • Only one physical location
  • Do not publicize mortgage rates or lender fees
  • Don’t appear to offer jumbo loans or second mortgages

Source: thetruthaboutmortgage.com

Apache is functioning normally

How do low rates, big savings, and a simplified mortgage sound? Well, that’s what “ConsumerDirect Mortgage” says it’s offering its customers.

The online mortgage lender has apparently renovated the home lending process to eliminate fees, while also boosting transparency and customer satisfaction.

So it might be possible to get a cheaper mortgage in less time, with less work, which should make for a happier borrower.

Let’s more about this digital mortgage company to see if they could be a good fit.

Update: In February 2022, ConsumerDirect Mortgage changed its name to “Real Genius.”

ConsumerDirect Mortgage Fast Facts

  • Direct-to-consumer mortgage lender offering home purchase and refinance loans
  • Founded in 2012, headquartered in Delray Beach, Florida
  • The online division of parent company FirstBank, an FDIC insured depository bank
  • Licensed to do business in 49 states and D.C. (not available in Maryland)
  • Originated more than $5 billion in home loans last year
  • 99% of their loans come with a lender credit to reduce or eliminate closing costs

As you might have already suspected given the name, ConsumerDirect Mortgage is a direct-to-consumer mortgage lender that offers home purchase and mortgage refinance loans.

That means they work with borrowers remotely from a call center, which is located at their mortgage headquarters in Delray Beach, Florida.

Their loan production and operations center is located in nearby Charlotte, NC, and their mortgage servicing department in Newark, NJ.

While they’ve only been around since 2012, they are a division of FirstBank, a publicly-traded, FDIC-insured bank that was founded all the way back in 1906.

FirstBank funded more than $5 billion in home loans last year, with about half coming by way of refinance and half home purchase loans.

Roughly 70% of their loan production consisted of conventional mortgages, with the remainder mixed between jumbo and government lending.

They were most active in the states of Alabama, Arizona, California, Colorado, and Tennessee, but are licensed in every state other than Maryland.

How to Apply with ConsumerDirect Mortgage

  • Simply call them up directly or visit their website to get started
  • Prospective borrowers can generate mortgage rates quotes on the fly without providing contact info
  • If you like what you see or hear, click on Apply Now to begin the digital mortgage application
  • They claim to be a 100% paperless loan originator meaning most tasks should be electronic

To get started, simply call them directly to speak with a loan officer about loan pricing and eligibility, or visit their website and do it on your own.

If you go the website route, you can click on “View Rates” to price out your own unique loan scenario to see the latest mortgage rates available.

From there, you can click on Apply Now to begin a formal loan application, and a loan officer will be assigned to you as your guide.

ConsumerDirect Mortgage claims to be a 100% paperless loan originator, so most if not all tasks should be digital/electronic, including the application itself.

I believe it’s powered by Silicon Valley-based Tavant, a provider of AI-driven digital lending products.

Once you’ve submitted an app, you’ll be able to log in to their online borrower dashboard to access your to-do list and see the latest status updates.

All in all, they seem to make it quick and easy to apply for a home loan thanks to their use of the latest technology available.

Loan Programs Offered by ConsumerDirect Mortgage

  • Home purchase loans including first-time home buyer options
  • Refinance loans: rate and term, cash out, and streamline
  • Conforming loans backed by Fannie Mae and Freddie Mac
  • Jumbo home loans
  • FHA loans
  • VA loans
  • Construction-to-perm loans
  • Fixed-rate mortgages: 10, 15, 20, 25, and 30-year loan terms available
  • Adjustable-rate mortgages: 5, 7, and 10-year ARMs available

ConsumerDirect Mortgage offers a bevy of loan options, including home purchase loans, refinance loans, and construction loans.

You can get a conventional mortgage backed by Fannie Mae and Freddie Mac, or a government-backed loan such as an FHA loan or VA loan.

They don’t appear to offer USDA loans, which is the only real major loan type missing.

However, they do offer jumbo home loans, though it’s unclear how large of a loan amount they’ll allow.

Those building a home can take advantage of their construction-to-perm loan offering, and my assumption is they also offer home renovation loans such as the FHA 203k loan program.

