With improved technology, people are doing more online than ever before — including every step of the home buying process.
Even before the COVID-19 stay-at-home orders, 50% of borrowers chose their lender based on whether or not it had an online application.
But for all the potential ease and speed of an online mortgage, some lenders may have their downsides, too. Just because a mortgage lender has online abilities doesn’t mean you’re getting the best deal possible. Evaluating a lender based on transparent pricing, accessibility to most borrowers, an extensive product offering, and a reputable history with customer satisfaction are important qualities, too.
That’s why it’s imperative you shop and compare a few mortgage lenders before committing.
A study by the Consumer Financial Protections Bureau (CFPB) cites a variant of 0.5% between mortgage rates with two similarly qualified candidates between lenders.
To help you navigate the process, NextAdvisor reviewed 36 different mortgage lenders and scored each one on categories including online convenience, transparency, accessibility, loan product variety, and customer satisfaction. We then narrowed it down to the following list of the best online mortgage lenders of January 2022.
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.
Best Online Mortgage Lenders of January 2022
- Rocket Mortgage, 4.6/5 Stars
- Truist Mortgage Lender, 4.5/5 Stars
- Sebonic Financial, 4.5/5 Stars
- Pennymac Mortgage, 4.5/5 Stars
- Better Mortgages, 4.4/5 Stars
- AimLoan Mortgages, 4.4/5 Stars
1. Rocket Mortgage, 4.6/Stars
Rocket Mortgage is the online lender for Quicken Loans and is one of the largest mortgage lenders in the U.S. We ranked the Detroit-based company as one of the best online mortgage lenders because of its simple digital-online application process, large nationwide footprint, low level of consumer complaints, the transparency and accessibility of its rates and fees, and the company’s wide offering of mortgage loan products.
Rocket Mortgage originated over one million loans in 2020, making it the largest lender we reviewed by total volume. Despite its magnitude, the company has lower-than-average consumer complaints registered on the Consumer Protection Financial Bureau’s (CFPB) consumer complaint database. We found 0.48 complaints per 1,000 loans — or less than half a complaint per 1,000 loans occurred. This figure is very low compared to the average complaint ratio of 2 complaints per 1,000 loans among other lenders we reviewed.
Rocket Mortgage offers prequalification and loan applications all online. It also offers support to new applicants through an online chat feature or over the phone seven days a week. For help with an existing mortgage application, phone support is available six days a week with slightly more limited hours.
Rocket Mortgage can simplify your application by importing — with your permission — certain data, such as employment history and financial account or income verification.
2. Truist Bank, 4.5/5 Stars
Truist Bank, now merged with Suntrust and BB&T under its name, has an extensive footprint across the U.S. through its thousands of brick-and-mortar branches and online presence. Truist offers a comprehensive menu of online or in-person banking accounts such as checking, savings, money market, and CDs. If you are in the market for a bank, looking to switch banks, or already have a Truist account, there is an allure of convenience to also have your mortgage through the same institution. Some lending institutions also give incentives or discounts to existing account holders.
Along with the company’s solid menu of mortgage products, easy-to-use online application process, transparency of rate and fee information, and average number of complaints compared to other reviewed lenders, the brand’s website is easy to navigate with several useful resources to help with the borrowing process, such as calculators, videos, and sample mortgages.
3. Sebonic Financial Mortgages, 4.5/5 Stars
Sebonic Financial is the mortgage lender division of North Carolina-headquartered Cardinal Financial. Sebonic Financial scored well with NextAdvisor because of the company’s high-end digital borrowing experience, full mortgage product lineup which is available in all 50 states, and the lender’s history of below-average customer complaints with the CFPB.
Based on 2020 data, Sebonic has less than one complaint per 1,000 loans originated in the same year. Although Sebonic’s mortgage rates and fees are not listed on the company website, the online system, Octane, Sebonic’s proprietary borrowing platform, makes it easy to access a quote without a credit check or drawn-out process.
With Octane, borrowers can get a fast rate quote, start an application, upload documents, and sign closing documents, with real-time updates along the way. We found Octane to be one of the best online application processes compared to other lenders we’ve reviewed. It’s easy-to-use, high-tech, and we appreciate the ability to have a full-online digital experience with the option to speak to loan officers.
