Today we’ll explore one of the nation’s largest loan servicers that happens to be a major mortgage lender as well, “Lakeview Loan Servicing.”
As their name implies, they service mortgage loans, meaning they collect monthly payments from customers after the loan funds.
These days, a lot of mortgage lenders don’t do that, and instead focus on making new loans and selling them off quickly so they can fund even more.
But Lakeview has adopted a strategy some of the largest mortgage lenders in the country have, doing both.
This means aside from servicing loans, they also originate billions in mortgages annually. Let’s see if they could be a good fit for a new mortgage.
Lakeview Loan Servicing Fast Facts
Direct-to-consumer mortgage lender that offers home purchase and refinance loans
Founded in 2010, headquartered in Coral Gables, Florida
Funded $41 billion in home loans last year (a top-25 mortgage lender nationally)
The 4th largest loan servicer in the country
Licensed to lend in 48 states and the District of Columbia
Also operates a wholesale and correspondent lending business
As noted, Lakeview Loan Servicing operates as both a loan servicer and a direct-to-consumer mortgage lender. This is similar to a NewRez or a Rocket Mortgage.
They are currently the nation’s fourth largest loan servicer in the country, and help more than 1.4 million customers manage their home loans annually.
The company also recently became the largest servicer of Ginnie Mae mortgages, aka FHA loans and VA loans.
To clarify, they own the servicing rights to all these mortgages, and actually partner with subservicers like LoanCare to process payments, manage escrow, etc.
At the same time, they mustered an impressive $40.7 billion in home loan origination last year, landing them in the top-25 lender list.
They did a near-equal amount of home purchase loans and mortgage refinances, so they could be a worthwhile choice for both a new home buyer or an existing homeowner.
My guess is they tap into their massive loan servicing portfolio to find new refinance candidates. So if they service your loan, they may have reached out.
As I always say, when a lender reaches out, reach out to other lenders! That way you can comparison shop.
At the moment, they are licensed in 48 states and D.C., with Hawaii and New York the exceptions.
How to Apply for a Mortgage with Lakeview Loan Servicing
If you’re a current loan servicing customer, you may have received solicitations from Lakeview Loan Servicing to refinance your loan.
But they’re also a big originator of home purchase loans, so home buyers with no prior relationship could also choose them as their lender.
They say they’ve got more than 100 loan officers in four locations across the country to serve home buyers and refinancers.
And both loan processing and underwriting are done in-house to ensure fast turn times. Those who need to get pre-approved for a mortgage can do so in as little as 24 hours.
To get started, you can visit their website or call them directly. If you go online, you can create an account and submit a new mortgage request.
At that point, a licensed loan officer will get in touch to discuss loan pricing and eligibility.
They offer a digital mortgage application powered by ICE Mortgage Technology that allows you to complete most tasks electronically.
And once your loan is submitted, you’ll be able to manage it and check status via the online borrower portal.
Once the loan funds, it’ll be serviced by them as well via one of their subservicing partners.
Lakeview Home Rewards
One perk to using them for a home purchase loan is the “Lakeview Home Rewards” program.
In short, it’s a real estate agent referral program and mortgage lender all rolled into one.
Once you sign up, you’ll be matched with a top local real estate agent and a dedicated mortgage loan officer from Lakeview.
After your loan funds, you’ll receive up to $6,500 cash back, depending on the home’s purchase price.
Those who sell and buy a home using the service can receive up to $13,000 in rebates once both transactions close.
Note that these rewards aren’t offered in some states (AK, IA, LA, and MO) and are limited in others.
They say they only work with “premier brokerages across the United States,” and pick the top real estate agents from those companies.
This includes real estate agents with at least five years of experience who maintain a 90%+ satisfaction rating.
If you aren’t already working with an agent, this program could be a money-saver and provide the convenience of an end-to-end home buying process.
Loan Programs Offered by Lakeview Loan Servicing
Home purchase loans
Refinance loans: rate and term, cash out, streamline
Conforming loans backed by Fannie Mae and Freddie Mac
Jumbo loans
FHA loans
VA loans
USDA loans
Home equity loans
Lakeview Loan Servicing offers home purchase loans and mortgage refinance loans, meaning they serve both existing homeowners and prospective home buyers.
If you already own a home, you can refinance to obtain a lower mortgage rate and/or get cash out. Streamline options are offered as well.
All the major loan types are available, including conforming loans backed by Fannie Mae and Freddie Mac, and government-backed loans like FHA, VA, and USDA loans.
It’s also possible to get a jumbo home loan, and even a second mortgage in the way of a home equity loan.
They seem to offer mostly fixed-rate mortgages, including the 30-year fixed, 15-year fixed, and other less common loan terms.
I’m not sure if they also originate adjustable-rate mortgages, which aren’t very popular at the moment.
But they should have enough options to suit most home buyers and homeowners out there.
Lakeview Loan Servicing Rates
They say they offer low interest rates, but that’s about it. You won’t find their daily mortgage rates listed online to compare to other lenders.
As such, you’ll need to call them up and get in touch with a loan officer to obtain the latest pricing.
Be sure to inquire about lender fees when you do that to get the full picture. It’s unclear if they charge a loan origination fee or other fees for processing, underwriting, and so on.
My guess is they’re a middle-of-the-road lender in terms of pricing, though that’s just an assumption.
At the end of the day, they might be priced lower than the big banks and national brands, but perhaps higher than the low-cost mortgage lenders out there.
But you won’t know until you call and speak to a human.
Lakeview Loan Servicing Reviews
On Zillow, they have a 4.84-star rating out of 5 from about 400 reviews. A decent number of recent reviews indicated the interest rate was lower than expected.
Their Zillow rating might be the best representation of their home lending division, while other reviews you come across could be more related to their servicing business.
For example, over at Google it’s more of a mixed bag, with a much lower 2.5-star rating from over 600 reviews. The caveat is this may include both lender customers and servicing customers.
This is one of the problems with operating as both types of companies under the same brand. Take the time to read the reviews to see if they relate to new loans or existing, serviced loans.
While they aren’t accredited with the Better Business Bureau (BBB), they do have an ‘A+’ rating based on complaint history.
In summary, Lakeview Loan Servicing could be a good choice for a home purchase loan due to their rebate program, and potentially good for refinancers if the rates are low.
The only question marks are pricing and customer service, the latter of which might be muddled because they are also a loan servicer.
Lakeview Loan Servicing Pros and Cons
The Pros
Can apply for a home loan online in minutes
Digital mortgage application powered by ICE Mortgage Technology
Lots of home loan programs to choose from including second mortgages
Lakeview Home Rewards offers up to $6,500 cash back
A+ BBB rating
They’ll service your loan after closing
Free mortgage calculator and mortgage glossary online
The Cons
Not licensed in Hawaii or New York
No physical branches
Do not publicize mortgage rates or lender fees
Lots of mixed reviews (which may be due to servicing)
It’s the first of the month, and with that comes fear and uncertainty that both homeowners and renters won’t be able to make payments due to loss of income related to the coronavirus.
While it’s not clear how bad things will get just yet, CNBC interviewed FHFA director Mark Calabria to get some preliminary numbers, which he himself called “very rough” and subject to change quickly.
Two Million Missed Mortgage Payments by May
300,000 missed payments for Fannie/Freddie owned loans in April
700,000 missed payments for overall market in April
Jumps up to 1M and 2M respectively by May
Expected to be worse for government loans backed by FHA/VA
He currently estimates that roughly 300,000 home loans backed by Fannie Mae and Freddie Mac could go delinquent in April, which is just over 1% of their book.
For the overall mortgage market, he said that translates to roughly 700,000 delinquent home loans.
By May, those numbers jump up to one million and a little more than two million missed payments, respectively.
He sees more stress in FHA/VA loans due to their lower credit score requirements, higher DTI ratios, and so on.
While it sounds pretty dire, Calabria was quick to point out that it only represents somewhere between 3-5% of the market, and that he’s “not seeing worst-case scenarios.”
This is counter to a comment made by MBA chief economist Mike Franantoni, who warned that if a quarter of U.S. homeowners (~12.5 million households) sought six months of mortgage forbearance, loan servicers could owe between $75 and $100 billion to investors.
Meanwhile, Mark Zandi, chief economist for Moody’s Analytics, said up to 15 million Americans could default if the lockdown goes through summer.
That would likely crush many loan servicers who lack the liquidity to face a barrage of missed payments, but the hope is it doesn’t come to that. Or the Fed steps in to help.
Calabria noted that if borrowers only miss 2-3 months of payments, most loan servicers should be OK, but if it goes beyond that time frame, a lot of firms will face liquidity problems.
Top retail mortgage lender Quicken Loans also services about 1.8 million home loans, and CEO Jay Farner said the company’s balance sheet is “strong enough” to pay holders of bonds backed by its mortgages in the event many default.
However, most forbearance requests have apparently come from homeowners who’ve never been late, which he says as a good sign they’ll get back on track once normal employment resumes.
Additionally, he pointed out that 70-80% of calls were from homeowners not yet facing hardship, who apparently just wanted to know their options.
