Flagstar Bank Lender Review 2021: A Full-Service Bank With Mortgage Options for Most Borrower Types

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Flagstar Bank Lender Review 2021
Flagstar Bank Lender Review 2021
Editor’s Score: (4.4/5)
Flagstar Bank Lender Review 2021
Editor’s Score: (4.4/5)
  • Minimum Credit Score:
    600 VA; 620 conventional, FHA, USDA; 660 jumbo
  • Minimum Down Payment:
    0% to 3.5% depending on loan type
  • Can Apply Online:
    Yes
  • Operates In:
    All 50 States

NextAdvisor’s Take

Pros
  • Has an extensive loan lineup for purchases, refinances, construction, and more
  • Operates 150 branches
  • Mortgages available in all 50 states and Washington, D.C.
  • $1,000 discount on closing costs for veterans and first responders on certain loan types
  • Flexible mortgage options for low-income borrowers (in certain states)
  • Full application process available online or in person
Cons
  • Credit score requirements a bit higher for FHA loans and USDA loans compared to some other lenders
  • History of regulatory actions
  • Above average consumer complaints per 1,000 loans
The Bottom Line

Flagstar can be a good option for just about any borrower, since the bank offers many types of home loans. However, you might need fair or better credit to qualify since the credit score requirements on FHA loans and USDA loans are a bit higher compared to some other lenders. The bank also has a history of consumer complaints and regulatory actions, which borrowers should be aware of.

Editorial Independence

As with all of our mortgage lender reviews, our analysis is not influenced by any partnerships or advertising relationships. For more information about our scoring methodology, click here.

Flagstar Bank Full Review 

Flagstar Bank, a subsidiary of Flagstar Bancorp chartered in 1987, is a full-service bank headquartered in Troy, Michigan. Flagstar offers checking and savings accounts, credit cards, personal loans, and investment products in addition to its mortgage loans. 

The bank originates mortgages in all 50 states and Washington, D.C., and has 150 retail locations spread across a handful of those states. If you’re in the market for a home loan, here’s what to know about this lender.  

Flagstar: Mortgage Loan Types and Products

Flagstar Bank offers a variety of mortgage options for borrowers looking to purchase, build, renovate, or refinance a home. Here’s what Flagstar Bank has on its menu right now:

Borrowers will find just about any type of home loan they’re looking for, and the bank is well-versed in helping customers overcome certain homebuying hurdles, too. A Flagstar representative says the company offers a $1,000 discount on closing costs for veterans and first responders who are purchasing a home with a conforming loan, government-sponsored mortgage, or a VA loan. 

The bank also connects borrowers with state housing programs that provide down payment assistance in Michigan, California, Nevada, Massachusetts, Washington, and other areas. And in designated counties within Michigan and California, Flagstar’s Destination Home mortgage sets flexible qualifying criteria for low- to moderate-income borrowers and has some options with no down payment. 

Flagstar Bank Transparency

Flagstar Bank’s website is easy to use, and you can get a rate quote without providing personal information or agreeing to a hard credit pull. This is important because you’ll be able to see if the lender’s a good fit without it affecting your credit. Once you enter a few details in the rate-quote tool, Flagstar estimates your interest rate for about a dozen loan options, such as a conventional 30-year fixed-rate mortgage, a VA 15-year fixed mortgage, and so on. 

Hit the “Apply Now” button, and you’ll be brought to a contact request page. A loan officer will contact you to discuss your mortgage options, or you can start an online application right away. You can also apply for a mortgage in person at one of the bank’s branches. Either way, a loan adviser will be assigned to help you through the application process and a loan processor will help during underwriting. You’ll get access to an online portal where you can upload documents, sign paperwork electronically, and track your loan progress. 

When researching mortgage lenders, it’s good to know whether it has a history of regulatory actions and complaints. Flagstar customers logged nearly 3,200 mortgage-related complaints against the bank between 2011 and 2021 through the Consumer Financial Protection Bureau (CFPB). In 2020 the company had 372 mortgage-related complaints, which equates to approximately 3 complaints per 1,000 loans originated — higher-than-average compared to other lenders we have reviewed. The most common complaint cited in 2020 was “trouble during payment process.”