4. PennyMac Loan Services, 4.5/5 Stars
PennyMac Loan Services isn’t a well-known name. But the California-based mortgage lender stands out for its convenient online application process, ability to get a rate quote without a credit check, transparency of rates and fees, and low frequency of consumer complaints with the CFPB. In 2020, the CFPB reported less than 0.30 complaints per 1,000 loans. Pennymac offers most mortgage products in 49 states, with 16 brick-and-mortar branch locations.
PennyMac does not carry niche products such as renovation loans, jumbo mortgages, and reverse mortgages, but provides all three government-backed loans (FHA, VA, and USDA), conventional, ARM, and refinancing loans.
PennyMac stood out as one of the best online mortgage lenders due to its simple and positive online experience. With PennyMac website, borrowers can find mortgage calculators, quick online rate- quotes, and paperwork can be done digitally. At NextAdvisor, we value price transparency and accessibility. PennyMac met this expectation with daily rate and fee updates and customizable rate quotes on its user-friendly webpage.
5. Better Mortgages, 4.4/5 Stars
Better Mortgage is an entirely online lender based out of New York City. The company doesn’t offer as many products as its competitors, such as VA or USDA loans, renovation loans, or home equity products, but the company is named one of NextAdvisor’s best online mortgage lenders because of its money-saving incentives and streamlined application platform. Borrowers can get a fast online mortgage preapproval in minutes on most major loan types in 46 states.
Better’s rate and fee information is accessible through its website, and the CFPB reports a below-average rate of consumer complaints in 2020 (1 complaint per 1,000 loans).
6. AimLoan Mortgages, 4.4/5 Stars
AimLoan (American Internet Mortgage) originates mortgages online in all 50 states, with a limited mortgage menu. AimLoans does not offer jumbo or government-backed loans (i.e., VA, USDA, FHA loans) and compared to the other reviewed lenders, it received an average number of consumer complaints with the CFPB (2.2 complaints per 1,000 loans).
Yet the brand is named one of NextAdvisor’s top online mortgage lenders because the company received top scores with online convenience, transparency of rate and fees, and nationwide availability. Potential borrowers can obtain a customized rate quote online with up-to-date lender fees without going through a full application or credit check.
AimLoan has a high level of pricing transparency. The company’s rates and fees are accessible on its webpage. What also stands out is the guarantee of closing costs at the time of application. Compared to other reviewed mortgage lenders, this isn’t typical. Usually, closing costs are an estimated percentage and unknown until the closing worksheet is completed, which is well into the mortgage process.
Honorable Mention: Navy Federal Credit Union, 4.8/5 Stars
Navy Federal Credit Union was the highest-scoring online lender by NextAdvisor. It received maximum points with nationwide availability, price transparency, online convenience, and loan product variety. It has a slightly above average complaint ratio of 2.8 complaints per 1,000 loans.
This lender offers no-down payment and flexible credit requirements on most mortgage products to qualified military service members and their families. Navy Federal Credit Union’s footprint is nationwide but only lends to eligible military families. The lender is worth an honorable mention since military members and families that bank with Navy Federal Credit Union will find it a leading online option. But since its availability is limited to military members, it didn’t make the best list.
Honorable Mention: Costco Mortgage Program, Not Rated
The Costco mortgage program does not originate mortgages, so it was not included in the list of best online mortgage lenders. However, the useful digital marketplace is worth an honorable mention. Costco members have access to a network of participating mortgage lenders offering discounts and incentives for borrowing through this channel. Through the Costco mortgage marketplace website, you can fill out a universal application, compare loan offers, and cash-in on discounts or lender fees if you choose a lender through this program.
The marketplace platform is easy to navigate with transparent pricing and terms. You can get a rate quote online in minutes and will only be contacted by the lender with your expressed permission.
Online Mortgage Pros and Cons
Online mortgages can be more streamlined and automated, and therefore less expensive to process than traditional mortgages. But the same automated processes that make online loans easier to process can also create problems. If your situation is outside the norm, and you require the expertise of a mortgage professional, you may want to consider the in-person branch experience.