He did reiterate that, “If you can pay your mortgage, please do so.”
The CARES Act Allows Borrowers to Miss 6-12 Mortgage Payments
Homeowners with a federally-backed mortgage can request forbearance for 180 days (and an additional 180 days)
Applies to FHA/VA/USDA and Fannie Mae/Freddie Mac loans
Simply requires borrowers to request assistance from their loan servicer and say they are facing a hardship related to COVID-19
Lenders may not charge fees, penalties, or interest beyond what would have been due had borrower remained current
The passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allows homeowners with a federally-backed residential mortgage to request forbearance for up to 180 days, or six months.
This includes FHA loans, USDA loans, VA loans, and home loans purchased or securitized by Fannie Mae or Freddie Mac.
That’s most of the mortgage market, aside from jumbo loans and portfolio loans kept on banks’ books.
It also grants them the ability to request an additional 180 days of forbearance if needed, or to cancel it at any time.
During the forbearance period, lenders may not charge fees, penalties, or interest beyond what would have been due had the borrower made all contractual payments on time and in full.
It’s still unclear what happens after the forbearance period ends. Does the loan servicer assess the borrower’s ability to get current or simply add the missed mortgage payments to the end of the loan term? Who knows.
Update: You can now get up to 15 months of mortgage forbearance.
Can Anyone Get Mortgage Forbearance Under CARES Act?
The CARES Act doesn’t define what a “financial hardship” is
Nor are loan servicers allowed to require additional documentation to grant mortgage forbearance
Both Calabria and Treasury Secretary Steven Mnuchin have urged homeowners to pay their mortgages if they can
But at the moment it appears anyone can qualify without proof of hardship
All a homeowner has to do to get mortgage forbearance is submit a request to their loan servicer that they are “experiencing a financial hardship due, directly or indirectly, to the COVID-19 national emergency,” regardless of delinquency status.
Other than that attestation from the homeowner, a loan servicer may not require additional documentation to grant mortgage payment forbearance.
This means you don’t have to prove loss of income or unemployment to qualify, something Calabria acknowledged while saying “we’re operating on the honor system.”
In other words, it should be very easy to get six to 12 months of mortgage payments put on hold with little more than a request, without the typical hoops to jump through.
While great for homeowners in need, it could be a disaster for loan servicers and the mortgage industry in general, assuming millions take part in the relief effort.
Read more: What’s the Last Day to Apply for Mortgage Forbearance Under the CARES Act?
Today we’ll check out a Southern California-based mortgage broker named “Lendevity,” which has been earning rave reviews lately.
Their name is actually a combination of lend and longevity, their way of saying they’ll be by your side throughout the loan process and beyond.
The company says it takes an “advisory approach” to better understand your financing needs and create a custom solution that fits your goals.
They do so using the latest technology, charge $0 lender fees, and aim to close loans in three weeks or less.
And they’ve got a loyalty program to boot if you come back to them a second time. Let’s learn more.
Lendevity Fast Facts
Online mortgage broker that offers home purchase and refinance loans
Founded in 2018, headquartered in Woodland Hills, CA
Licensed to do business in five states (AZ, CA, CO, OR, WA)
Charge $0 lender fees on most loans
Offer a loyalty program for repeat customers that waives 3rd party fees
As noted, Lendevity is a mortgage broker, meaning they connect consumers with their wholesale lender partners.
This gives them the ability to shop your loan so you don’t have to in order to find the best price.
They may also have access to unique loan programs the bigger banks might not offer.
The company is located in Woodland Hills, California and was founded in 2018. Despite being rather young, they’ve got consistently excellent reviews.
At the moment, they are licensed to do business in just five states, including Arizona, California, Colorado, Oregon, and Washington.
One benefit to using them is their lack of lender fees, along with a loyalty program if you come back a second or a third time.
How to Apply for a Mortgage with Lendevity
To begin, you can call them up, visit their office, or simply cruise over to the website and apply.
Since they like to take a hands-on approach, your best move might be speaking to a rep first to discuss your loan scenario.
From there they can determine eligibility and loan pricing, then you can apply via their website.
Their digital home loan application, which allows you to complete most tasks electronically, is powered by ICE Mortgage Technology.
You can fill out the app from any device, upload necessary documents, eSign disclosures, and track loan progress from start to finish.
They aim to close their loans in three weeks or less, which is also a plus if you’re in a hurry or simply don’t want the process to be dragged out.
What’s nice about mortgage brokers these days is they offer the same technology that the big fintech companies have, like Rocket Mortgage or Better Mortgage.
So you can get the best of both worlds when using a local broker. And those who need a little more attention get a loan guide throughout as well.
Loan Programs Offered by Lendevity
Home purchase loans
Refinance loans
Conforming loans backed by Fannie Mae and Freddie Mac
FHA loans
VA loans
Jumbo loans
Bank statement loans
Band-Aid loans
One of the benefits of a being a mortgage broker is the ability to offer home loan programs from a variety of different companies.
This allows Lendevity to extend a complete lending menu to its customers, even if they’ve had issues obtaining financing elsewhere.
Lendevity has options for new home buyers (home purchase loans) and existing homeowners (refinance loans), including cash out solutions.
They’ve got all the usual stuff like conforming loans backed by Fannie Mae and Freddie Mac, FHA loans, and VA loans.
The only major program they don’t seem to offer is USDA loans, which are reserved for rural home buyers.
They even offer jumbo loans with loan amounts up to $10 million. So even if you’re buying or refinancing an absolute mansion, they should offer a solution.
Those who’ve had trouble qualifying for a home loan in the past can take advantage of their so-called Band-Aid Loan, which pays off debts to improve credit scores and DTI ratios.
Then they can get you more permanent financing six months or so later.
If you’re a self-employed borrower, Lendevity also offers bank statement loans that don’t require tax returns to qualify.
Both fixed-rate and adjustable-rate mortgages are available in a variety of different loan terms to suit different needs.
Lendevity Mortgage Rates and Fees
While Lendevity doesn’t post their mortgage rates on their website, they do claim to utilize a transparent pricing model.
This means showing you a variety of mortgage rate and fee options that you can choose from depending on your needs.
For example, you may want to pay discount points for an even lower mortgage rate. Or you could be satisfied with a slightly higher rate in exchange for no fees whatsoever.
Lendevity says they don’t charge lender fees. And claims you won’t be charged an origination fee unless the circumstances of your loan program require it.
Not exactly sure what that means, but it sounds like they don’t charge fees in the vast majority of cases.
And either way, will probably structure your loan as a no cost mortgage, meaning nothing is paid out-of-pocket.
Anecdotally, I’ve seen their rates advertised on third-party websites like Zillow and they were among the lowest listed.
So my guess is they’re pretty competitive with other online, low-cost lenders out there, which may be cheaper than big banks and other household names.
If they can help you snag a low mortgage rate at the same time, it’s a win-win. No costs and a low monthly payment for as long as you keep your loan.
Speaking of, they have a loyalty program for existing customers who refinance a mortgage. In short, they’ll waive all third-party fees, such as title insurance and escrow.
That might give them another leg up on the competition if they’re already matching the lowest rate you find elsewhere.
Lendevity Mortgage Reviews
On Zillow, Lendevity has a perfect 5-star rating from 55 reviews. Nearly all of them indicated that either the interest rate or closing costs were lower than expected, or both in some cases.
They’ve also got a perfect 5-star rating on Yelp from 45 reviews and a similarly solid 4.9-star rating out of 5 on Google from nearly 120 reviews.
It’s the same story on the Better Business bureau (BBB) website, a perfect 5/5 from 28 customer reviews.
Lendevity is also an accredited business with an ‘A+ rating at the moment.
All in all, they appear to be very well-liked by their customers, despite not having hundreds or thousands of reviews. Hopefully it’s a sign of more good things to come.
To sum things up, Lendevity seems to be big on customer service like many mortgage brokers are.
They could be a good fit for a first-time home buyer who needs some additional hand-holding, or someone with a more complex loan scenario that a big bank might fumble.
If their mortgage rates are also low, they could be a good pick for just about any home buyer or existing owner looking to refinance.
Lendevity Pros and Cons
The Good
Can apply for a mortgage online in minutes
Offer a digital mortgage process
Do not charge lender fees
Loyalty program that waives third-party fees for return customers
Today we’ll take a hard look at San Diego, CA-based mortgage broker “Grander Home Loans,” which has some of the best customer reviews I’ve come across.
On all the major ratings websites, they have perfect 5-star reviews, which is a huge testament to their goal of putting the customer first.
At the same time, they say they offer the best combination of mortgage rate, monthly payment, and overall savings.
So it appears you can get the best of both worlds, responsiveness and a competitively-priced mortgage, without sacrificing a thing.
What’s more, they can shop your home loan on your behalf with their many wholesale lender partners so you don’t have to. Read on to learn more.