Their mortgages are available on all major residential property types, including single-family homes, condos, townhomes, and multi-unit properties.

You can get both a fixed-rate or adjustable-rate mortgage, in a variety of different loan terms ranging from 10 to 30 years.

ConsumerDirect Mortgage Rates

Another positive to ConsumerDirect Mortgage is the fact that they let you price out daily mortgage rates right on their website.

Simply click on today’s rates from the top menu once at their website and fill out the short form to see how they’re priced.

You can get rates for all types of different loan programs at once, along with different rate and fee combinations to determine the best approach.

As noted, most of their borrowers take advantage of lender credits to create a no cost loan, meaning nothing is charged out-of-pocket.

In terms of lender fees, they appear to charge a $675 loan origination fee, which is pretty low relative to other lenders.

From what I saw, they were pretty well priced for a variety of different loan types, including adjustable-rate mortgages like the 5/1 ARM, which is a rarity these days.

They may not offer the very lowest rates out there, but seem to be a super close second in many scenarios.

ConsumerDirect Mortgage Reviews

One thing Consumer Direct Mortgage isn’t short of is good reviews. They’ve got lots from all the different ratings websites.

At Zillow, they have a 4.73-star rating out of a possible 5 from more than 800 customer reviews, which is super solid given the large sample size.

Quite a few of those reviews indicated that the interest rate and/or closing costs were lower than expected.

On LendingTree, they have an equally impressive 4.8-star rating from over 230 reviews, and a 94% recommended rating, meaning most past customers would vouch for them.

At Google, they have an even better 4.9-star rating from 100+ reviews, and at CreditKarma a 4.5 out of 5 from 50 reviews. They also have a 4.2-star Bankrate score.

Lastly, they are an accredited business with the Better Business Bureau and currently hold a perfect ‘A+’ rating based on customer complaint history.

Additionally, they have a 4.72-star rating out of 5 from over 100 customer reviews on the BBB website, which is a really high score for the complaint-driven BBB website.

In summary, ConsumerDirect Mortgage appears to be a highly-liked mortgage lender with excellent customer satisfaction.

And if their mortgage rates are also on point, they could be a good choice for a homeowner, especially someone looking to refinance an existing mortgage.

They may not be as favorable for home buyers due to their lack of physical locations, though these days working remotely doesn’t seem to be an issue for most borrowers.

ConsumerDirect Mortgage Pros and Cons

The Pros

  • Offer a digital mortgage application
  • Can apply for a mortgage directly from their website
  • Say they offer a 100% paperless loan process
  • Lots of loan programs available
  • Licensed to do business in 49 states
  • Excellent reviews from past customers
  • A+ BBB rating, accredited company
  • They service their own loans
  • Backed by a large, publicly-traded depository bank
  • Knowledge center and mortgage glossary on their website

The Cons

  • Do not offer USDA loans
  • Not available in Maryland
  • Limited physical locations

(photo: Joris Leermakers)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Those looking to buy a home, along with existing owners, may have come across the term “mortgage rate lock-in effect” lately.

It’s a relatively new phrase that came about thanks to the ultra-low mortgage rates that were available in 2020-2022.

During those years, it was entirely possible to snag a 30-year fixed in the 2-3% range.

In fact, some lucky homeowners might have even got their hands on a mortgage rate that starts with 1.

Here’s the problem – now that rates have doubled, many of these homeowners don’t want to give up their low rate. Or perhaps worse, can’t.

What Is the Mortgage Rate Lock-In Effect?

mortgage rate lock-in effect

In a nutshell, the mortgage rate lock-in effect is a phenomenon where borrowers are essentially trapped in their homes thanks to very cheap mortgages.

It’s not exactly a negative, assuming they like their property. But it has been referred to as “golden handcuffs” because it can be somewhat bittersweet.

Basically, folks with mortgage interest rates locked in at 2-3% know they’ve got an amazing deal on their hands.

But if and when they sell, they’ll lose that incredible rate. And worse yet, they’ll have to take on a significantly higher mortgage rate if they buy another home and finance it.

Really the only way to avoid this situation is to sell and rent, or sell and buy a home with cash.

