New American Funding Review: A Prime Choice For Minority Borrowers
Having bad credit can be a major roadblock in your efforts to buy a home. If your credit score is low, you’ll likely be rejected outright when you apply for a mortgage. However, some lenders may still consider your application even if your credit score is low – New American Funding is one of them.
In this New American Funding review, we’ll go over why they are one of the best mortgage lenders if you have a low credit score. We’ll also discuss why they’re a great choice for Spanish speakers and minorities, what loan options they offer, and their strengths and weaknesses as a mortgage lender.
Our Lender Review Criteria
Before we review New American Funding’s performance as a lender, we’ll go over the five main criteria that are used in this review.
Mortgage Loan Products Offered
One of the most important measures of a lender is their suite of loan offerings, especially because the company you choose largely depends on what kind of loan you need. For a better understanding of them, we discuss the features of major loan types in this section.
Most first-time homebuyers opt for a fixed-rate conventional mortgage due to its simplicity. This type of conventional loan features static mortgage rates that won’t rise or fall throughout your loan term, regardless of market conditions. This means that you’ll be paying the same monthly payment until your loan is completely paid off, making long-term financial planning easier.
Adjustable-Rate Mortgages (ARMs)
Unlike a fixed loan, an ARM features interest rates that fluctuate according to a market index rate chosen by the lender. ARMs usually feature a certain period of fixed interest at the start of the loan before they begin the adjustable period. Then, your interest rate will be adjusted annually according to the index movement.
The fixed-rate period and adjustment frequency is usually expressed in the loan’s name. For example, a 5/1 ARM features fixed interest for the first five years of the loan. Once your fixed interest period ends, your loan’s rate will adjust annually.
Sometimes, the house you’re planning to buy may have prices that exceed mortgage loan amount limits set by the Federal Housing Finance Agency (FHFA). To help you buy more expensive real estate, a lender may offer jumbo loans. These loans have larger limits and are available in fixed-rate or adjustable-rate terms.
Several branches of the United States federal government also provide loan products – these usually feature lower credit score and down payment requirements as well as more affordable mortgage rates. Some of these loans include an FHA loan for low-to-mid-income borrowers, the USDA loan for rural home buyers, and a VA loan for military personnel.
When you refinance a mortgage, you replace your old mortgage with a new one. You may use this to get lower rates or switch loan terms. You can also take a cash-out refinance to leverage your home equity.
Rate And Fee Transparency
This criterion focuses on how easy it is to access the lender’s interest rate information and lender fees. Knowing these is an important part of mortgage shopping and allows you to accurately compare numbers between various lenders.
We also review the lender’s online service, which includes their application process – whether they’re fully online or not as well as other online conveniences that they offer.
Service And Branch Availability
Since some people still prefer going to a physical branch when mortgage shopping, we also check if they have offices located in various parts of the United States and offer services across all 50 states.
Because customer satisfaction is a deal-breaker when choosing mortgage lenders, we examine how they perform in that regard. To help us measure this, we collect reports from customer satisfaction study organizations like the Better Business Bureau and the Consumer Financial Protection Bureau.
New American Funding Mortgage Review
New American Funding (NMLS ID#6606) is a family-owned lender that was established in 2003 by Rick & Patty Arvielo. The lender places great emphasis on serving underserved home buyer demographics like immigrants and minorities.
Their 2019 data shows that 19% of their total loans were issued to Hispanic homebuyers, while 9% were provided to black clients. These numbers are higher than the national loan value average of 7.85% for Hispanic borrowers and 6.22% for Black borrowers.
According to 2020’s loan origination volume data from the Home Mortgage Disclosure Act, they are now ranked as a top 20 national lender. Despite serving a niche market by gearing their loans toward minorities, New American Funding’s fast growth qualified them to be in Inc. 5000 Magazine’s list of fastest-growing companies six times.
New American Funding Mortgage Products
As a non-bank lender, New American Funding offers a selection of loan types typically found in a similar institution. These loan types include:
Conventional fixed-rate loans available in 15-year, 20-year, and 30-year terms
Conventional adjustable-rate loans available in 5/1, 7/1, and 10/1 terms
Government-backed options – VA, USDA, and FHA loans
Jumbo mortgages with a minimum 10% down payment
Cash-out refinancing and home equity lines of credit
One thing to note if you’re looking for a jumbo mortgage or a home equity line of credit (HELOC): these loan options aren’t listed on the website. However, you can ask about these mortgage products through the lender’s call center or with a loan officer from the nearest New American Funding branch.
In addition to regular mortgage loans, New American Funding also has the I Can mortgage program. This program allows you to set a mortgage term between eight to thirty years for your primary home and only requires a minimum FICO score of 500 to qualify.
If you’re a first-time homebuyer, New American Funding can also provide you with personalized assistance to help you find down payment grant programs run by your local and state governments.
Another way that New American Funding helps minorities and underserved communities is by employing a manual underwriting process. Because home mortgage applications are reviewed in person, they can help people with low credit scores and non-traditional credit history have a better chance at getting home loans.
Normally, New American Funding offers a guaranteed closing time of 14 days for your loans. However, due to the coronavirus pandemic, they’ve temporarily suspended this guarantee until further notice.