Grander Home Loans Fast Facts
Mortgage broker that offers home purchase loans and refinances
Founded in 2014, headquartered in San Diego, CA
Currently licensed in nine states nationwide
One of only seven LendingTree Certified Lenders nationwide
Grander Home Loans, Inc. is a mortgage brokerage that offers home purchase loans and mortgage refinances.
This means they connect home buyers and existing homeowners with their wholesale lender partners.
The company has been around since 2014 and is headquartered in San Diego, California in the Mission Valley area.
Their claim to fame, other than having perfect customer reviews, is the fact that they’re one of just seven LendingTree Certified Lenders.
Such lenders have proven that they consistently provide customer satisfaction that is absolutely top notch.
At the moment, they’re licensed in nine states, including Alaska, California, Colorado, Florida, Hawaii, Idaho, Montana, Oregon, and Washington.
It’s unclear if they plan to expand, or simply focus on the states they already do business in.
Aside from their San Diego headquarters, they have an office in Lanai City, Hawaii, which is located on the island of Lanai.
How to Apply with Grander Home Loans
Because they’re a mortgage broker, the loan application process may vary depending on which wholesale partner you wind up with.
But they’ll likely start by providing you with a mortgage rate quote and ask you to electronically complete a loan application and eSign disclosures.
They have a secure upload form on their website that allows you to submit supporting documentation, such as tax returns, bank statements, and so on.
Once submitted, you’ll be able to use this same portal to satisfy any prior-to-doc conditions that are required to close your loan.
They say they provide “regular loan updates and progress reports” throughout the loan process to keep you informed and in the know.
And because customer satisfaction is their number one goal, you should be partnered with a very responsive lending team.
To that end, Grander says it promptly responds to emails and returns phone calls, a common gripe in the mortgage space.
This is especially useful for first-time home buyers and those who have never refinanced, where a little hand-holding goes a long way.
Available Loan Programs at Grander Home Loans
Home purchase loans
Refinance loans: rate and term, cash out, streamline
Conforming loans backed by Fannie Mae and Freddie Mac
High balance loans (those that exceed conforming limit)
Jumbo home loans up to $5 million loan amounts
FHA loans
VA loans
Fixed-rate mortgages: loan terms between 8 and 30 years
Adjustable-rate mortgages: 5/1, 7/1, and 10/1 ARM
When it comes to product choice, Grander Home Loans has lots of loan programs to choose from, including the ability to choose a loan term from 8 to 30 years.
This could allow you to avoid resetting the clock when refinancing, a great way to stay on track if paying your mortgage in full is a priority.
They also offer core first-time home buyer programs, such as Fannie Mae and Freddie Mac’s 97% LTV offerings, along with the FHA’s 3.5% down product.
Those with not-so-great credit can take advantage of an FHA loan with credit score minimums of just 550.
If you’re active duty or a veteran, you can take advantage of a VA loan that requires no money down.
Those purchasing a home or refinancing a mortgage in a more expensive region of the country shouldn’t have any issues thanks to their high balance and jumbo loans, with loan amounts as high as $5 million.
For those sitting on a ton of home equity, they allow cash out up to $1 million.
They lend on all common property types, including single-family homes, vacation homes, condos/townhomes, and 2-4 unit investment properties.
The only major loan program they seem to be missing is USDA loans, which are reserved for home buyers and homeowners in rural areas.
Grander Home Loans Rates
The only area where I wish I knew more is their pricing and fees. They say right on their homepage that they “offer the best combination of rate, payment, term, and overall savings.”
But they don’t post daily mortgage rates on their website, or a list of lender fees that must be paid.
Despite this, my assumption is that they are very competitively priced because mortgage brokers often are, and they have stellar customer reviews.
I doubt they’d have incredible reviews if their pricing was high, or even just so-so.
They also have the advantage of shopping your loan with multiple wholesale lenders at once, instead of simply looking within.
Still, take the time to haggle and negotiate with them and gather mortgage rate quotes from other banks, lenders, and brokers.
Remember, you should compare mortgage brokers too, even if they can shop for you with their partners.
Also be sure to take into account any lender fees, such as a loan origination fee, or required mortgage points for a given rate.
The mortgage APR should give you the complete picture, which you can then compare with other companies during your home loan search.
Grander Home Loans Reviews
Over at LendingTree, where they are just one of seven Certified Lenders, they have a perfect 5-star rating out of a possible 5 from about 300 customer reviews.
Additionally, 100% of former customers recommend them to others, which is a great sign if you want a solid mortgage experience.
With regard to the Certified Lender status, one of the requisites is “providing exemplary service to LendingTree consumers,” while having at least half their staff certified with the company.
Grander Home Loans also achieved “President’s Club” status back in 2020, which is “presented to an elite group of loan officers” based on a commitment to customer excellence and LendingTree best practices.
They’ve also got a perfect 5.0-rating from about 250 Google reviews, which is quite impressive given the volume.
Beyond that, they also have a perfect 5-star ratings on Customer Lobby, Yelp, and Zillow.
On aggregate, they seem to have achieved perfection from a customer satisfaction standpoint.
To sum things up, Grander Home Loans is one of the highest-rated mortgage companies I’ve come across, so if you value customer service, they could be a great choice.
They also operate as a mortgage broker, which means they should offer a hands-on approach and a wide array of loan programs and mortgage rates to choose from.
This could serve both existing homeowners looking to refinance and prospective home buyers, the latter of which may need more guidance than a big bank can offer.
Grander Home Loans Pros and Cons
The Good Stuff
Say they offer competitive pricing
Can shop your loan with multiple lenders because they’re a broker
Lots of loan programs to choose from
Perfect 5-star customer reviews across all ratings websites
BBB accredited business since 2015
LendingTree certified lender (one of just nine nationwide)
MARSHFIELD, WI (OnFocus) – Credit scores are numerical ratings that lenders use to evaluate a borrower’s creditworthiness. They are calculated based on a variety of factors, including payment history, credit utilization, length of credit history, and types of credit accounts. The most commonly used credit score model is the FICO score, which ranges from 300 to 850. The higher the score, the more creditworthy the borrower is considered to be.
“When it comes to home-buying, credit scores play a significant role in determining whether a borrower will qualify for a mortgage and at what interest rate,” said Josh Kilty, Mortgage Loan Officer with Fairway in Marshfield. “Our experienced mortgage advisers have a keen understanding of the loans that will be the best fit for your unique situation. And one of the biggest factors in finding the loan most suitable for you is your credit score. Based on your credit score, you will be a candidate for some types of loans but not others.”
Credit scores and mortgages have been in the news a lot lately, due to LLPA’s.
Loan-Level Price Adjustments are fees that are added to the interest rate of a mortgage loan, based on various risk factors associated with the borrower and the property being mortgaged. These adjustments are determined by the mortgage investor or servicer and are typically applied to loans that do not meet certain criteria, such as having a lower credit score or a higher loan-to-value ratio.
For example, if a borrower has a credit score below a certain threshold or if the property being mortgaged is considered to be in a high-risk area, such as a flood zone or an area with high foreclosure rates, the mortgage investor may apply an LLPAs to the loan, which will result in a higher interest rate.
Loan-Level Price Adjustments can vary depending on the lender and the type of mortgage being offered, and they can significantly impact the total cost of the loan over time. It’s important for borrowers to understand the LLPAs associated with their mortgage loan and to shop around for the best loan terms and interest rates.
Fairway Mortgage professionals can help home-buyers navigate the credit score requirements for obtaining a mortgage. They can provide guidance on improving credit scores, such as paying bills on time, paying down credit card balances, and avoiding new credit applications. Additionally, they can help borrowers understand the different types of mortgage loans available and the specific credit score requirements for each.
Conventional Loans
These are loans not created by a government entity. Also known as conforming conventional loans, they simply “conform” to the guidelines put in place by Fannie Mae and Freddie Mac. A conventional loan also involves borrowing no more than $548,250. Minimum credit score: 620.
USDA Loans
Insured by the federal government, USDA loans are limited to certain “rural” areas. However, these areas are often near more urban areas. Since this loan is one of the few that requires no down payment, it is known for its affordability. Therefore, it tends to be popular among first-time buyers. Minimum credit score: None officially, but most lenders will require 640 or greater.
FHA Loans
Also backed by the U.S. government, FHA loans offer flexible qualification guidelines that help buyers who may not qualify for a conventional mortgage. This flexibility enables lenders to provide home loans with down payments as low as 3.5% of the purchase price. Minimum credit score: 580 (with 3.5% down).
VA Loans
The U.S. Department of Veterans Affairs (VA) provides this affordable home financing option for service members, veterans and their surviving spouses. Fairway’s minimum credit score for VA-loan eligibility is just 580 — less than the 620 required by many other lenders.
Jumbo Loans
Available for home purchases over $726,200 and up to $2,000,000, jumbo loans require a higher credit score than pretty much any other loan you’ll ever find. Minimum credit score: 680.
Credit scores are a crucial factor in the home-buying process, and Fairway Mortgage professionals can help borrowers understand and improve their credit scores to increase their chances of qualifying for a mortgage and obtaining favorable loan terms. If you’re concerned about your credit score being too low, ask your Fairway mortgage adviser for assistance.
