New American Funding Mortgage Review 2021: Great for First-time Homebuyers and Underserved Communities

A photo to accompany a review of New American Funding Mortgage Illustration/NextAdvisor

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New American Funding was established as a family business in 2003 and has grown into one of the largest privately owned direct mortgage lenders in the U.S. Borrowers can apply for a mortgage loan online, over the phone, or at nearly 200 offices across 32 states. 

This lender offers all the major mortgage programs plus one unique product where you can choose your own loan term. But borrowers in New York and Hawaii won’t be able to apply with this lender. Here’s what to know before applying with New American Funding.

Pros and Cons of New American Funding

Pros

  • Offers all the major mortgage programs and a unique product where you can choose your loan term

  • Borrowers can get a rate quote, apply, upload documents, and track the progress of their loan online

Cons

  • Borrowers can’t get a rate quote without a credit pull

  • Mortgages are not available in New York and Hawaii

  • Fees aren’t disclosed until you request a loan preapproval or submit a mortgage application

New American Funding: Loan Types and Products

New American Mortgage offers all the major mortgage programs and gives borrowers a choice between fixed-rate and adjustable-rate mortgage (ARM) loans. ARMs are available in 5/1, 7/1 and 10/1 terms. From start to finish, borrowers usually close on a mortgage within 30 to 45 days.

Here is what’s on the lender’s lineup right now:

New American Funding currently doesn’t offer construction loans or home equity loans. But it does offer a unique loan product called the I CAN Mortgage, which allows you to choose a repayment term between eight to 30 years on a primary residence. This provides more flexibility for selecting the ideal mortgage (and payment) for your situation. The I CAN Mortgage has a minimum down payment of 5% and a credit score requirement of 620, depending on the loan type.

New American also offers first-time homebuyer programs and can connect borrowers with state and local down payment assistance programs. It’s also focused on helping underserved communities access home loans. In 2019, 19% of New American’s loan volume went to Hispanic borrowers, compared with the national average of about 8%, and customers can talk with English/Spanish bilingual loan officers as needed. The lender also launched an initiative in 2016 to increase homeownership in Black communities.

New American Funding: Transparency

While New American Funding’s website says applicants can request a rate quote without registering or submitting documents, the process isn’t quite so easy. 

To receive a quote, you’ll need to fill out a form with details on your financial situation and contact information, set up an account, and allow the lender to review your credit profile. We spoke with a company representative to clarify details about the loan process. Prospective borrowers can’t get a rate quote without a hard credit pull, which is an extra step that most other lenders don’t require. This multi-step process can be confusing and misleading, and the hard credit pull could temporarily ding your credit.  

New American Funding: Rates and Fees 

New American Funding advertises daily refinance and purchase rates for conventional 15-year loans, conventional 30-year loans, VA 30-year loans, and FHA 30-year loans. These rates can change every day and are based on a few assumptions, such as having a credit score of 740 and a 40% down payment when buying a primary residence. 

Pro Tip

You can make sure you’re getting the best deal on your home loan by submitting at least three mortgage applications to different lenders and asking for a Loan Estimate. Take the best offer and send it to another lender, asking them to beat the interest rate or closing costs (or both). Getting a lower interest rate may help you save hundreds or thousands of dollars over the life of the loan.

The advertised rates can include discount points, which is an optional fee you pay at closing in exchange for a lower interest rate. This can lower your long-term costs as long as you’ll stay in the home long enough to recoup the fee. If you want to avoid this expense, you’ll likely get a higher mortgage rate than advertised.

The minimum credit score required by New American Funding is 580, though it may be higher for certain types of loans, such as conventional mortgages. 

We spoke with a New American Funding loan officer to get an idea of the lender’s fees and closing costs. There are no prepayment penalties on any of its loans, and you can lock in an interest rate for free for up to 60 days. A fee may apply if you need to extend the rate lock.

According to the representative, New American’s closing costs may include an origination fee of $1,629 plus third-party fees such as title fees and an appraisal fee. For a complete breakdown of the closing costs, including lender fees and discount points, you’ll need to request a preapproval or submit a loan application.

Refinancing With New American Funding

When you refinance a home loan with New American Funding, you’ll have several options. A loan officer can help you figure out which type of refinance works best for your situation:

  • Rate-and-term refinance, which lets you get a new interest rate, loan term, or both.
  • Cash-out refinance, in which you take out a mortgage for more than you currently owe and use the extra cash for any type of expense.  
  • FHA Streamline Refinance, which allows you to refinance an existing FHA mortgage. 
  • VA Interest Rate Reduction Refinance Loan (IRRRL), which is designed for VA loan borrowers who want to lower their interest rate or switch from an adjustable rate to a fixed rate.

To receive a breakdown of the fees you might pay for a loan refinance, you’ll need to contact the lender. You can avoid the upfront expense by rolling the closing costs into your new home loan, if you have enough equity.

New American Funding Compared to Other Mortgage Lenders

New American FundingFairway Independent Mortgage Corp.Guild Mortgage
Minimum credit score580620 for conventional loans; 660 for jumbo loans; 600 for FHA loans; 600 for VA loans620 for conventional loans; 600 for FHA, VA, and USDA loans; 680 for jumbo loans
Minimum down payment0% to 5%, depending on the mortgage program0% to 5%, depending on the mortgage program0% to 3.5% on most loans; 15% on jumbo loans
Where does the lender operate?Washington, D.C., and all states except New York and HawaiiAll 50 states and Washington, D.C.All 50 states and Washington, D.C.
Major loan typesConventional, jumbo, VA, FHA, USDA, renovation loans, adjustable-rate, fixed-rate, refinance, cash-out refinance, reverse mortgages, home equity lines of creditConventional, jumbo, VA, FHA, USDA, various renovation loans, adjustable-rate, fixed-rate, refinance, cash-out refinance, reverse mortgages, home equity loans, home equity lines of creditConventional, jumbo, VA, FHA, USDA, various renovation loans, adjustable-rate, fixed-rate, refinance, cash-out refinance, energy-efficient mortgages, manufactured-home loans, bridge loans, reverse mortgages

How to Shop Around to Get the Best Mortgage Rate

Shopping around for the best deal is so important because it can save you hundreds or thousands of dollars over the life of the loan. 

Take a look at one example: Say you’re looking to buy a home worth $200,000 with a 10% down payment and 30-year term. You receive quotes from two different lenders — and while they both offer the same closing costs, the interest rates are slightly different:

  • With an interest rate of 3.5%, your monthly principal-and-interest payment comes out to $808
  • A rate of 3.25% yields a monthly P&I payment of $783.

The lower rate saves you $25 a month — and while that might not sound like much, it adds up to $9,000 in savings over 30 years. 

When you’re shopping for a mortgage, submit applications to at least three lenders and ask for a mortgage Loan Estimate. This standardized form can help you compare interest rates and closing costs. An online mortgage calculator can help you figure out your monthly savings.

Bottom Line

New American Funding is a strong contender for most borrowers — but with Spanish-speaking loan officers and homebuyer assistance programs, this lender excels in serving first-time homebuyers and the Latinx community. It offers a full menu of mortgage options and a quick digital application, but borrowers can get help within minutes if needed. But as with any financial product, it’s always a good idea to compare offers when you’re looking to take out a home loan.