Ally Bank Mortgage Review: Best Value For Existing Members
With the rise of the Internet and digital technology, people have become more and more dependent on online businesses. Mortgage lending isn’t an exception to this, with banks increasing their focus on online loan applications and processing.
Operating since 2016, Ally Home is one of the major players in online mortgage loans. In this Ally Bank Mortgage review, we’ll go in-depth on how they do as an online lender. We’ll explain the main criteria that you need to look for in a mortgage lender and review how well Ally Bank does on each one of them. We’ll also go over the strengths and weaknesses of working with Ally Home as your lender.
Mortgage Lender Review Criteria
To help define what makes a good lender and how well Ally Home performs as one, we need to establish several review criteria. Here are the five main criteria that we’ll discuss in this review.
Home Loan Options Offered
We always take a look at the main products and services the lender offers – in this case, home loans. For a better understanding of what mortgages we prioritize, here are the five major home loan types explained:
Conventional Fixed-Rate Mortgage
Fixed-rate mortgages are the most common conventional loans chosen by homebuyers. These loans boast a constant interest rate for the entire life of the loan, giving you the same monthly payment amount until you’ve finished paying your loan off. These loans are popular because their predictability makes it easier for long-term financial planning.
These loans are regulated by the Federal Housing Finance Agency (FHFA), which imposes upper limits on how much you can take out on a fixed-rate mortgage. Generally, these loans are offered in 15-year, 20-year, and 30-year fixed-rate terms, although some lenders may offer any number of years under 30 in their product lineup.
Conventional Adjustable-Rate Mortgage (ARM)
In contrast to fixed-rate mortgages, an adjustable-rate mortgage’s interest rate fluctuates during the life of the loan. These loans have rates that rise and fall depending on a market index chosen by the lender. The rates are then adjusted periodically by the lender, most commonly on an annual basis.
The fluctuating rates may impact your monthly payments, causing you to pay more or less each year depending on the market rates. However, ARMs usually offer more competitive rates in the first few years compared to a fixed-rate loan.
Jumbo mortgages are conventional loans that feature amounts exceeding FHFA limits – these are usually taken out when you’re looking to buy a more expensive home. While they provide a larger budget for you, lenders take on more risk with these loans and may impose higher rates and minimum credit score requirements as a result.
If you fulfill certain criteria, you can qualify for a government loan. This loan type usually features lower credit score minimums, required down payments as low as 3%, and affordable rates.
The loan types that fall in this category include an FHA loan for low-to-middle income homebuyers, a VA loan for military service members, and a USDA loan for rural homebuyers.
Refinancing a mortgage means that you’re taking out a new loan to pay off your current one, usually used to take advantage of a lower rate, switch from an ARM to a fixed-rate loan, or vice versa. If you’ve built enough equity in your home, you can also take advantage of cash-out refinancing.
When you take out a cash-out refinance, you’ll get a new loan that is worth more than your remaining debt. You can then use the extra cash for other needs.
Rate And Fee Information
Being able to reliably and accurately check your interest rates and lender fees – including closing costs, origination expenses, and other fees paid at closing – is an essential part of mortgage shopping. If accessing your estimates is easier, you’ll find it easier to calculate how much your mortgage will cost you.
We also rate the bank’s online service completeness. In addition to their loan application page on their website or app, we also check if they have additional features that make the application process more convenient.
Sometimes, banks don’t have branch offices in all fifty states but provide service across all of the continental United States. For this criterion, we examine the bank’s service availability in the entire United States.
Customer satisfaction is an integral part of the mortgage lending process. Therefore, we’ll examine how the bank rates from a customer service standpoint. For a better measure of this, we’ll take a look at customer review studies and reports from organizations like J.D. Power, the Better Business Bureau, and the Consumer Financial Protection Bureau.
Ally Home Mortgage
Originally founded under General Motors in 1919, Detroit-based Ally Bank began offering mortgages in the 1980s but stopped in 2013 due to the housing crisis. After announcing its reentry into the mortgage industry, Ally Home (NMLS ID #181005) was launched in 2016 as the direct-to-consumer online lender subsidiary of Ally Bank.
Ally offers a suite of mortgage loans for home purchase and refinance on an online-only basis, operating without physical offices. Ally Bank also offers traditional financial products and services such as banking and credit cards on a similarly online basis, in addition to investment banking through Ally Invest.
Home Loan Options Offered
Ally offers a suite of mortgage options commonly found in most online mortgage lenders, which include:
Conventional fixed-rate mortgages with 15-year, 20-year, and 30-year terms
Adjustable-rate mortgages with 5/1, 7/1, and 10/1 terms
Jumbo loans without private mortgage insurance for qualified customers
Mortgage refinance in fixed-rate and adjustable-rate terms
These mortgage products generally require a credit score of at least 620 and a maximum debt-to-income ratio of up to 50%. However, jumbo borrowers will have to attain a credit score of at least 700 and a maximum debt-to-income ratio of 43%.
To qualify for jumbo loans without mortgage insurance, you’ll need to come up with a 10% down payment for a $1.5 million loan and a 20% down payment for $2 million loans. You may borrow up to $4 million on jumbo loans if you pass a review by the Ally Home team.
At the moment, Ally Home Loan doesn’t offer government-backed loans. So if you’re looking for FHA, VA, or USDA loans, you may have to look up another lender.