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While it’s still possible to request mortgage forbearance via the CARES Act if you’re having trouble making monthly payments, this option will eventually come to an end.
In fact, you might only have about two months left to contact your loan servicer for relief. So if you think you’ll need help, act sooner rather than later to avoid missing out.
This cutoff date depends on the type of mortgage you have, e.g. an FHA loan or a conventional loan.
What’s the Last Day to Apply for Mortgage Forbearance?
Fannie and Freddie loans – when the “national emergency” ends
FHA loans – June 30th, 2021
USDA loans – June 30th, 2021
VA loans – June 30th, 2021
Oddly, it’s not even known when that date is, at least when it comes to mortgages backed by Fannie Mae and Freddie Mac.
That’s because the GSEs currently have the end date for relief set to the end of the national emergency. So it might be a moving target given COVID-19 seems to just be getting started.
Seeing that the other agencies have extended into the first six months of 2021, the hope is Fannie/Freddie will also do at least that.
The FHA had set a deadline of October 30th, 2020 (which was extended to December 31st , 2020, then Feb. 28th, 2021, then to March 31st, 2021, and now to June 30th).
Similarly, the USDA had announced a deadline of December 31st, 2020 for approving forbearance requests, then aligned it with the FHA’s February 28th, 2021 cutoff date, and has since extended it until June 30th, 2021.
With regard to VA loans, it’s the same story as the FHA as government-backed home loans appear to have the same cutoff dates (other than USDA).
Whether these end dates all get extended in light of the continued uncertainty and ongoing economic disruption remains to be seen.
They’ve already been extended several times, so it won’t be a surprise if they move them into the future again, especially with COVID continuing to keep the economy shuttered.
Loan Servicers Will Have Their Busiest Season Ever
I spoke to Sapan Bafna, senior leader, Advanced Delivery Engines for CoreLogic, who is responsible for developing IntelliMods, a web-based loan modification decisioning tool, to get his take on how things might go once the CARES Act forbearance option runs out.
In short, he believes loan servicers will experience “their busiest season ever” as they process post-forbearance requests for millions of homeowners.
He developed IntelliMods as a result of the 2008 economic crisis and believes the industry will be held accountable for underusing technology and available data.
In other words, they could make a complete mess out of things once borrowers exit their CARES Act forbearance plans.
And that won’t be good for the industry, which only recently got past the many loan modification and foreclosure snafus from the Great Recession.
Still, things don’t seem nearly as bad this time around, at least for most homeowners.
[How Is Mortgage Forbearance Paid Back?]
What Will Be the Most Common Outcome Post-Forbearance?
Fannie and Freddie loans will likely go the payment deferral route
FHA loans will use the COVID-19 Stand Alone Partial claim option
USDA and VA loans will have full suite of existing home retention options on the table
When asked what would be the most common outcome after forbearance ends, Bafna broke it down by loan type.
He believes borrowers with Fannie- and Freddie-backed mortgages will take advantage of the payment deferral option, followed by a loan modification if they’re unable to resume making their regular mortgage payments.
For FHA loans, he expects most to go with the COVID-19 Stand Alone Partial claim option, followed by four new modification options that have been specifically created for the COVID-19 pandemic.
For USDA loans and VA loans, he believes “homeowners will be offered the full suite of existing home retention options.”
If all else fails, it is possible that some homeowners will have to go the deed-in-lieu of foreclosure route, or simply be foreclosed on.
The good news for the overall market is because of severe inventory shortages, additional foreclosed properties likely won’t put much if any downward pressure on home prices.
Of course, he did say “Some local markets have been hit particularly hard by the pandemic recession and will experience elevated unemployment and home-price weakness in 2021.”
At the same time, more resilient metros will rebound and actually see additional home price appreciation next year.
With regard to short sales, which were big after the most recent housing crisis, Bafna believes they’ll be “a small component since we currently see only around 3% of mortgages with negative equity.”
The House Rich, Cash Poor Conundrum
While it sounds like most homeowners will see relatively positive outcomes post-forbearance, he highlighted another issue regarding the many borrowers nationwide who are now house rich and cash poor.
Because property values have increased significantly over the past several years, but incomes have lagged, some homeowners may have difficulty refinancing their mortgages or otherwise accessing their home equity.
As such, a borrower experiencing financial distress because of the pandemic-related recession will be at the greatest risk of losing their home.
And while they might be able to sell via traditional channels due to their amassed equity, they’ll still incur moving costs, lose any homeowner-related tax benefits, and “forego the opportunity to build equity in their homes as prices rise in the future.”
This exemplifies the problem with real estate, which is an illiquid asset. Often there’s a lot of money trapped inside that can’t be easily accessed.
There are some options out there, like reverse mortgages and innovate products like Noah’s home equity sharing program, but no one solution is totally ideal.
The good news, even if hard to access, is homeowners have lots of equity this time around, which is a big improvement from a decade ago when their mortgage balances grossly outweighed their property values.
That should allow the real estate market to absorb the negative impact of the COVID-19 pandemic, even if it goes on for another year or longer.
Read more: There Will Be a 3-Month Waiting Period to Get a Mortgage After Forbearance
Imagine a situation where you could transform your mortgage into a more favorable and empowering financial tool. Picture the possibilities of accessing the equity in your property or securing lower interest rates. Welcome to the world of mortgage refinancing. Refinancing your mortgage is like hitting the reset button on your home loan, allowing you to replace your current mortgage with one that better aligns with your financial goals. The general rule of thumb is that you’ll pay between 2% and 6% of the refinance value. Here’s how it breaks down.
For help figuring out how to refinance your mortgage in a way that works for you, consider working with a financial advisor.
Mortgage Refinances Basics
A mortgage refinance refers to the process of replacing an existing mortgage with a new one, typically to take advantage of more favorable terms or to access equity in a property. Refinancing means receiving a new loan to pay off your current loan and obtaining a lower interest rate, longer loan duration, or a different type of mortgage. For instance, you might refinance your fixed-rate mortgage to a 5/1 adjustable-rate mortgage (ARM) for a lower interest rate.
Remember, although mortgage refinancing can provide a more favorable loan, it involves closing costs and fees. As a result, it’s essential to calculate whether the potential savings or benefits outweigh the expenses over the long term.
Average Cost to Refinance a Mortgage
Refinancing a mortgage means paying for the loan servicing required for your original mortgage. While the average refinance costs 2% to 6% of your loan amount, costs vary depending on your circumstances. In addition, interest rates have risen in the last two years, making borrowing more expensive.
Here’s a breakdown of refinancing costs:
Application fee: $0-$500
Attorney fees: $500-$1,000
Credit report fee: $10-$100
Discount points: 0%-3%
Document preparation fee: $50-$600
Flood certification: $15-$25
Home appraisal: $300-$700
Home inspection: $300-$500
Origination fees: 0.5%-2%
Recording fees: $25-$250
Reconveyance fee: $50-$65
Tax service: Varies
Title insurance and search: $400-$900
Factors Affecting Refinance Costs
Refinancing your mortgage can save you a significant amount of money. However, it’s critical to note that, similar to acquiring a new home loan, a refinance entails closing costs that can impact your immediate and long-term financial situation. Compared to closing on a comparable purchase loan, the closing costs for a refinance are generally lower. The precise amount you’ll be required to pay depends on various factors, such as:
Your Loan Size
As mentioned above, lenders base mortgage insurance and other costs on your total loan amount. Therefore, the larger your loan, the higher the refinance cost.
Your Lender
Each lender has its own fee structure. For example, some lenders may waive your credit report or application fee. As a result, it’s wise to shop around for lenders and ask for a summary of fees before committing to a specific lender. This way, you can compare the offers available.
Your Location
Costs of home inspections, recording fees, taxes and more depend on your location. Therefore, where you live can change your refinance costs by hundreds or thousands of dollars.
Your Credit Score
Your credit score and history demonstrate your consistency and reliability as a borrower. As a result, your lender charges lower interest rates to customers with higher credit scores because they present less risk. On the other hand, a low credit score means you’ll pay more interest, increasing your refinancing costs.
Your Home Equity
Similarly, home equity can also impact the interest rates available when refinancing. Generally, lenders offer better rates to borrowers with higher levels of equity. With more equity in your home, you represent less risk to the lender, which can result in more favorable interest rate options.
In addition, the loan-to-value ratio (LTV) is a crucial factor lenders consider when evaluating a refinance application. You can calculate it by dividing the loan amount by the property’s appraised value. Lenders typically have maximum LTV ratios they are willing to accept. For example, if a lender has a maximum LTV of 80%, they will only refinance up to 80% of the home’s appraised value. So, if your original mortgage required private mortgage insurance (PMI) because you had a low down payment or a higher LTV ratio, refinancing can help you eliminate PMI. Building equity to achieve an LTV ratio of 80% or less can eliminate PMI, reducing your monthly payment.
