With the coronavirus pandemic limiting mobility, many businesses start to offer their services online – and mortgage lending is no exception. Guaranteed Rate, however, is ahead of the curve. Being an early player in the online mortgage game, they came prepared for the pandemic with their fast and fully-online application process.
But how does Guaranteed Rate stack up compared to other lenders? In this Guaranteed Rate mortgage review, we go in-depth on what makes it one of the premier options in online mortgage lending! We discuss their online convenience, their suite of loan offerings, as well as the assistance programs they offer.
Our Main Mortgage Lender Review Criteria
To understand how we review Guaranteed Rate’s performance, in this section we explain the five main criteria that this review uses to rate mortgage lenders.
Mortgage Products Offered
The primary measure of a mortgage lender’s performance is the loans that they offer. This is especially important because the right lender needs to offer the mortgage that you need. Here, we explain the major loan types in detail.
This loan is the simplest among the two conventional mortgage loan types. This simplicity comes from the fixed interest rate and APR that aren’t influenced by market conditions, which translates into identical mortgage payments until the entire loan is paid off.
Because of their stability and simplicity, fixed mortgages are popular with first-time homebuyers and borrowers who want to plan far ahead in their finances. However, due to the relatively higher rates, you may end up with a larger interest payment if you choose long-term mortgage loans like a 30-year fixed-rate mortgage.
Adjustable-Rate Mortgage (ARM)
In contrast to a fixed-rate loan, an adjustable-rate mortgage has a mortgage rate that may rise or fall according to a market index. These loans tend to have a short period of a fixed mortgage interest rate before they enter the adjustable phase. While the risk is higher than a fixed-rate mortgage due to unpredictable interest payments, ARMs are typically better for short-term savings due to the lower interest rate during their introductory period.
An ARM’s specifications are denoted in its title. If you get a 5/1 ARM, it means that you’ll have five years of a fixed mortgage rate. Once those five years pass, your interest rate will be adjusted once per year.
If you take out a jumbo mortgage, it means that you’re borrowing a loan valued beyond limits set by the Federal Housing Finance Agency (FHFA). These loans are a subtype of conventional mortgages, so you have the option to choose between fixed-rate and adjustable-rate jumbo mortgages.
Because these loan products represent more risk to the lender, you may encounter higher mortgage rates and credit score requirements.
The U.S. federal government provides home buying assistance to certain demographics through several loan products. The three major loan products are:
FHA loan: Aimed at low-to-moderate income homebuyers
USDA loan: Targeted at homebuyers who seek to live in rural areas
VA loan: Provided to help military personnel and their families find affordable housing
These loan products typically feature lower credit score requirements and a more affordable mortgage rate. However, you may need to pay for mortgage insurance or an equivalent expense on some of these mortgage loans.
Refinancing a mortgage entails taking out a new loan to replace your old one. Reducing your mortgage rates or changing your loan terms – from adjustable-rate to fixed-rate or vice versa – are the most common reasons to refinance.
If you’ve built some equity in your home, you also have the choice to take a cash-out refinance. This refinance loan converts the home equity you’ve built up into cash that you can use for other purposes.
Interest Rate And Mortgage Fees Transparency
Finding accurate interest rate and closing cost information is essential – reliable access to this data allows you to compare rates and fees from different lenders. This makes estimating the loan’s value easier. In this criterion, we discuss how easy it is to get estimates on your rates and mortgage fees.
This criterion covers the lender’s suite of online services. It includes their online application process as well as any other conveniences they offer.
Branch And Service Availability
While online services are important for lenders, some people also place great importance on going to a physical office and speaking to a loan officer face-to-face. This criterion discusses the lender’s branch presence and service availability all across the country.
Customer service can make or break the mortgage experience. Because this is an especially important metric for lenders, we examine reports and studies from three major customer service research organizations: The Better Business Bureau (BBB), the Consumer Financial Protection Bureau (CFPB), and J.D. Power.
Guaranteed Rate Mortgage Review
Chicago-based Guaranteed Rate (NMLS ID# 2611) was founded in 2000. Guaranteed Rate Mortgage aims to be a disruptor in the mortgage market by concentrating on new technologies that make the mortgage process easier. Since their start in 2000, Guaranteed Rate has originated over $120 billion in mortgages.
Their efforts were rewarded in 2017 when Guaranteed Rate became the 16th largest mortgage lender in the U.S. Due to their focus on digital technologies, they were also awarded an American Business Award for digital mortgage technology in 2016.
Guaranteed Rate Mortgage Loan Products
Guaranteed Rate offers a suite of mortgage loan products usually found in most non-bank mortgage lenders. These mortgage products include:
Conventional fixed-rate mortgages in 15-year and 30-year terms
Conventional adjustable-rate mortgages available in 5/1, 7/1, and 10/1 terms
Government loans: FHA, VA, and USDA
Conventional jumbo mortgages
Based on 2019’s Home Mortgage Disclosure Act data, Guaranteed Rate provides competitive interest rates that put it on par with major lenders like Quicken Loans, Chase, and Wells Fargo. However, Guaranteed Rate’s fees are half compared to the fees charged by Quicken Loans.
While Guaranteed Rate provides most loan types available on the market, there’s a notable omission of home equity loan products. If you’re looking for home equity loans, home equity lines of credit (HELOC), or cash-out refinancing, you may need to search for another company.
For conventional loan types, Guaranteed Rate requires you to have a credit score of at least 620. If you’re looking for government loans, you’ll need a minimum credit score of 580 on an FHA or VA loan, and a minimum 640 credit score on a USDA loan. To qualify for jumbo loans, you need to have a credit score of at least 700.