In addition to the lack of government mortgages, Ally Bank also doesn’t offer home equity loans or home equity lines of credit, which means you’ll need to find another lender if you’re looking to leverage your home’s value. The only option that the bank offers in this regard is cash-out refinancing.
However, if you’re looking for a more affordable path to homeownership as a first-time borrower, Ally Mortgage provides a low-down-payment loan called a HomeReady mortgage. This program is offered by loan guarantor company Fannie Mae to low-to-moderate-income homebuyers, allowing them to buy a home with down payments as low as 3%.
To qualify for Fannie Mae’s HomeReady mortgage, you need to fulfill the following requirements:
Your income must be within a certain limit, determined by your area.
You have a credit score of at least 620.
You have completed a first-time homeowner’s education course.
You pay for mortgage insurance if you put under 10% down, until your home equity reaches 20%
For first-time homebuyers, Ally provides a mortgage “playbook” that explains how to choose the right mortgage type and build your financial health. It also contains other helpful tips regarding mortgages and refinancing.
Rate And Fee Information
The home mortgage and refinance page on Ally’s website provides a rate estimate tool that you can customize according to your location, property price, down payment amount and credit score estimate. You can also designate the property type and purpose for more accurate estimates.
The rating tool supplies information on interest rates and annual percentage rates alongside your monthly payment amount. It also shows you the amount of closing costs that you need to pay. You can click the question mark next to the lender fee amount to break down what items are included in your closing costs, such as origination charges, credit report fees, and flood certification expenses where applicable.
Ally provides a monthly payment calculator to help you estimate how much you’ll be paying each month on your house. This calculator breaks down your monthly payment and gives you a picture of how much you’ll be paying for your interest and principal, property taxes, as well as homeowner’s insurance.
Additionally, Ally Home’s intuitive online application process is framed as a question-and-answer survey in everyday language – no complicated jargon, so you can fill it out without any issues. However, if you do encounter a problem during the application, Ally Home’s loan consultants are available for contact at any time.
Once you’ve filled this survey out, you’ll receive mortgage options that suit your needs. You’ll also be able to sign and submit documents electronically. After you complete the application, the Ally Home Team will let you know once your loan has been closed.
Since Ally is an entirely-online bank, they have no physical branches. This means that if you prefer to get your mortgage shopping done by visiting physical banks, Ally may not be the lender for you. However, Ally does offer 24/7 customer service support to address your issues at any time.
As of February 2020, Ally serves mortgage needs in 40 states and the District of Columbia. Ally doesn’t offer home loans in Hawaii, Massachusetts, Maryland, Minnesota, New Hampshire, New York, Nevada, Virginia, Vermont, and Wyoming.
At the time of this writing, Ally Bank has not been accredited by the customer satisfaction review body Better Business Bureau (BBB). However, BBB has rated the company a B- with 245 total complaints filed within the last 3 years.
While the bank’s mortgage arm Ally Home did not appear in recent J.D. Power mortgage satisfaction studies, its main company Ally Bank is rated 864 out of 1000 by J.D. Power in their 2019 direct banking satisfaction study. This places them second behind Charles Schwab Bank with an “Among the best” rating.
We found no information from the Consumer Financial Protection Bureau regarding Ally Home mortgages, but the CFPB has taken action against Ally Financial in a fair lending issue regarding auto loan practices in 2013. However, there are no major scandals or issues that involved Ally Bank or Ally Home in recent years.
In this section, we’ll break down the two main advantages of taking out a mortgage from Ally.
Fast Loan Processing
In addition to its simplified online experience and mortgage application process, Ally also boasts a fast turnaround on loan processing. When you apply for a mortgage loan with Ally, you can get a pre-approval within three minutes. You can also close your loans in 30 to 40 days or less, 10 days faster compared to the industry average.
Closing Cost Credit
If you’re already banking with Ally, you’re at an advantage. If you own an Ally account that’s at least 30 days old, you’re eligible for a $500 credit on your closing cost. By fulfilling this very simple requirement, you can save up a decent amount of money to help pay your mortgage expenses after you take out your loan.
There are some caveats to working with Ally to finance your home – here are two of the main drawbacks.
Lack Of Loan Variety
Ally’s loan options are somewhat limited. Because they only offer conventional loans, the bank doesn’t provide USDA loans or FHA loans. If you’re looking for FHA, VA, and USDA loan options, Ally may not be the right lender for you.
Another limitation if you’re looking to take advantage of your home’s value is that Ally doesn’t offer home equity loans and home equity lines of credit.
Your only option for a home loan with low credit scores is the HomeReady mortgage, which allows you to get a home for as little as a 3% down payment.
Limited Physical Presence And Service Availability
Because all of Ally’s banking and mortgage services are done online, you may find it difficult if you’re the type who prefers face-to-face interaction with loan officers and customer service agents. While Ally does provide customer service by phone, it’s still no substitute for in-person interaction for some.
Ally only provides mortgage services in 40 states and the District of Columbia. If you plan to buy a home in the other 10 states, you may need to look for other options.
Thanks to their completely online and intuitive application, Ally Bank makes mortgage applications easier for their borrowers. Their interest rate estimation tools and payment calculators also make it easier for comparison shoppers to see whether a mortgage from Ally provides the best value for them. However, this convenience is slightly offset by the limited mortgage products being offered and the lack of service in several states.
Looking for more online lender alternatives? Wesley Mortgage, LLC has compiled more lender reviews to help you decide on the lender that’s best for you. If you’re looking for a personal mortgage consultation, contact us today to see how our professional team can help you!