Your Loan Duration
Refinancing means receiving new terms for your loan. For example, you might extend your loan by five years or more through a refinance. Although doing so can lower your monthly payment, it usually increases the amount of interest you pay over time. On the other hand, shortening your loan duration means paying it off more quickly, reducing paid interest.
Your Type of Mortgage (Fixed-Rate or Adjustable-Rate)
With a fixed-rate mortgage, the interest rate remains constant throughout the entire loan term. The rate you agree upon at the beginning of the loan remains unchanged over the life of the mortgage, whether over 15, 20, or 30 years. This stability allows you to have predictable monthly mortgage payments, making budgeting easier. The downside is your interest rate is permanent, even if market trends in the future produce lower interest rates.
In contrast to fixed-rate mortgages, adjustable-rate mortgages (ARMs) have an interest rate that can change periodically. Typically, an ARM has an initial fixed-rate period, such as 5, 7, or 10 years, during which the interest rate remains stable. This rate is usually lower than fixed-rate mortgages. Then, after the initial period, the interest rate can adjust periodically based on an index, such as the U.S. Treasury rate. Therefore, the interest rate can fluctuate over time, potentially resulting in higher or lower monthly payments. If interest rates rise, your payments may increase, but if rates fall, your payments could decrease.
Your Specific Mortgage Program
In addition, you’ll pay different amounts for mortgage insurance depending on the loan type. For instance, mortgage insurance for conventional loans costs 0.15% to 1.95% of the loan amount every year. For FHA loans, you’ll pay a 1.75% premium upon closing and 0.15% to 0.75% of the loan amount every year. VA loans have a funding fee at closing of 0.5% to 3.6%. Lastly, USDA loans have a 1% upfront fee and a 0.35% annual fee.
Your Type of Property
The type of property you own can impact the refinancing process. Lenders may consider different factors and have specific guidelines based on the property type. Here are a few ways the property type can affect a refinance:
Primary Residence: Refinancing a primary residence typically offers the most favorable terms and options. Lenders may provide lower interest rates and more flexible terms for primary residences because borrowers prioritize them over other real estate and assets.
Investment Property: Refinancing an investment property, such as a rental property or vacation home, often comes with slightly higher interest rates and stricter eligibility requirements. Lenders may impose stricter debt-to-income ratios, require larger down payments and assess the property’s rental income potential to determine the feasibility of the refinance.
Condominiums: Refinancing a condominium may have specific requirements. Lenders may assess the financial health of the condominium association, including factors such as the percentage of owner-occupied units, insurance coverage and reserve funds. Additionally, lenders may have stricter appraisal requirements for condos to ensure the property’s value and marketability.
Multi-Unit Properties: Refinancing a multi-unit property, such as a duplex, triplex, or apartment building, may involve different considerations. Lenders typically evaluate the property’s rental income potential, occupancy rates and the borrower’s experience as a landlord. The appraisal process may focus on the property’s income-generating capabilities.
Manufactured or Mobile Homes: Refinancing a manufactured or mobile home may have specific requirements and considerations. Lenders may have stricter criteria for these types of properties due to their unique characteristics. They may require specific certifications, consider the property’s foundation and location and have limitations on the loan-to-value ratio.
Typical Cost Breakdown
Here’s an example of how these numbers work. According to a recent report by Freddie Mac, the average rate refinance is about $273,500. So, here’s how the costs look at percentages of the loan balance on average using the dollar figures introduced earlier:
Application fee: 0%-0.18%
Attorney fees: 0.18%-0.36%
Credit report: 0.003%-0.03%
Discount points: 0%-3%
Document preparation fee: 0.018%-0.2%
Home appraisal: 0.11%-0.25%
Home inspection: 0.11%-0.18%
Origination fees: 0.5%-2%
Recording fees: 0.009%-0.09%
Reconveyance fee: 0.018%-0.023%
Title insurance and search: 0.14%-0.33%
Additional Considerations
Here are several other aspects of refinancing a mortgage to contemplate before taking action:
Interest Rates Variations
Interest is the foundation for how lenders make money on loans. As a result, it’s one of the primary expenses for refinanced mortgages. The rate is a percentage of your principal balance, and your monthly payment goes toward interest first, then the principal. As a result, a higher interest rate means you’re paying more for the cost of the loan and less on the loan itself, increasing the cost and requiring more time for repayment.
Choosing Between Fixed-Rate and Adjustable-Rate Mortgages
Remember, a fixed-rate mortgage offers an interest rate that doesn’t change throughout the loan. This feature offers predictability for monthly payments until you repay the loan. On the other hand, adjustable-rate mortgages (ARMs) have interest rates that shift according to market trends after the initial fixed period. The advantage of ARMs is that your initial rate is usually lower than fixed-rate mortgages, and the adjustable rate afterward could also remain lower, increasing your savings.
Potential Savings Over the Long Term
How long you plan to live in your home is another crucial factor regarding refinancing. The refinancing process entails paying closing costs, which can outweigh the savings the interest rate reduction provides. Therefore, it’s best to estimate how long you plan to stay in your home to determine if you can break even or save money through refinancing. One method is to calculate the break-even point by dividing the total cost of the refinance by your monthly savings.
For example, say you save $100 per month, and the closing costs amount to $5,000. In this case, it would take approximately 50 months (or over four years) before you experience savings on your refinance. If you intend to stay in your home for longer than that, refinancing is worthwhile.
Loan-To-Value Ratio (LTV)
The eligibility of your mortgage for refinancing is influenced by the current value of your home compared to the loan amount. During the refinancing process, an independent party appraises your home to determine its market value. The appraised value is critical since the LTV usually can’t exceed 80%. If your home’s value has declined since you purchased it, you might lack sufficient equity to refinance, or you may need to bring additional funds to cover the difference between the home’s value and the loan amount.
Income Stability and Debt-To-Income Ratio
Other debts besides your mortgage, such as car loans or credit card debt, can impact your ability to refinance or the interest rate you receive. Lenders evaluate your debt-to-income ratio when you apply for a refinance. To calculate this ratio, divide your monthly debt payments by your gross monthly income. Generally, a debt-to-income ratio below 43% is desirable for mortgage or refinance qualification.
In addition, your current income and employment status, will influence the refinancing application. Specifically, changes in your income or employment can affect your refinancing eligibility. For instance, you may qualify for a better rate or more favorable terms if your income recently increased.
Conversely, suppose your income has decreased or you recently changed jobs. In that case, the refinancing process may be more challenging, depending on the duration of your current job or the extent of the income reduction. If you’ve recently started a new job, giving your situation several months to stabilize before attempting to refinance can help you qualify for a loan.
Cash-Out Refinance
Freddie Mac’s most recent report shows that 41.9% of refinances in 2021 were cash-out refinances. A cash-out refinance means liquidating a portion of your equity, putting thousands of dollars in your pocket. Homeowners cash out their equity for numerous purposes, such as improving the home, paying off debt, or starting a business. As a result, this refinance enlarges your mortgage, and you get a lump sum in return.
Strategies to Minimize Refinance Costs
Because refinancing can be expensive, it’s recommended to reduce costs as much as possible. This way, excessive fees won’t ruin the benefits of the refinance. These strategies can help you do so:
Shopping Around for Lenders
The whole lending market is open to you when refinancing. Although refinancing with your current lender might be convenient, you could find better rates and terms by getting quotes from several lenders and comparing the offers. This way, you’ll get the best deal available and save money on fees and interest.
Negotiating Fees and Closing Costs
Negotiating fees and closing costs with the lender is also an option. Many fees have wiggle room on the price, so asking lenders about discounts and waivers can be fruitful. In addition, a preexisting relationship with a lender, such as having a bank account or loan beforehand, allows you to access special deals.
Utilizing Mortgage Points
Lastly, you can purchase mortgage points to reduce your interest rate. Typically, they cost 1% of the loan amount per point. As a result, you can cut your interest rate down by paying several thousand dollars up front, reducing interest payments over time. It’s crucial to calculate when you break even if you do so. For example, say you spend $1,500 to lower your interest rate by 1%, lowering your monthly payment by $50. In this scenario, it will take 30 months to break even.
Hidden Costs to Be Aware Of
In addition, some refinancing costs are less apparent when shopping lenders. Here’s what to keep an eye out for:
Loan duration and its impact on costs: Generally, the longer the repayment schedule, the more expensive the loan. Your loan duration affects how long the interest rate builds upon the principal. So, repaying the loan faster means fewer compounding periods, which equates to less interest accrual.
Tax implications: Both original and refinanced mortgages provide a tax deduction for paid interest. In addition, purchasing points for a refinance loan creates another tax deduction. Specifically, you’ll divide what you paid over the number of years for the loan. So, paying $1,000 for a mortgage point for a 10-year loan results in a $100 deduction every year.
Costs associated with mortgage insurance: Refinancing with a conventional loan can incur mortgage insurance costs if you have less than 20% equity in your home. Specifically, private mortgage insurance (PMI) charges a percentage of your loan amount. These charges can occur at closing and each month as part of your loan payment.