Any other scenario basically results in a doubling of the borrower’s interest rate, from that 2-3% range to 6%+.

Not only is this a tough pill to swallow, it also presents affordability challenges. Especially since home prices haven’t come down all that much.

Remember, there isn’t a negative correlation between home prices and mortgage rates. Both can rise together, or fall together.

Though given the steep increase in mortgage rates lately, there was obviously some downward pressure on home prices, especially in regions of the country that saw big gains.

However, because of this rate lock-in, existing home supply is super limited and has kept home prices elevated.

Mortgage Rates Doubled After the Refi Boom

refi boom

As noted, the 30-year fixed was priced in the 2-3% range a few years ago. It officially hit its lowest point on record during the week ending January 7th, 2021, according to Freddie Mac.

At that time, you could get a 30-year fixed mortgage for 2.65%, and actually even lower if you paid discount points. Or simply shopped around for the best deal.

And that’s exactly what many homeowners did. The so-called “Great Pandemic Mortgage Refinance Boom” resulted in about 14 million new mortgages between the second quarter of 2020 and the fourth quarter of 2021.

Per the Federal Reserve Bank of New York, about five million borrowers extracted a total of $430 billion in home equity via their refinance. These are known as cash out refinances.

Another nine million refinanced their loans without equity extraction and lowered their monthly payments in the process. This is known as a rate and term refinance.

It resulted in a staggering $24 billion in aggregate reduced annual housing costs. And remember, that can be for the next three decades on these 30-year fixed mortgages.

And yes, fixed, meaning the interest rate doesn’t change, regardless of what happens with mortgages in the meantime.

Speaking of, the going rate on a 30-year fixed is now closer to 6.5%, per Freddie Mac.

Can Existing Homeowners Afford to Move?

Now trading in a mortgage priced at 2-3% for one above 6% is clearly unfavorable, especially if the home price doesn’t change much.

This makes a lateral move disadvantageous, and a move-up purchase unlikely.

Moving from one like home to another simply isn’t cost-effective. Let’s consider an example.

Say you purchased a home in 2021 for $500,000, put down 20%, and obtained a 30-year fixed at 2.75%.

That puts the monthly principal and interest payment at $1,632.96. What a deal!

Now imagine you grow tired of your home, or simply want to move for whatever reason. A home you like is going for $475,000. Prices came down a little bit.

You put down 20% and wind up with a loan amount of $380,000, but the mortgage rate is now 6.5%. Ouch!

That puts the monthly principal and interest payment at $2,401.86. What a drag!

Your mortgage payment just increased about $770, or 47%. Yes, you’re reading that right. So not only is it a huge deterrent to move, it’s also potentially unaffordable for some (or many).

This explains why many of today’s homeowners are essentially locked-in to their existing properties.

Either because it makes no financial sense to move, or because it’s not even affordable to do so.

Literally, some homeowners probably couldn’t get approved for a home loan at today’s much higher rates.

But Can’t the Mortgage Rate Lock-In Effect End If Rates Come Down?

Those who don’t buy into this whole mortgage rate lock-in effect argue that life happens. People will move for a variety of reasons, regardless of their low mortgage rate.

While that’s true, it’s unclear how many will move for these reasons. It might be a pretty small percentage of the overall pie.

They also claim that over time, there is a diminishing value to the low-rate mortgage. After all, each time you make a monthly mortgage payment, you have one less at your disposal.

But remember that a 30-year fixed comes with 360 monthly payments. So it’ll take a very long time for that scenario to play out.

What could put an end to the mortgage rate lock-in effect is lower mortgage rates. They don’t necessarily have to be 2-3% again, just something in the ballpark.

So perhaps 30-year fixed rates back in the 4% range would do it. It’d be more palatable for a homeowner to swap a rate of 3% for a rate of 4.5%. And more affordable too!

You could argue that falling home prices would entice people to move, but they’d also have to sell in the process. And it’s unclear if they’d want to take a haircut and lose their low rate.

What would maybe be more likely would be renting out their home and buying another if that were to happen.

This explains why homeowners may be keeping their mortgages for a very long time. And why being locked in can actually be a wonderful thing.

Source: thetruthaboutmortgage.com