If you can’t make the 20% down payment requirement on most mortgage loan products, Guaranteed Rate also provides low down payment mortgage product alternatives from government-sponsored loan guarantors Fannie Mae and Freddie Mac. These products provide borrowers with a low-down-payment loan featuring more flexible terms. If you choose these loan products, you may need to pay for mortgage insurance.
Interest Rates And Mortgage Fees Transparency
Guaranteed Rate Mortgage provides borrowers with detailed estimates of their mortgage rates and closing costs. To access this, you need to answer questions related to your homeownership plans, credit score information, and property locations. While it’s somewhat more complicated than a calculator, you won’t need to supply contact information to receive this estimate.
As one of the pioneers of online mortgage lending, Guaranteed Rate boasts a fully-online mortgage application process through their website. The loan process begins by answering questions about how far you are in the home buying process and what’s most important for you in a mortgage (lowest rates or best flexibility, for example).
Once you fill out this questionnaire, you’ll receive loan options with personalized rate estimates. After you receive the rate estimate, you can fill out the digital application. To help make the process easier, the lender also provides you with the means to upload and sign documents electronically.
You also have a checklist to track your application processing progress. If you fulfill all the qualification requirements and the loan officers find no issue, you can close on loans in ten minutes.
Another tool that the lender provides is their Know Your Neighborhood page. By entering your city name or zip code, you can find detailed data on the area’s market trends, demographics, and school information.
Branch And Service Availability
Guaranteed Rate is licensed to originate loans in all fifty states and Washington D.C. To support their business the company also operates over 300 branch offices across 45 states. If you prefer to discuss your mortgage with a loan officer in person, you also have the opportunity to close your loan in ten minutes if your documents are electronically reviewed and signed beforehand.
However, the distribution of branch offices can be somewhat lacking. Some states like California have many Guaranteed Rate branches, while some other states like Louisiana have just one branch.
To compensate for the somewhat uneven branch office distribution and complement their online application process, the company provides a hotline. This hotline can be used to contact loan officers and provide the same services as their in-person and online mortgage banking avenues.
In terms of serving their customers, Guaranteed Rate records an average performance compared to other mortgage lenders. In data from their 2019 study, Guaranteed Rate received an ‘about average’ JD Power rating with a score of 846/1000. This puts them slightly above rivals Wells Fargo and Bank of America.
Currently, the lender has a B+ satisfaction rating from the Better Business Bureau. This score was given due to an action taken by the U.S. government in 2020 stemming from an issue with FHA and VA loans.
CFPB reviews Guaranteed Rate in a more favorable light compared to Better Business Bureau and J.D. Power. From 130,400 mortgages that they originated in 2019, there were only 20 recorded complaints from customers – putting them at 0.15 complaints per 1000 loans. This score puts Guaranteed Rate well ahead of rivals Quicken Loans, Wells Fargo, and U.S. Bank.
Guaranteed Rate’s Strengths
We break down the main strengths that make Guaranteed Rate one of the prime choices in online mortgage lending among borrowers.
Excellent Service Availability
Guaranteed Rate offers a lot of flexibility in their service. The borrower is expected to mainly take care of their mortgage needs online through their digital lending process, but the lender also caters to the varying needs of their customers.
If you prefer a face-to-face discussion with Guaranteed Rate’s mortgage officers, you can visit one of the 300 branch offices available in 45 states. As a third option to complement their online and physical banking service, you can also call their customer service hotline for a phone discussion with a loan officer.
Down Payment Assistance Programs
Coming up with a down payment can be one of the toughest parts of buying a home. To help new home buyers get their dream home affordably, the company provides down payment assistance programs in addition to their suite of home loan offerings.
While most of these loans are issued by Fannie Mae and Freddie Mac, a Guaranteed Rate Mortgage borrower can still take advantage of them without having to go to another lender.
Neighborhood Research Feature
Deciding where to buy a home is as important as deciding what kind of home to buy. Because different areas have different demographics and features, researching them yourself can be difficult. Fortunately, Guaranteed Rate features a Know Your Neighborhood page.
Using this page, you can enter the area’s name and you’ll get detailed results on the area’s statistics. By compiling all this data in one place, making an informed decision about where to buy your home will be easier.
Guaranteed Rate’s Weaknesses
While Guaranteed Rate offers many perks for their borrowers, you should keep in mind there are some caveats to banking with Guaranteed Rate.
Low Rate Transparency
Guaranteed Rate offers an easy way to see personalized rate estimates through their home buying questionnaire. However, it isn’t clear whether this estimate assumes you paid for discount points or not. To avoid any surprises when you close on the loan, it’s recommended that you speak to a loan officer to get detailed and accurate information on your interest rates and closing costs.
History Of Government Action
Another thing that you may need to consider before getting a loan from Guaranteed Rate is the recent issue regarding FHA and VA loans. In 2020, Guaranteed Rate was hit by a whistleblower lawsuit regarding false claims in loan underwriting. This lawsuit alleges that Guaranteed Rate orders its underwriters to endorse ineligible loans to get government insurance.
In the end, Guaranteed Rate agreed to pay a $15 million settlement and improved its internal control mechanisms according to FHA and VA loan requirements.
Due to its experience in online mortgage lending, Guaranteed Rate is popular among borrowers who want to take out a mortgage without leaving the comfort of their homes. While Guaranteed Rate mortgage rates are somewhat similar to their peers, the lender also provides down payment assistance programs with a fast closing process. However, borrowers should also keep in mind the government action taken against the lender and the middling customer satisfaction scores.
If you want to research more before making your final decision, Wesley Mortgage, LLC is here to help! We have reviews from America’s top bank and non-bank lenders to help you choose the best mortgage lender that fits your needs. For a personalized mortgage consultation with our team, contact us today!