The Bottom Line
Mortgage refinancing can benefit homeowners by allowing them to take advantage of more favorable terms and access equity in their property. However, it’s vital to carefully consider the costs involved in the refinancing process and determine whether the potential savings or benefits outweigh these expenses in the long term. As a result, it’s necessary to understand how numerous factors, including the loan amount, origination fees and discount points, can impact the overall cost of refinancing and evaluate the potential savings. Other considerations include the option of a cash-out refinance, which allows homeowners to access their equity, and using strategies to minimize refinance costs.
Tips for Refinancing a Mortgage
It’s a good idea for homeowners to analyze their financial situation and goals before refinancing their mortgage. Fortunately, you can consult with a financial advisor to evaluate your circumstances and make informed decisions that align with your long-term plan. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
The real estate market fluctuates daily, making it challenging to understand when refinancing is beneficial. You can get an interest rate estimation using SmartAsset’s rate comparison tool to see if the market conditions suit you.
For those looking to build their dream home, purchasing land is usually the first big step.
While building a house is far from easy, there are ways for first-time homeowners to make their dreams achievable. Land loans are a great resource, often used in conjunction with a traditional loan. Anyone choosing to build a house is likely to at least consider applying for a land loan.
A land or lot loan is a great financing option for those who have always dreamed of buying land and building their own home.
11 Best Banks for Land Loans
Because land loans typically carry higher interest rates than traditional mortgage loans, it pays to carefully consider the pros and cons of several lenders.
Below we’ve compiled a detailed list of the banks and credit unions offering the best land loans available today. Whatever lender you choose, be sure to check beforehand that they are fully licensed to provide mortgage loans.
The Nationwide Mortgage Licensing System (NMLS) is a centralized database of licensed lenders which you can use as a reference.
1. Atlantic Union Bank
Atlantic Union Bank offers land loans for both residential lots and undeveloped land. The bank is based in Virginia.
There are also separate construction loans available for those interested in financing the construction of a residence. Bear in mind that while Atlantic Union has a strong reputation as lenders, having been in business since 1902, they don’t have services like loan calculators, interest rate guidelines, or down payment information on their website.
For more information on a land loan with Atlantic, you’ll need to call them or visit a local branch to speak about a land loan.
2. Old National Bank
Old National Bank is headquartered in Indiana, and has been in operation since 1834. They offer lending products and services to residents of Indiana, Minnesota, Wisconsin, Michigan, and Kentucky. Old National has two different types of financing for land on offer, depending on the size of the property you’re interested in:
Lot Loans are designed to finance land purchases of no more than 5 acres, requiring a 20% down payment.
Land Loans are for larger property, designed to finance land purchases between 5 and 25 acres. These loans come with a minimum down payment of 35%.
Both land and lot loans with Old National will carry various interest rates and repayment terms. You can get either of these loan types for both improved and unimproved land, and there is no obligation to immediately begin building once a loan is secured.
Old National Bank also has around 250 brick-and-mortar locations since merging with First Midwest Bank. If visiting a local branch to speak with a loan officer is your preference, you shouldn’t have to travel too far.
On the other hand, you also have the option of using Old National’s online loan calculator and online loan application service, if visiting a local branch isn’t convenient.
3. Mountain America Credit Union
Mountain America Credit Union is a federally chartered credit union regulated by the National Credit Union Administration (NCUA) and headquartered in Sandy, Utah. They locations across Arizona, Idaho, Utah, Montana, Nevada, and New Mexico.
Mountain America’s lot loans are available with 85% financing on approved credit, fully amortizing fixed-rate and balloon options, and an easy online application process. The loans are designed to be easily converted to a construction loan, ensuring that you can move forward with your home building plans when you’re ready.
4. WaFd Bank
WaFd, or Washington Federal, offers bank loans for improved land up to the value of $700,000, without any immediate obligations to build.
You can use their online loan calculator to receive an estimate of the interest rates you can expect for a land loan. These estimates are based on your credit score, development plans and the specifications of your desired property.
The minimum down payments and interest rates will vary depending on your ideal loan term, as well as all the other details of your application.
You can apply directly for loans through their online portal, as well as in person at a bank branch. Land loans are available from WaFd Bank only in the following states: Washington, Idaho, Nevada, New Mexico, Oregon, Texas and Utah.
5. Banner Bank
Banner Bank is active in the states of Idaho, Washington, Oregon, and California. They offer financing for purchasing both improved and unimproved land. Banner allows customers to borrow up to 75% of a property’s purchase price, and they also claim to bring competitive interest rates and fees.
All loans with Banner Bank are approved in-house, which means a streamlined credit score check and loan approval process.
If you do apply for a loan with Banner Bank, you also have the option of locking in a fixed interest rate or a flexible rate. Banner also offers financing for construction and personal loans.
6. California Bank & Trust
Customers with California Bank and Trust can potentially avail of both a land loan and a construction loan in one. The bank offers financing for up to 60% of the lot purchase value, along with several loan options.
The option to choose either a single or dual-purpose loan, which can cover both land purchase and construction of a home, makes California Bank & Trust an attractive lender. This is a great option for those looking to save both time and money.
You can apply for a loan online, over the phone, or in person at a local branch.
7. Randolph-Brooks Federal Credit Union
Randolph-Brooks Federal Credit Union is not your typical financial institution. As a financial cooperative, its sole mission is to help members save time, save money, and earn money. Over the years, the credit union has expanded its reach to over 1 million members in Texas and beyond, with a strong presence in Austin, Corpus Christi, Dallas-Fort Worth, and San Antonio.
With over 60 branches dedicated to serving members and the community, RBFCU offers a range of land loan benefits and features, including term options up to 15 years, free 60-day rate lock, and up to 90% financing.
And the best part? There are no building requirements from the lender, so you can have the freedom to build your dream home the way you want. Set up automatic payments and let RBFCU help you make your land ownership dreams a reality.
8. Citizens Bank & Trust
Citizens Bank & Trust is a North Alabama-based institution that’s committed to providing a hassle-free lending experience. What’s more, you can roll your loan into a permanent one, saving you on closing costs.
With local decision-making and processing, you’ll get the personalized attention you deserve, while a streamlined application process ensures you get your funds when you need them. You can experience a stress-free borrowing experience when you choose Citizens Bank & Trust for your land loan needs.
9. Alpine Bank
Alpine Bank is active in Colorado, offering financial services including land loans. Specifically, they offer loans for both lot and new constructions, with a maximum loan to value amount of 75% for land classified as improved.
Alpine Bank doesn’t offer lending details on their website. You can use their website to connect with lending experts in your county. You can also reach out for more loan information online, over the phone, or in person at one of their local bank branches.
10. First Bank & Trust
If you’re looking to buy land or a lot and build your dream home, First Bank and Trust Company can help. Headquartered in southwest Virginia, with additional locations in Tennessee, North Carolina, and Virginia, the bank is committed to helping you realize your homeownership goals.
With a range of lot and land loans, you can choose the financing option that’s right for you, while enjoying competitive rates and flexible terms. Whether you’re looking to build your dream home or invest in a piece of land, First Bank and Trust Company has the financing options you need to make it happen.
11. First Hawaiian Bank
First Hawaiian Bank offers land loan options designed for those who are ready to buy land but not quite ready to build. With 2- and 3-year terms available and no prepayment penalty, you can secure the land you want without worrying about costly fees. And with interim financing available to purchase a vacant lot at residential pricing, you can lock down the land you need to bring your vision to life.
Best of all, your FHB land loan can be refinanced into a construction-to-permanent loan with reduced fees, making it easier than ever to get the financing you need to build your dream home.
What are land loans?
Land loans are loan products designed to help individuals and businesses purchase land for development. A bank, credit union, or online lender can offer specific loans for those interested in buying land. Land loans are also known as ‘lot loans’.
Similar to a mortgage loan, land loans provide individuals and small businesses the opportunity to finance the purchase of land for many purposes, such as investment, agriculture, recreation, or development.
However, because these types of loan are considered riskier for lenders, they typically come with a higher interest rate compared to a mortgage loan. In addition, the conditions of the loan will depend on the type of land being purchased, as well as what the land will be used for.
Let’s take a closer look at the types of land that a land loan can help finance.
Types of Land Classification
Your chances of obtaining financing for land will depend partly on the type of land you want to purchase. In general, lenders who offer land loans will view developed land as less of a risk than undeveloped land.
When it comes to land loans, there are three primary types of land considered for financing.
Raw Land
‘Raw land’ is the first classification and refers to completely undeveloped, rural land. Think no buildings, electricity or drainage system. This is the most difficult land to obtain financing for because land loan lenders view it as the greatest risk of abandonment.
As a result, if you plan to apply for a land loan for raw land, you’ll need to demonstrate that you’ve got a detailed plan for development. Showing lenders that you’re competent and dedicated to the project will help you navigate the lending market.
Although the purchase price of raw land is often cheaper than land that is developed, a raw land loan will come with higher rates. You may also be required to put up a more substantial down payment.
