LoanDepot Mortgage Review: Fully-Automated Applications With Fast Closing Process
Normally, closing on a mortgage loan to buy a house can take you anywhere between a month to two months. If you’re still living in a rented property, that means you need to pay for at least another month’s worth of rent. However, LoanDepot provides its borrowers the ability to close on loans within a fraction of that time.
Aside from this fast closing guarantee, what else does LoanDepot offer? In this LoanDepot review, we discuss how they perform as a mortgage lender. We present five main criteria that borrowers should look at when deciding on their mortgage lender and examine how LoanDepot performs on each point.
How We Review Mortgage Lenders
In reviewing mortgage lenders, we examine their performance in five main criteria. To help understand it better, we break these five points down in this section.
Availability Of Mortgage Products
In deciding which mortgage lender to do business with, their selection of loan types is one of the most important factors. To better understand the main loan products offered by lenders, we explain them here:
In a fixed mortgage, your interest rate and APR will stay the same regardless of market conditions. The static interest rates translate into consistent monthly payment amounts until your loan is fully paid off. Because they’re predictable, these conventional loans are popular with first-time borrowers and people who want to plan their finances for the long term.
On a conventional loan, you usually have two down payment options: Pay 3% but spend more money on mortgage insurance, or pay 20% to avoid mortgage insurance.
Adjustable-rate mortgages (ARMs) are alternatives to fixed loans that feature interest rates that change according to a market index. This index is chosen by the lender and depending on its performance, will be the basis of your annual rate adjustment. These conventional loans usually feature a short period of fixed interest rates at the start of the loan before the adjustable phase starts.
These conventional loans are typically better in the short term because of the lower rates during their introductory period. However, adjustable-rate mortgages are less predictable once they enter the adjustable phase.
Conventional mortgage amounts are limited by the Federal Housing Finance Agency (FHFA). To help borrowers buy higher-valued property, lenders offer jumbo loans. These are conventional loans that exceed FHFA loan limits, available in fixed-rate and adjustable-rate terms.
To balance out the risk that lenders take originating jumbo loans, you may encounter higher mortgage rates. You may also need a higher credit score and a better debt-to-income ratio to qualify. Jumbo loans also require a higher down payment.
To help certain demographics purchase property, the U.S. federal government offers several loan products. These loans feature relaxed requirements compared to conventional loans – which means people with lower credit scores are more likely to qualify.
The three most common government loans are:
FHA loans for low-income homebuyers, administered by the Federal Housing Administration. These loans require a minimum credit score of 580 and only require a 3% down payment.
VA loans for military personnel, administered by the Department of Veterans Affairs. To qualify for this, you need to be a military service member and have a minimum credit score of 580 to 620.
USDA loans for homebuyers in rural areas, administered by the U.S. Department of Agriculture. The USDA sets no credit score minimums on these loans.
When you refinance a loan, you apply for a new mortgage to pay off the previous one. This is usually done to take advantage of falling market rates or change your loan terms from fixed-rate to adjustable-rate or vice versa.
You can also leverage your home equity using a cash-out refinance. In a cash-out refinance, you apply for a larger mortgage to pay off your previous loan and receive the difference in cash.
Interest Rate And Mortgage Fees Transparency
When shopping for mortgage loans, comparing offers from various lenders allows you to see which one offers the best value. To make comparisons easier, you need transparent and accurate information on your interest rates and mortgage fees. Because this is an integral part of the mortgage experience, the transparency of rates and fees are included within our considerations.
Another point of consideration in our mortgage lender review is the completeness of online services. We examine their online application process and discuss other online conveniences that the lender offers.
Offline Availability And Support Service
Some lenders provide home loans in the entire U.S., but some do not. In this criterion, we examine their service coverage and branch availability. We also cover any additional services the lender provides.
Another essential part of the mortgage lending experience is its level of customer service and timely response to complaints. For a better picture of the lender’s customer satisfaction level, we examine reviews from customer research organizations. The three agencies we refer to in this criterion are the Better Business Bureau, J.D. Power, and the Consumer Financial Protection Bureau.
LoanDepot Mortgage Review
Founded in 2010, California-based LoanDepot (NMLS ID# 174457) is one of the top 10 lenders in the nation in terms of refinance loan volume. According to CFPB data, LoanDepot is also the fourth-largest mortgage lender in America.
LoanDepot’s main selling point is its drive for innovating new mortgage technologies to make the mortgage lending process more convenient. One of their most notable innovations is Mello Smartloan, a suite of tools that automate and expedite the processing of loans.
Availability Of Mortgage Products
In terms of loan products, LoanDepot Mortgage offers most loan types offered by similar non-bank lenders. These loan types include:
Conventional fixed mortgage available in 10-year, 15-year, 20-year, and 30-year terms
Conventional adjustable-rate mortgage available in 3/1, 5/1, 7/1, and 10/1 terms
Jumbo mortgage for home loans over $548,250. LoanDepot offers jumbo loans of up to $2 million
Federal Housing Administration (FHA) loans
Department Of Veterans Affairs (VA) loans
Mortgage refinance loans
The company’s mortgage rates and lender fees are comparable to top lenders like Wells Fargo and Quicken Loans. Its average 30-year fixed mortgage interest rate in 2019 is 4.15%, slightly lower than Wells Fargo’s 4.22% and almost identical to Quicken’s 4.16%.
While Loan Depot offers FHA and VA loans, they do not offer USDA loans. Another notable exception is the lack of home equity products – namely home equity loans and home equity lines of credit. However, if you’re still looking to leverage your home equity with the company, they still offer cash-out refinances.