Typically less overhead
Can have lower rates and fees
Quicker loan processing
Lack of personal touch
Harder to get questions answered
Unique loan programs or personal situations can be more difficult to work through
Why It’s Important to Shop Around Between Different Online Mortgage Lenders
It’s important to compare offers from a variety of online lenders because each will evaluate your financial situation differently. To secure the best rate, fees, and terms for your situation most financial experts recommend comparing at least two to three different quotes. Here is what to consider:
A difference of 0.50% doesn’t sound like a lot but can save you thousands of dollars over the loan’s life.
Take this example on a 30-year fixed, $300,000 loan:
|Loan Amount||Interest Rate||Monthly Principal and Interest Payment||Total Interest Over Loan’s Life|
With this example, the 0.50% difference in interest rate is the difference of $82 a month. Over a 30 year loan, that difference equates to $30,096 in total interest.
Comparing Lender Fees
Securing the lowest interest rate isn’t the only factor you need to consider when comparing mortgage lenders. Two lenders can advertise the same mortgage rate but charge wildly different closing fees. A low rate with high closing costs can eat away at the savings you thought the low rate provided.
One sure-fire way to evaluate the difference between offers is to look at a mortgage loan’s APR. The APR factors in many of the loan’s fees, in addition to the interest rate, over the loan’s full term.
Consider this example on a 30-year fixed, $200,00 loan:
|LOAN AMOUNT||INTEREST RATE||CLOSING COSTS||APR|
Loan A is the more tempting offer since it has a lower interest rate but it has higher lender fees. Loan B may be overlooked because of its higher interest rate. But it has lower lender fees and a lower overall APR.
That is why the best apple- to-apples comparison when comparing offers is to compare the APR on each Loan Estimate. The best approach is to do plenty of research, narrow it down to a list of two to three, get prequalified with each, and compare the Loan Estimates side by side.
Don’t wait too long in between applications, though. According to Experian, multiple hard credit inquiries related to mortgages are counted once in a 30-day period.
For more information on specific lenders, NextAdvisor has an extensive library of mortgage lenders reviews here.
How We Chose the Best Online Mortgage Lenders
To find the best online mortgage lenders, we first looked at 39 reviewed mortgage lenders by NextAdvisor. The lenders chosen to be reviewed are based on consumer search interest. To narrow the list to the best online mortgage lenders, we developed a scoring framework using a weighted average score between 0 and 5, with more weight awarded to the criteria we determined to be the most important.
Our list doesn’t take into account key financial factors like mortgage rates, APRs, and fees, because those depend on market conditions and your individual creditworthiness. Instead of focusing on those numbers, it’s best to first determine the qualities you want in a lender and how to find the best mortgage rates. Then you’ll be prepared to find the best lender for you.
The factors we used to evaluate the best mortgage lenders are:
- Online Convenience: A lender is scored 1 through 5 based on the company’s online application experience. A 5 is awarded if the company’s mortgage application can be completed fully online with a streamlined process, including uploading documents and a customized rate quote. A lower score is awarded if additional phone calls are needed to process an application or for a poor online user experience.
- Transparency: Lenders are scored 0 through 5 based on the accessibility and transparency of mortgage rates, lender fees, and credit check requirements for rates and/or fees. A 5 is awarded if the lender advertises rates and fees on its websites and doesn’t require a hard credit check to get rates and/or fees. Conversely, a lower score is awarded when consumers cannot easily access rate and fee information and/or must go through a hard credit check to access them.
- Nationwide Availability: Lenders are scored 1 through 5 based on the company’s geographical footprint. A lender can score a 5 if it operates in all 50 U.S. States.
- Loan Product Variety: Lenders are scored 1 through 5 based on their loan product menu and variety of products offered. A high score of 5 is given if most or all mortgage products are available, with a lower score awarded for a limited mortgage menu.
- Customer Satisfaction: To measure customer satisfaction, we reviewed the number of complaints filed against each lender with the Consumer Financial Protection Bureau in 2020. We divided the total consumer complaints with the total number of loans originated over the same time period to get a complaint ratio per 1,000 loans originated. We sourced the total loans originated using publicly accessible data provided under the Home Mortgage Disclosure Act and regulated by the Federal Financial Institutions Examination Council (FFIEC).
Online Mortgages Frequently Asked Questions (FAQ)
How do I find the best online mortgage lender?