Unimproved Land
‘Unimproved land’ is a step up from raw land, and covers a broad variety of possibilities. Unimproved land will often be land that was once developed, or has seen failed attempts at development in the past. In some cases unimproved land will have some limited access to utilities and amenities, but will need significant repair and refurbishing.
An unimproved land loan can also be difficult to get, even though it poses less risk compared to raw land. Again, having a detailed plan and being aware of the challenges at hand will be a huge help when negotiating with lenders. A large down payment and a strong credit score will also be helpful.
While lenders tend to view unimproved land loans as less risky than raw land, it is still common for rates to be a fair bit higher compared to traditional mortgage rates, for example.
Improved Land Loan
‘Improved land’ typically has decent or good access to utilities, roads and water. Because improved land is the most developed land type, it almost always comes with a higher price tag. On the other hand, this means that interest rates will be significantly lower compared to raw or unimproved land loans. You’ll also find more affordable down payments for developed lots.
For most aspiring homeowners, purchasing land that is already developed with access to basic amenities is the ideal. This allows them to immediately get to work building a house, whereas having to develop land first could add at least another year to their construction project.
How to Apply for a Land Loan
If you want to buy land and build your dream home, you’ll probably want to apply for a land loan. Land loan applying isn’t complex, and land loans work the same as many other types of loan. Here are the steps involved:
Find a Plot
You should start by first identifying the plot of land you want to buy. It helps to have a few options chosen in advance. For example, in the event that you can’t afford to find a good lending option for your first choice, you can quickly move on to an alternative instead.
Draw up a Development Plan
The next step is to make a development plan for each plot that you have on your shortlist. You may need or want to hire professional help to create a solid plan. Try to include as much detail as possible, without overextending yourself or wasting too much time and money.
When it comes to development and construction plans, both an estimated timeframe and overall cost range are the most important details. A good plan will help you negotiate the best rates with a lender.
Find a Lender
Once your development plan is ready, it’s time to seek potential lenders. Depending on the type of development you’re proposing, as well as the type of land you want to buy, it may take some time to find willing lenders.
Be prepared to also take some time to consider more than one loan offer. Ideally, you can compare multiple lenders, and use a pre-approved quote from at least one lender to negotiate against others.
Complete the Application Process
Once you’ve chosen a lender and been approved for your loan, you’ll be guided through the lender’s application process. The majority of lenders will require information such as your development plan, a credit check, and personal information.
You might also need to provide details on things like zoning considerations, utilities access and land use restrictions, where relevant.
Alternative Land Financing Options
In addition to seeking a land or construction loan, there are several other types of loans and financing options available.
USDA Loans
If you’re looking to own land and build a home in a rural area, you may be eligible for a USDA loan. The U.S. Department of Agriculture offers loans that may assist low and moderate income families in finding a new home. USDA Section 523 loans are for wanting to purchase land to develop, and Section 524 loans are for financing new constructions by contractors.
While it isn’t easy to qualify for a USDA loan, the benefit is they require no down payment and the interest rates are low. USDA loans must be settled within two years, however, so there are no long term options.
FHA Loans
Another government-funded product, FHA loans are tailored towards those wanting to buy land and quickly build a home. The Federal Housing Administration insures these loans, protecting FHA-approved lenders from risk.
FHA loans are not available for land purchase alone, but for those intending to build a home on as well as land. FHA loans are sometimes granted in conjunction with construction loans, too. If you’re eligible for one of these loans, you’ll likely have a lower minimum down payment, but potentially higher interest rates.
Home Equity Loans
Home equity loans may be an appealing alternative to land loans for some homeowners. If you already own a property and have good credit standing, this kind of loan might be a good fit. A home equity loan acts as a second mortgage, and will essentially convert your equity into collateral for a new loan to fund your purchase.
Cash-Out Refinancing
Cash-out refinancing involves homeowners refinancing their homes to increase equity. This type of refinancing is essentially paying off your current mortgage to secure another mortgage, but with a lower interest rate and easier monthly payments.
Once the remortgaging is made official, your bank or financial institution will issue you a check based on the equity in your property. You can then use this payment to fund your land purchase.
SBA Loans
The Small Business Administration (SBA) offers loans to small business owners from the 504 loan program.
These loans are best suited to the purchase of real estate for business reasons, so they are not ideal for regular homeowners. However, if you’re looking for land to purchase to grow your business, you might want to consider an SBA loan.
Generally, the Small Business Administration will cover 40% of the purchase value, with 10% from the borrower and another lender of choice providing the other half of the loan. The terms and rates on SBA loans vary depending on the lender you choose to fund 50% of the land purchase.
Seller Financing
If you’re lucky, you may be able to obtain financing directly from the landowner you want to buy from. Also known as land contracts, these types of loans involve the buyer essentially taking out a loan directly from the seller, often with a substantial down payment.
Seller financing also tends to come with less than competitive interest rates. For those who struggle to qualify for a traditional mortgage or financing, seller financing can often be a great, but more costly, alternative.
Frequently Asked Questions
What is the best loan for buying land?
The best loan option for buying land depends on your circumstances. While improved land loans may seem ideal, the reality is there are multiple loan options to choose from.
Your credit score, debt-to-income ratio, and the condition of the land you wish to purchase are all factors that can influence which type of financing will suit you best.
Is it difficult to get a loan for land?
It’s true that obtaining loan financing for the purchase of land isn’t as easy as getting a regular personal loan. However, there are lenders out there with experience financing land purchases. As with any loan, the bottom line will be your credit score, as well as the size of your down payment. The nature of the land in question is also a primary factor.
If you can’t qualify for traditional financing options, there are alternatives such as USDA loans, FHA loans and more to consider.
As affordability challenges conspire to keep would-be buyers out of the housing market, the nation’s two largest mortgage lenders have rolled out programs that allow borrowers with modest incomes to qualify for a loan with just 1 percent down.
Rocket Mortgage, the largest lender in the U.S. in 2022, announced its ONE+ program this week. United Wholesale Mortgage, the No. 2 lender, launched its Conventional 1% Down loans in April — then made them significantly more generous following Rocket’s announcement.
The rival programs piggyback off of Fannie Mae’s HomeReady mortgages and Freddie Mac’s Home Possible loans. Those initiatives allow borrowers who make less than 80 percent of their neighborhoods’ median income to obtain a conventional loan with just 3 percent down.
Both programs come at a time when home prices remain near record highs and mortgage rates are more than double what they were two years ago.
“With affordability being tougher, people are getting boxed out,” says Bill Banfield, executive vice president of Capital Markets at Rocket Mortgage. “Free money helps people want to buy a home.”
How the 1% mortgages work
To make 1 percent down a reality, both lenders cover 2 percent of the 3 percent down payment needed to obtain a HomeReady or Home Possible mortgage. The borrower supplies the remaining 1 percent.
Rocket offers this scenario as an illustration: A buyer of a $250,000 home with a HomeReady or Home Possible mortgage needs at least 3 percent down, or $7,500. Under its new program, Rocket covers $5,000, or 2 percent of that down payment, through a grant. The borrower then needs to put down just $2,500, or 1 percent.
Rocket’s program also covers private mortgage insurance (PMI) at no cost to the borrower. Typically, lenders require borrowers to pay these insurance premiums if their down payment is less than 20 percent. On a $242,500 loan, those premiums can run as much as $245 a month, according to Rocket.
ONE+ is available to first-time and repeat homebuyers, and there are no limits on assets, just income (more on that below).
United Wholesale Mortgage’s program is similar, following the same guidelines as HomeReady and Home Possible. The lender pays 2 percent of the purchase price, up to $4,000. That means the down payment benefit maxes out at $200,000; a borrower who takes a $400,000 loan under the program would get 1 percent of the down payment from United Wholesale Mortgage, and need to come up with 2 percent.
When United announced its program in April, the down payment assistance was limited to borrowers making less than half of area median income. After taking criticism on social media — and after Rocket rolled out its more generous income limits — the lender boosted its income limit to 80 percent.
What are the income limits?
To qualify for the 1 percent down programs — or any HomeReady or HomePossible loan — you can’t make more than 80 percent of the median income in the area where you’re buying. Those figures vary widely throughout the U.S. A few examples of the 80 percent limit:
Atlanta
No more than $76,560
Chicago
No more than $84,560
Dallas
No more than $76,480
New York City
No more than $90,080
San Francisco
No more than $120,880
To see income limits in your area, enter an address into this map on Fannie Mae’s website.
Is there a catch?
These programs are a sweet deal for borrowers — so much so that there’s no guarantee the terms will stay the same, as evidenced by United Wholesale Mortgage’s decision to boost income limits.
What’s more, the down payment assistance is so generous that the nation’s two largest lenders could decide to pull the plug.
“Some of the features on this are costly for the lender,” says Rocket’s Banfield. “We’ll have to see how it all plays out.”
Another risk for borrowers: They could find themselves owing more than their homes are worth. Median home prices shrank 1.7 percent from April 2022 to April 2023, and home values could keep declining. For homebuyers who put just 3 percent down, a 5 percent decline in local home prices could put them underwater.