Another specialty of LoanDepot Mortgage is their line of home improvement loan products. The premier product in this line is the FHA 203k loan, which combines a mortgage and a home renovation loan in a single product. The FHA 203k allows you to borrow an extra $30,000 over the property’s value to make home improvements. Due to this extra amount, it’s popular with borrowers who buy old homes they intend to renovate.
If you’re looking to perform some home improvement work but don’t have enough equity in your property, the company also offers personal loans. However, a personal loan usually features much higher interest rates than a regular mortgage.
Interest Rates And Mortgage Fees Transparency
Finding rate and closing cost estimates on the LoanDepot site is difficult. Some links that supposedly lead to pages where you can find information on interest rates instead only return pages containing a description of the loan in question. If you want to receive accurate customized rates according to your credit score, you need to start an application or speak to a loan officer.
Due to this low transparency, you’re unlikely to get accurate information without some commitment to the company. This may make comparing their mortgage rates and appraisal fees with other lenders tougher. You also don’t know whether you need to pay your property taxes separately or pay them alongside your monthly payments.
Online convenience is the main priority for LoanDepot. With their Mello Smartloan system, they boast the ability to expedite the lengthy closing process from the typical 40-50 days to just eight days. While not all loans can be closed within eight days, LoanDepot reports that they generally close 50% faster compared to the industry average.
The Mello Smartloan system was originally developed as one of their internal tools, but the lender made it a consumer-facing feature to help borrowers. This system helps in verifying the borrower’s details, examines their credit records, and helps in the appraisal process. By automating all those processes, the system helps minimize human involvement and allows it to be done faster.
Offline Availability And Support Services
While LoanDepot’s online features are its primary selling point, potential borrowers can still go to a branch office if they prefer to do business with an account manager in person.
The company is licensed to originate mortgages in all fifty states and operates 200 physical offices or loan stores across 43 states. The seven states that do not have LoanDepot offices are Vermont, Wyoming, Nebraska, Iowa, Alaska, Delaware, and North and South Dakota.
To complement their offline and online presence, LoanDepot also provides a phone hotline with over 2,000 loan officers on their team ready to cater to your mortgage needs. LoanDepot notably doesn’t offer a mobile app for its borrowers. While not all lenders have mobile apps, it’s a notable absence in the case of a lender like LoanDepot that prioritizes technology.
LoanDepot claims to have a high level of customer service. This claim is backed up by the A+ rating from the Better Business Bureau from their trustworthiness and great customer reviews.
J.D. Power also rates LoanDepot quite highly in their 2020 mortgage reviews. With a score of 844/1,000, LoanDepot took the 7th spot over rivals Wells Fargo and Guaranteed Rate.
However, LoanDepot didn’t perform as well in CFPB reviews. In 2019, out of 257,847 mortgages originated their customer service team received 105 complaints – for a ratio of 0.41 complaints per 1,000 loans. While these complaints received a timely response, this complaint-to-loan ratio puts them far behind Quicken Loans with a ratio of 0.24.
Strengths Of LoanDepot
LoanDepot’s reputation as a top ten lender in the United States is well-earned, due to its focus on customer satisfaction. In this section, we discuss the main strengths that the company offers to its borrowers.
Faster Loan Finalization
One of LoanDepot’s greatest strengths is its speed. Thanks to their proprietary Mello Smartloan system, loans can be closed within eight days. The fully-digital data verification process also makes it easier for borrowers because they don’t need to deal with any physical paperwork in the process.
Offers Renovation Loans
Not all mortgage borrowers want new homes. Normally, a homebuyer might need two loans – one to buy the home and another to fund renovations – if they want to buy a used property.
LoanDepot offers their customers the opportunity to combine their home buying and renovation loans into a single mortgage. Using their FHA 203k loan program, you can borrow more money on top of the property’s sale price to fund your renovation.
Borrower Loyalty Programs
Another perk that LoanDepot offers its borrowers is a lifetime guarantee of free lender fees. After you take out a mortgage with LoanDepot, your future refinances on that loan will have no closing costs.
While not everyone can benefit from this lifetime guarantee, it may be attractive if you’re an adjustable-rate borrower who plans to refinance in the future.
Weaknesses Of LoanDepot
There are, however, several caveats of borrowing with LoanDepot that you need to keep in mind before making your decision.
Lack Of Government & Home Equity Loan Options
If you’re looking to leverage your home equity, you may need to find another lender because LoanDepot doesn’t offer home equity loans and home equity lines of credit. The only option that LoanDepot offers to use your home equity is cash-out refinancing.
Furthermore, while you can get an FHA or VA loan with LoanDepot, they don’t offer a USDA loan. This may limit your home loan options for low-down-payment and low credit score mortgages.
Low Rate And Fee Transparency
Another drawback of borrowing from LoanDepot is its lack of rate transparency. Unless you create an account and start a mortgage application or talk to a loan officer, you can’t get rate estimates. While their site purports to have rate information, going to the related pages only returns an explanation of the mortgage product.
Potential Of Unwanted Advertising
The fine print on their application form states that applicants may receive offers for products and services from LoanDepot and its partners. While it’s no guarantee that you’ll receive unwanted ads in your email inbox, you’re still opening yourself up if you send in a LoanDepot application.
With its quick closing process and borrower loyalty programs, LoanDepot makes a good case to be one of the top lenders in the United States. Their suite of home improvement loans also makes LoanDepot an appealing option for borrowers who seek fixer-uppers to renovate. However, their low rate transparency may make estimating Loandepot’s mortgage offering values harder.
Looking for more mortgage lender reviews? Wesley Mortgage, LLC is here to help! We’ve compiled reviews on America’s top lenders so you can decide which one of them is right for you. We also provide mortgage consultations with our team if you need personalized advice. Contact us today for more information!