Additionally, the federal government settled a civil fraud lawsuit against Flagstar Bank in 2012 for improperly approving mortgage loans for government insurance. Flagstar was ordered to pay a $132.8 million penalty and to reform its business practices. Two years later, the Consumer Financial Protection Bureau took action against Flagstar Bank for illegally blocking borrowers’ attempts to avoid foreclosure. The CFPB ordered Flagstar to pay $27.5 million to affected homeowners and pay a $10 million fine. NextAdvisor contacted Flagstar Bank to request comment on the complaints, lawsuit, and fine. A Flagstar representative shared the following response in a written statement: “We take customer complaints very seriously, which is why we have a rigorous, enterprise-wide program in place to address customer issues. The program is built on accountability, has a clear process for escalation, and requires responses within specific deadlines.”

Flagstar Bank: Mortgage Rates and Fees 

Flagstar Bank doesn’t advertise daily interest rates on its website, but customers can get a customized rate quote online, over the phone, or at a bank branch. When you later submit a mortgage application, the lender will give you a list of fees you’ll pay at closing. These vary based on the borrower, location of the property, and the type of loan. 

We didn’t receive a list of fees specific to Flagstar, but borrowers commonly pay the following costs with most lenders:

Flagstar doesn’t charge prepayment penalties, so you won’t be on the hook for an extra fee if you decide to sell your home, refinance, or pay off the balance soon after closing. 

The minimum credit score and down payment required by this lender vary by loan type, according to a company representative. Borrowers need a credit score of at least 620 to qualify for a conventional loan, and some products come with a minimum 3% down payment. 

Flagstar sets the same 620 credit score requirement for FHA loans and USDA loans, while eligible borrowers may get a VA loan with a credit score of 600. You’ll need a down payment of at least 3.5% for an FHA loan but no down payment on a VA loan or USDA loan. 

The bank also offers jumbo loans, which are mortgages that exceed a dollar amount called the conforming loan limit. The Federal Housing Finance Agency sets this limit and it may change each year. In 2021, the conforming loan limit is $548,250 — though it can be higher in certain high-cost areas. Flagstar borrowers who want to buy homes over this limit will need a credit score higher than 660.

These requirements are based on a single-unit property, so they may vary if you’re looking for a condo or multi-unit property. A loan adviser can provide a more accurate rate quote based on your personal situation.

Borrowers can lock in a mortgage rate for 30 days initially and then pay a fee to extend the rate lock on certain mortgages. But you might not need an extension, since Flagstar typically closes loans within 21 to 30 days — and in some cases within 15 days.

Refinancing With Flagstar Bank

Flagstar Bank provides a brief overview of the refinance process on its website, along with a refinance calculator and a link to general mortgage information. Loan advisers can help you review the best refi options and provide a customized rate quote without a hard credit pull.  

Borrowers have a choice between a rate-and-term refinance — in which you get a new interest rate, loan term, or both — or a cash-out refinance, where you take out a loan for more than you owe and receive the difference in cash. 

As with any home loan, it’s a good idea to compare mortgage lenders before refinancing.  

Flagstar Bank Compared to Other Mortgage Lenders

Flagstar BankPennyMac Loan ServicesSebonic Financial
Minimum credit score600 for VA; 620 for conventional, FHA, and USDA; 660 for jumbo Typically 620 for a conventional loan and 580 for FHA loan620 for conventional; 550 for FHA
Minimum down payment0% for VA and USDA; 3% for some conventional; 3.5% for FHA0% for VA loan and USDA; typically 3% to 5% for conventional; 3.5% for FHA0% for VA and USDA; 3.5% for FHA; 5% for conventional
Where does the lender operate?All 50 states and Washington, D.C.49 states and Washington, D.C.All 50 states and Washington, D.C.
Major loan typesConventional, VA, FHA, USDA, jumbo, fixed-rate, adjustable-rate, refinance, cash-out refinance, construction, renovation, home equity productsConventional, VA, FHA, USDA, fixed-rate, adjustable-rate, refinance, cash-out refinance, several streamlined refinance optionsConventional, jumbo, VA, FHA, USDA, adjustable-rate, fixed-rate, refinance, cash-out refinance

How to Shop Around to Get the Best Mortgage Rate

Mortgage rates can fluctuate every day and even by the hour, and every lender has its own way of setting rates for customers. So shopping around and getting multiple rate quotes is the best way to find a good deal. Start by researching mortgage lenders, submitting at least three mortgage applications, and comparing Loan Estimates. (You’ll reduce the hit to your credit by submitting these applications within a short time frame, about two to six weeks.)

According to research from the Consumer Financial Protection Bureau, the simple step of comparing offers can help you save as much as $300 per year. You may save even more based on the interest rate you receive and whether you negotiate. 

Editorial Independence

As with all of our mortgage lender reviews, our analysis is not influenced by any partnerships or advertising relationships. For more information about our scoring methodology, click here.