The Great Recession infamously played up the dangers of buying with little equity — but it’s worth pointing out that the mortgage market and housing sector are on much firmer footing now than they were 15 years ago. What’s more, borrowers still must qualify based on such factors as debt-to-income (DTI) ratio.
“There’s no stretching the underwriting,” says Banfield.
More lenders are getting creative
In another nod to the challenges facing buyers in a still-expensive market, Movement Mortgage this month announced it’s now allowing FHA borrowers to take out a 10-year second mortgage to finance the 3.5 percent down payment required for FHA loans. In effect, this eliminates the need for borrowers to put down any money upfront. To qualify, you must have a credit score of 620 or higher.
That offer is just one way lenders are responding to the one-two punch of an affordability squeeze and a sharp slowdown in mortgage applications since 2021. Lenders have been rolling out all manner of mortgage promotions, including rate buydowns paid for by the seller and discounts on future refinances.
In another variation on the theme, Rocket earlier this year unveiled a new credit card that allows homebuyers to earn up to $8,000 towards closing costs and a down payment. The Rocket Visa Signature Card offers a generous 5 percent back on all purchases, up to the limit — with the stipulation that the rewards are worth full value only if you ultimately get your home loan from Rocket Mortgage.
Other low-down payment mortgage options
Mortgage lenders and regulators recognize that down payments are one of the primary obstacles to homeownership, so there are several low- and no-down payment loan options. Loans backed by the U.S. Department of Veterans Affairs (VA), for instance, don’t require a down payment.
Aside from HomeReady and Home Possible conventional loans, here are other options for buyers looking to make low down payments:
FHA loans: Insured by the Federal Housing Administration (FHA), FHA loans allow borrowers to put down just 3.5 percent with a credit score of 580 or higher, or at least 10 percent with a score as low as 500. However, FHA borrowers with less than 20 percent down have to pay FHA mortgage insurance premiums (MIP) for the life of the loan.
USDA and VA loans: USDA and VA loans don’t require any down payment, but they’re only for specific types of borrowers: USDA loans for borrowers in certain rural areas and VA loans for active-duty service members, veterans and surviving spouses. Neither charge mortgage insurance, but USDA loans come with guarantee fees and VA loans come with a funding fee.
It’s tough out there for first-time homebuyers. They’re facing multiple challenges, including rising mortgage rates, high home prices and limited inventory. However, that doesn’t seem to scare off young Americans — in fact, 71.5% of Gen Zers plan to buy their first home in the next one to six years, according to a Rocket Mortgage survey from earlier this year.
At the same time, not every Gen Zer knows what mortgage lenders are looking at when evaluating a home loan application. On average, 33.9% of Gen-Z were wrong about the factors lenders consider when deciding whether to approve a mortgage, according to the survey.
What most mortgage lenders look at when considering your application
CNBC Select explains what factors influence mortgage approval and what young people can do to increase their chances of qualifying for a home loan.
Credit score
Most Gen Zers know that their credit score can impact their ability to secure a mortgage (73.2%). And while they’ve had less time to establish a credit history, Gen Zers have an average FICO score of 679 according to the latest data from Experian. That’s lower than that of older generations but still considered good.
The minimum credit score to qualify for a conventional mortgage is 620. Government-backed mortgages have more relaxed credit requirements. The minimum credit score for an FHA loan is 580 with a down payment of 3.5% or as low as 500 if you can put at least 10% down. USDA and VA loans don’t have set credit requirements, but lenders that offer them might.
Besides approval chances, a homebuyer’s credit affects the interest rate on the loan. A small difference in interest rates can add hundreds of dollars to a monthly mortgage payment.
It’s best to work on building credit before applying for a mortgage. Free credit monitoring services such as CreditWise® from Capital One and Experian free credit monitoring can be helpful in tracking progress and finding opportunities to improve.
CreditWise® from Capital One
Information about CreditWise has been collected independently by Select and has not been reviewed or provided by Capital One prior to publication.
Cost
Credit bureaus monitored
TransUnion and Experian
Credit scoring model used
VantageScore
Dark web scan
Identity insurance
Terms apply.
Experian Dark Web Scan + Credit Monitoring
On Experian’s secure site
Cost
Credit bureaus monitored
Credit scoring model used
Dark web scan
Yes, one-time only
Identity insurance
Terms apply.
Note that the scores credit monitoring services offer differ slightly from the scores mortgage lenders use when making their decisions. That said, they should be pretty close and provide a good idea of your overall credit health.
Debt-to-income ratio (DTI)
Almost one-third of Gen-Z didn’t name the debt-to-income ratio (DTI) as one of the factors affecting mortgage approval (32.8%). In reality, lenders evaluate this closely when determining whether to approve a mortgage and what the terms of the loan will be.
DTI is the amount of debt relative to income. To qualify for a conventional mortgage, you don’t want a DTI any higher than 43%. For USDA and VA loans, the DTI limit is typically 41%, while the FHA might allow you to go up to 50%. Remember, these are guidelines — it’s up to individual lenders to determine the cutoff for what’s an acceptable number.
Calculating your DTI
To calculate your DTI, divide your total monthly bills, such as rent and any debt payments, by your gross monthly income (how much you make before taxes).
For example, let’s say your monthly bills total $2,500 and your gross monthly earnings are $5,000.
$2,500 / $5,000 = 0.5
Multiply the result by 100 to get the percentage. In this case, your DTI would be 50%.
Down payment
When a homebuyer makes a sizeable down payment, the lender may consider them a less risky borrower. Having more money to put down increases the chance of mortgage approval and can lower the monthly mortgage payment.
According to the survey, 10.1% of Gen-Z plan to put down 20% of their home price. If they do, they’ll start off with a good amount of equity in their home and won’t have to worry about private mortgage insurance (PMI). PMI is a monthly fee rolled into the mortgage payment, designed to protect the lender if the borrower can’t pay their home loan.
That said, it’s possible to secure a mortgage without a 20% down payment. In fact, FHA loans require as little as 3.5% down with a credit score of at least 580. Qualified first-time homebuyers can also put 3% down with conventional mortgages, such as HomeReady and Home Possible. USDA and VA loans have no down payment requirement at all.
Saving up for a down payment can take some time — often, several years. Putting the funds in a high-yield savings account can help them grow a little faster. Some of CNBC Select’s favorite accounts include LendingClub High-Yield Savings and the Western Alliance Bank Savings Account for their high APYs and ease of use.
LendingClub High-Yield Savings
LendingClub Bank, N.A., Member FDIC
Annual Percentage Yield (APY)
Minimum balance
No minimum balance requirement after $100.00 to open the account
Monthly fee
Maximum transactions
Excessive transactions fee
Overdraft fees
Offer checking account?
Offer ATM card?
Western Alliance Bank Savings Account
Western Alliance Bank is a Member FDIC.
Annual Percentage Yield (APY)
Minimum balance
$1 minimum deposit
Monthly fee
Maximum transactions
Up to 6 transactions each month
Excessive transactions fee
The bank may charge fees for non-sufficient funds
Overdraft fee
The bank may charge fees for overdrafts
Offer checking account?
Offer ATM card?
Terms apply.
Employment
Current employment, as well as work history, are also factors in mortgage lending decisions. It’s not uncommon for a lender to require two years of consistent employment history. Note that it doesn’t necessarily mean working for the same company. More likely, the lender will be looking to see whether the borrower has been employed in the same line of work or career field and if there are any lengthy gaps without a job.
Showing this kind of consistency can be tricky for Gen Zers who have only just started building their careers. However, as long as the homebuyer can prove they have a stable income and are a responsible borrower, the lack of two years of work history might be something a lender can live with.
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How Gen-Z can prepare for a mortgage application
While mortgage lenders generally examine the same things when evaluating an application, they might not always agree on what’s an acceptable risk. Individual lenders also may offer different types of home loans, work with different down payment assistance programs or even have their own unique offers for first-time homebuyers.
For that reason, it’s wise to speak to several lenders before choosing one. Plus, this will also allow for interest rate shopping, which is essential to securing the best possible mortgage terms.
CNBC Select picked PNC Bank as one of the best lenders for first-time homebuyers, thanks to the variety of home loan options they can offer. Rocket Mortgage can be a good choice for borrowers with lower credit scores, and Ally Bank Mortgage can help new homebuyers save on lender fees.
PNC Bank
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, FHA loans, VA loans, USDA loans, jumbo loans, HELOCs, Community Loan and Medical Professional Loan
Terms
10 – 30 years
Credit needed
Minimum down payment
0% if moving forward with a USDA loan
Terms apply.
Ally Bank Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Conventional loans, HomeReady loan and Jumbo loans
Terms
15 – 30 years
Credit needed
Minimum down payment
3% if moving forward with a HomeReady loan
Terms apply.
Bottom line
Gen-Z are entering a challenging housing market, but many feel up for the task and plan to buy a home in the next few years. Homeownership can be an excellent way to build wealth, but before springing into action, it’s a good idea to educate yourself on what impacts mortgage lending decisions and get your financial ducks in order based on what you’ve learned.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