Outside of price and lender reliability, narrowing down your choice comes down to what is best for you and your personal circumstances. Depending on your goals and needs as a borrower, one online lender could be a better fit than another. For example, a first-time homebuyer with little savings for a downpayment can look into lenders with down payment assistance programs. Another borrower may have a low credit score and may need a lender with a lower credit threshold.
Here is what you can use to evaluate your decision:
Types of mortgages available
One of the first steps to narrowing down the list of online lenders you’re considering is figuring out what type of mortgage you need.
If you have blemishes on your credit report, like a bankruptcy, then an FHA loan is likely to be easier to qualify for than conventional loans. Other loans, such as USDA and VA loans, offer 100% financing with no down payment required. If you want to take advantage of any of these government-backed loan programs, then you’ll need to find a lender that offers these types of loans.
The loan repayment term can also impact the lender you choose. Most lenders offer 15-year or 30-year mortgages, but if you want a 10-year mortgage or a 40-year mortgage, your options will be more limited.
Homebuyer assistance programs
Homebuyer assistance programs can provide you with thousands of dollars to put toward your down payment and closing costs. For many first-time homebuyers this assistance is the difference between buying a home or needing to continue renting. As you’re comparing online lenders, be sure to ask if they have these types of programs.
What factors affect a mortgage rate?
Many factors that go into determining your mortgage rate. An online lender won’t give you an accurate estimate until you apply for a mortgage and have a credit inquiry performed. From there, a Loan Estimate will be provided that breaks down all of the fees and your interest rate. The following factors will determine your rate and fees:
The higher your credit score, the better your interest rate. You may be able to qualify for a mortgage with a credit score under 700, but you’ll pay a premium for the loan.
To get the lowest mortgage rate, you’ll want a credit score of 740 or higher. Building your credit score can take some time, but it can make homeownership much more affordable in the long run.
Loan-to-value ratio (LTV)
A loan-to-value ratio takes into account the size of your down payment or how much equity you have in your home if you’re refinancing. This figure is an important consideration for lenders. In the eyes of the lender, the lower the LTV, the more the borrower is invested in property, and the better the chances of loan approval and competitive rate.
An LTV of 80% or less will help you secure the best mortgage rate and allow you to avoid paying private mortgage insurance (PMI) on conventional loans. So if your home, or future home, is worth $200,000, a 20% downpayment of $40,000 will give you an LTV of 80%.
Debt-to-income ratio (DTI)
How much debt you have will limit the amount you can borrow and impact your mortgage interest rate. Because your mortgage is paid monthly, lenders typically look at your monthly debt payments and calculate it as a percentage of your income. This is known as your debt-to-income ratio, or DTI.
The maximum allowable DTI varies by loan type and can be as high as 50%. But the maximum DTI you’re allowed to have isn’t necessarily ideal. You want to make sure you’re purchasing a home you can afford, and as your DTI increases, your mortgage rate can move up right along with it. A good DTI target is 36% or less, including your future mortgage payment.
Proof of stable and consistent income is an important factor a lender will take into consideration when approving a low rate offer. Certain types of employment, such as self-employed or commission-based pay, could factor into a loan approval and rate offer. In the eyes of the lender, some borrowers are a riskier investment and may want the borrower to pay more for that risk.
What is an online mortgage?
An online mortgage is a home loan where the entire process, from application to approval, is completed online. Online mortgages are offered by lenders that are entirely digital, but may also be issued by lenders with physical locations that offer traditional mortgages as well. So with some online lenders you may have the option of applying online and still working with a local loan officer.
The nuts and bolts of an online mortgage are the same as traditional mortgages. You’ll typically have access to the same array of loan terms, and types of mortgages. So you’ll be able to get everything from an FHA loan to a conventional loan as an online mortgage.
An online mortgage can be ideal for certain consumers that prefer the in-person process. When a lender is fully-online, the application and mortgage underwriting process are entirely digital as well. However, even with an online mortgage you can still have an in-person or hybrid closing.
Keep in mind, the lender may be fully digital, but the attorney hired for closing may not be. So if you prefer a 100% home closing be sure the attorney offers this option. Although, some states have yet to pass remote notarization laws.