Better Mortgage Review: Is This Online Lender Right For You?

Gone are the days when you have to line up at a bank in order to finance a home. With Better Mortgage (a.k.a. Better.com), you can complete the entire home loan application process online.

Founded in 2014, Better.com is a direct lender that aims to make the home loan process more convenient. The company uses advanced algorithms to check market conditions and evaluate the individual characteristics of a property. Within minutes, Better.com can come up with customized mortgage rates just for you.

In this Better.com mortgage review, we'll take a closer look at the mortgage products offered by Better.com. We'll also look at the lender fees and rates to see if they're the right mortgage corporation for you.

What To Look For In A Mortgage Lender

Before we move on, let's discuss the factors we assess when reviewing a lender.

Available Loan Options

The best lenders offer a wide variety of loan types. Typically, you can pick from the following:

Conventional Loans

This refers to mortgages that are not insured by the federal government. They can be used for a primary or secondary home, as well as investment properties.

This type of loan is ideal for people with strong credit, a stable income, and a down payment of at least 3%. However, you'll be required to buy private mortgage insurance if your down payment is less than 20% of the home's purchase price.

Under this category, you can find these two loan types:

Conforming: These are mortgages where the loan amounts fall within the maximum limits set by the Federal Housing Finance Agency.
Non-conforming: These are loans that don't meet guidelines set by Fannie Mae and Freddie Mac. Typically, they include loans made to borrowers with poor credit, high debt, or a recent bankruptcy. Jumbo loans also fall under this category.

Government-Backed loans

The U.S. government does not offer mortgages directly to homeowners but instead guarantees loans that are offered by mortgage lenders.

Typically, you can choose from the following government-backed mortgages:

FHA loans: This type of loan is backed by the Federal Housing Administration. It's ideal for people who cannot make a large down payment or don't meet the credit score requirements of other types of loans. Generally, you'll need a credit score of at least 580 for a 3.5% minimum down payment.
VA loans: This type of loan is offered to people who served in the armed forces. It's also available for those who were discharged honorably.
USDA loans: This is ideal for rural property buyers who cannot secure a loan from traditional lenders.

Rate Terms

Aside from loan types, lenders should also give borrowers the ability to choose how their loans are rated. Typically, you can pick between the following:

Fixed-rate mortgages: These have a consistent rate for the entire period. Usually, you can choose from 15, 20, or 30-year fixed-rate loans.
Adjustable-rate mortgages (ARMs): These have an interest rate that's fixed for the first 5, 7, or 10 years. Afterward, your rates will be adjusted depending on market conditions. ARMs have caps, which prevent the interest rates from increasing sharply.

Mortgage Rates And Fees

Before you sign a contract with a lender, they'll provide you with a loan estimate. This estimate should include the interest you'll pay along with the other fees they will charge you.

We evaluate the price range offered by a lender by looking at the following factors:

Mortgage interest rates: The interest rate (expressed in percentages) determines how much you'll pay each month or year for your mortgage.
Annual percentage rate: The annual percentage rate reflects the interest rate, mortgage broker fees, and other charges you pay for the loan. Since it includes more fees, it's usually higher than the interest rate and is a more accurate picture of your expenses.
Discount points: This refers to upfront payments you can make to lenders to reduce the interest rate on your loan. One point is equal to 1% of the loan amount.
Origination fee: Some lenders charge this fee to cover administrative costs related to processing your mortgage.
Underwriting fee: Some lenders charge this fee to cover the work of evaluating your application.
Application fee: Some lenders require application fees before reviewing documents provided by potential borrowers. This may be included in your loan origination fee, so review your estimate carefully to ensure you're not being double-charged.
Credit report fee: Lenders usually check your credit score during the underwriting process. This fee will cover the cost of obtaining your credit report.
Rate lock fee: Some lenders charge a fee before they guarantee an interest rate to a borrower.
Private mortgage insurance (PMI): Most lenders require you to buy PMI if your down payment for a conventional mortgage is less than 20%.

Application Process

One of the most troublesome aspects of buying a property is applying for a mortgage. Borrowers will need to do some paperwork, wait for the application to be processed, and anticipate the result. On average, it can take more than a month to close a mortgage deal.

Fortunately, technology is changing how the industry works. Most lenders now have an online process that allows borrowers to take out a mortgage online. They also have automated underwriting systems that help them evaluate borrowers as quickly as possible.

When assessing the efficiency of a lender's mortgage application process, we look at the following:

Is the lender's online system fast and easy to navigate?
Can the borrower upload/sign documents online?
Is there transparency during the process?
Does the lender make soft/hard credit inquiries when assessing borrowers?
How fast can the mortgage company close a deal?

Customer Service

Customer satisfaction is one of the main factors we look at when evaluating a mortgage company. To assess a company's customer service, we look at the following:

Can customers call or set up a meeting to discuss issues?
Are complaints/issues resolved quickly?
Does the company have a good online reputation?
What is their rating with the Better Business Bureau?

Better.com Mortgage Review

Better Mortgage offers loans for borrowers looking to buy a home or refinance an existing property. Whether you're buying a single-family home or Planned Unit Development (PUD), you can turn to them for assistance. The company also provides loans for people looking to buy foreclosed/banked-owned properties.