Rate And Fee Transparency
New American Funding does have a listing of their home mortgage rates, giving you a picture of the rates and APR for their most popular loan products. However, this listing comes with fine print. Upon checking the disclosures section, the mortgage rates advertised on their site are rates if you pay for two discount points and have a 60% loan-to-value ratio. While it’s possible to attain these rates, you may need to spend extra cash up front.
Another issue if you’re looking to compare New American Funding’s offers to another lender is that you need to receive a quote first to see your estimated lender fees and closing costs. Paired with the manual online application review process, you may need to wait longer compared to other lenders to get a full estimate of your closing costs and APR.
Due to the relatively low rate and fee transparency, we recommend that you get a proper quote and read the terms and conditions thoroughly before you decide to get a mortgage from New American Funding. You should also compare it with loan offers from other lenders.
New American Funding provides three methods of applying for a mortgage – online, in person, and by phone. They also allow you to upload and sign documents electronically.
In addition to these conveniences, you can get a pre-qualified letter by contacting their customer care agents. Then, once your mortgage is approved, you can manage your loan payments and check your balance online through their website.
However, the application process isn’t fully online. Once you’ve sent in your loan application form, you’ll need to call or email the lender’s loan officer to get your quotes.
Service And Branch Availability
As of 2020, New American Funding currently operates 204 offices in 31 states. They also provide mortgage services all over the United States, with the notable exceptions of New York and Hawaii.
Customer satisfaction is one of New American Funding’s greatest strengths. According to data from the Consumer Financial Protection Bureau (CFPB), the lender receives a very small amount of complaints compared to other mortgage lenders.
From CFPB's 2019 data, New American Funding received 13 complaints from the 91,800 loans they originated. This means that they received 0.14 complaints per 1,000 mortgages, considerably lower compared to major lenders Quicken Loans with 0.24 and Wells Fargo with 0.33.
In addition to the complaint data, New American Funding also received an A+ accreditation from the Better Business Bureau (BBB). As evidence of their excellent ethics and commitment to customer satisfaction, New American Funding also received the Torch Award from BBB in 2019.
Strengths Of New American Funding
In this section, we’ll break down the main strengths of New American Funding that make them a favorite among customers.
Low Credit Score Minimums
This lender is liked among borrowers with a less-than-stellar credit score due to its relatively relaxed qualification requirements. Normally, most lenders need a 620 credit score for conventional loans and 580 for government-backed (FHA/VA) loans. New American Funding requires a 500 credit score as its bare minimum for conventional loans, placing it far below the industry standard numbers.
In addition to the low FICO score requirements, New American Funding is also more lenient in its debt-to-income ratio requirements. Generally, banks will require you to have a maximum of 43% DTI to qualify for a mortgage. However, New American Funding may approve borrowers with up to 50% DTI.
Fully-Manual Underwriting Process
New American Funding is friendlier to borrowers with non-traditional credit history, like self-employed or freelance workers, due to their manual online application review process. Reviewing mortgage applications with human judgment enables New American Funding to originate mortgages for applicants who may have their applications rejected with an automated review system.
This manual review is in line with their mission to help people who couldn’t otherwise purchase a home due to their credit history. Their basis for home loan underwriting is to originate mortgages as long as it makes sense, reviewing them thoroughly so they don’t deny home loans just because applicants have bad credit scores.
Friendlier For Minorities And Spanish Speakers
New American Funding also provides conveniences for minorities, especially Spanish speakers. To assist the Hispanic community, the lender provides bilingual English/Spanish customer care for all five workdays and half days on Saturdays.
Weaknesses Of New American Funding
However, there are some disadvantages to lending money from New American Funding that you may need to keep in mind. These are:
Low Fee Transparency
If you’re still on the fence and need to compare home loan offers from other lenders, you may need to do some extra work to get an accurate estimate from New American Funding.
The listed rate estimates from their website may include extra discount points and a higher loan-to-value ratio than the minimum required, which means you may need to pay more to get those rates. You’ll need to put in an application to get a proper quote for comparison.
Lack Of Automatic Quotes
While the manual review process does help people with lower credit scores have a higher chance to qualify for a mortgage, this can be a double-edged sword. Since the process is done manually by a human mortgage officer, it may take longer for you to receive a quote. This may be a disadvantage if you’re just looking for quick quotes to compare with other lenders.
Another potential issue is a privacy concern. To get a quote, you need to provide financial and contact information to the company regardless of whether or not you end up getting a mortgage from New American Funding.
Due to their focus on minorities and underserved borrower demographics, New American Funding is popular with Hispanic and black borrowers. But you should keep in mind that they are more than a minority-only borrower.
Their thorough application review will help you qualify for mortgages, even if you may have a less-than-ideal credit score. However, the low fee transparency may need you to spend more time and effort to get a loan estimate.
If you’re looking for more mortgage lender reviews, Wesley Mortgage, LLC is here to help! We’ve compiled reviews from America’s top mortgage lenders to help you decide which one fits your needs best. If you need mortgage assistance with one of our experts, contact us today for a consultation!