However, keep in mind that they do not provide loans for multi-family homes, modular homes, and mixed-use properties.

Available Loan Options

Unfortunately, Better Mortgage doesn't offer an extensive range of loan types. In general, they only offer the following:

Conventional Loans

Better.com Mortgage offers conventional loans with a 3% minimum down payment. Under conventional loan types, you can choose between a 15, 20, or 30-year fixed-rate mortgage or an adjustable-rate mortgage.

HomeReady Loan Program

Better.com offers loans under Fannie Mae's HomeReady program. This is ideal for borrowers with low income and cannot pay a large down payment.

FHA Loans

Better.com offers mortgages backed by the FHA. For this type of loan, you only need to make a 3.5% down payment. Credit requirements are also typically more lenient.

Jumbo Loans

If you are buying a more expensive property, you can also turn to Better.com for a jumbo loan. You can get jumbo loans with no mortgage insurance if you provide a 10% down payment. As with conventional mortgages, you have the option to choose between a fixed-rate or adjustable-rate mortgage.

Mortgage Rates And Fees

Generally, Better.com offers slightly lower mortgage rates compared to traditional lenders like banks. It also has lower annual percentage rates. These are true for both home purchases and refinancing.

The best part about Better.com is that the company doesn't charge any lender fees. You don't have to worry about paying for underwriting and origination fees, either. According to the company, waiving these fees can help new home buyers save up to $19,600. Meanwhile, people who refinance their property can save up to $7,300.

The company also offers a better-price guarantee. They will try to match any valid competitor's offer and provide borrowers with an extra $100 credit. Even if they cannot match the offer, they will send the $100 to the potential borrower anyway.

Additionally, Better Mortgage provides a Better Real Estate discount in some states. If you hire a real estate agent referred by the company, then choose the company as your mortgage lender, you'll be eligible for a $2,000 discount.

Like most lenders, Better.com will require you to pay private mortgage insurance for conventional loans with less than a 20% down payment.

Application Process

Getting a mortgage at Better.com will take only a little over three minutes. You need to provide basic credit information and allow the system to conduct a soft credit inquiry – this enables the online mortgage lender to access your credit score and history.

People who are applying for a conventional loan are required to have a FICO score of 620 or higher and a debt-to-income ratio of up to 55%. You may also need to make a minimum down payment of 3%. Better Mortgage also follows the loan requirements for mortgages approved by Fannie Mae and Freddie Mac, as well as those backed by the Federal Housing Administration.

At Better.com, you can get your loan estimate right away – no need to wait three days or more, like other mortgage lenders. Once you receive the official estimate, you can get a pre-approval letter and lock in your mortgage rate.

On average, Better.com can close on a mortgage within 21 days. This is a lot faster than the industry average. After your loan closes, Better.com will transfer your loan to a servicing company. The company will contact the servicer on your behalf if any issues arise.

Customer Service

Better.com is an online mortgage lender, so the company prefers to handle all its transactions through its website. You don't have to deal with paper documents or have phone conversations unless absolutely necessary. If you need in-person assistance, you can schedule a time for them to call you.

Keep in mind that the company's service team doesn't earn any commissions – they won't push you to sign up for services you don't need just to make a sale. Instead, they earn bonuses whenever they receive high satisfaction ratings.

Since Better.com is a relatively new company, you won't find a lot of information on the Consumer Financial Protection Bureau's (CFPB) complaint database related to the company's services. However, based on the little information so far, it seems that the company has very few complaints compared to the number of mortgages it has sold in the past few years.

The company has an A- Rating with the Better Business Bureau. It has received 52 complaints in the past three years.

Pros

Complete online experience: If you prefer handling the mortgage process online, Better.com is for you. It has an automated system that produces mortgage rate quotes instantly. You can also get a pre-approval letter in as fast as three minutes.
Quick closing: Better.com has a seamless mortgage process that will allow you to secure a loan as quickly as possible. On average, the company can close a loan within three weeks.
Automatic discounts: Better Mortgage's online system checks the details of your application and automatically applies discounts that you're eligible for.
Borrowers with a fair credit score can qualify: With a minimum credit score of 620, you can qualify for a loan at Better Mortgage.
Cost savings: If you get a mortgage from Better.com, you don't need to pay a lender fee or origination fee. You don't have to worry about underwriting fees or application fees, either.

Cons

Limited loan options available: Unfortunately, VA or USDA loans are not available at Better.com. Home equity loans and home equity lines of credit are also not available.
No brick-and-mortar locations: If you prefer talking to a loan officer face-to-face, you're out of luck.
Not available in all states: The company only offers loans in 43 states and the District of Columbia. According to their website, they are working to become licensed in all 50 states soon.

The Bottom Line

Better.com is a mortgage lender that offers a complete online experience. If you're a tech-savvy individual who prefers to do all your transactions through the web, then this lender is a good fit.

Additionally, Better.com Mortgage offers competitive mortgage rates. If you choose to take out a loan from the company, you don't have to worry about paying lender fees or origination fees, either.

If you want to learn more about the best mortgage lenders, get in touch with Wesley Mortgage, LLC. We'll help you look for a lender that can help you buy a home or refinance your existing property.