Flagstar Bank Mortgage Review: Specialty Mortgage Experts

Flagstar Bank Mortgage is a great one-stop shop for both the first-time home buyer and repeat borrower. One thing we like about Flagstar is that it's a full-service bank, not just a mortgage lender. If you like simplicity, you can keep your finances in one place using Flagstar's checking, savings, money market, CDs, health savings accounts, and retirement accounts. Keep reading to find out whether this mortgage lender offers the right mortgage loan for you.

This mortgage lender is a good fit for: Borrowers who need help getting into their first mortgage, people who want to renovate or build a home, investors, and people who have a higher debt-to-income ratio.

Top perks

Specialty loan options

Flagstar Bank Mortgage offers a wide enough selection to meet most borrowers' needs, including some specialty loans that you won't find everywhere. Some of the harder-to-find mortgage loan programs include:

• Multiple-property loan for borrowers with seven to 10 financed properties
• Construction loan
• Renovation loan
• Programs designed to help people become homeowners, including down payment assistance and lower monthly private mortgage insurance (PMI) rates

Down payment assistance

Flagstar Bank Mortgage offers home buyer grants. Grants are non-repayable funds that you can use toward your down payment, closing costs, or both. Several programs are offered. In one program, you can get a grant for up to $15,000 depending on your income and location.

Online interest rate comparison tool

The Flagstar Bank Mortgage rate comparison tool is very handy. You can enter your information and get sample interest rates for various options. It's easy to play around with your purchase price, down payment amount, and credit score. Entering different credit score ranges shows you how much you might be able to save if you can raise your score before you apply.

Home buyer education

Buying a home is one of the biggest financial decisions many people make. The Flagstar Bank Mortgage website offers easy-to-find and detailed information about the mortgage process. The Learning Center section of its website includes information about how to qualify, shop around, and apply for a mortgage, as well as how to manage it. The FAQ explains everything from homeowners insurance and PMI, to escrow and closing, and even what will happen if you run into financial hardship and need assistance. If you're a first-time home buyer, you can learn a lot about the process without giving your contact info to a sales team.

Qualification checklist

If you're wondering about first-time home buyer requirements or you haven't gotten a mortgage in a long time, you can refer to a convenient mortgage qualification checklist on Flagstar Bank's website.

Accessible HELOC

The minimum draw amount for Flagstar's home equity line of credit is just $10,000, which is lower than many other lenders' minimums. That makes it a good option for lower financing needs. Also, the maximum interest rate disclosed in Flagstar's footnotes is lower than the average credit card interest rate. That makes the Flagstar HELOC a potentially good option to consider for homeowners looking to consolidate higher-interest credit card debt.

What could be improved

Wow factor

Flagstar Bank earns below-average ratings on the J.D. Power 2023 U.S. Primary Mortgage Servicer Satisfaction Study™ and didn't make the J.D. Power 2023 U.S. Primary Mortgage Origination Satisfaction Study™. In fact, Flagstar has had a history of below-average marks on these studies for the past few years, with customer satisfaction for origination having a poorer showing than customer satisfaction for servicing. It's worth noting, however, that Flagstar Bank has earned an A+ from the Better Business Bureau -- which says that when customers do complain, the bank reaches out and works to find a resolution.

Annual fee for HELOC

Flagstar currently charges a $75 annual fee for its HELOC (it's waived the first year). Many other lenders offer HELOCs with no annual fee.

Did you know? Flagstar Bank Mortgage is one of the largest mortgage lenders in the United States.

Qualifying for a loan from Flagstar Bank Mortgage will depend on the type of mortgage that's right for you.

For an FHA loan, qualified borrowers need a FICO® Score of at least 580. But if you want a conventional loan, you'll likely need a minimum score of 620. For a jumbo loan up to $3.5 million, you need a score of 660 or higher.

Your debt-to-income ratio (DTI) represents your total monthly debt payment, including your mortgage payment, compared to your income. A mortgage lender will want to make sure you can afford to repay the loan, so they will look at how much you have to spend each month. They'll tally up all of your required minimum payments to figure out the monthly payment amount that you can afford for housing. All of those payments together make up your DTI. Flagstar Bank Mortgage allows a DTI up to 50% (of your pretax income) for conventional loans, but only 43% for a jumbo loan. Some FHA loans allow a DTI between those two numbers.

It's a good idea to tackle your current debts before you apply for a mortgage, because less debt means your mortgage payment will be more affordable.

Don't worry if you can't make a 20% down payment for a mortgage. Flagstar Bank Mortgage offers mortgages that require a down payment of as little as 3% to 3.5% (zero if you qualify for a VA loan). Qualified borrowers buying in certain areas can get Flagstar's Destination Home™ mortgage with zero down. And Flagstar offers down payment assistance and home buyer grants as well, to help bridge the gap.

If you don't meet the criteria for a traditional mortgage loan, Flagstar offers non-qualified mortgages that have different underwriting guidelines. For example, the allowable DTI may be higher. Non-qualified mortgages typically come with a trade-off. For example, if the lender allows a higher DTI, you may need to make a larger down payment. The loan officer at Flagstar can tell you about your options.

Flagstar's mortgage refinance rates are very competitive, trending slightly below the national average. They are about the same as comparable purchase loan rates. The refinance rates are very easy to find using Flagstar's online rate search tool, and you don't have to provide any contact information to see them. Flagstar's tool is unique in that it is the only one we have seen that allows you to adjust the number of mortgage discount points you are willing to buy in addition to your down payment amount, credit score, property type, and ZIP code.

Flagstar Bank's mortgage rates trend lower than the national average. The same online rate tool described above makes it really easy to play around with different possible purchase loan scenarios. Cost transparency is a wonderful thing when you're talking about the largest purchase most of us ever make. Knowing your potential closing costs while you research loans can help you make a more informed choice.

Flagstar Bank Mortgage is an excellent choice for specialty loans. If you're building a brand-new home or buying one that needs significant renovations, Flagstar is a great choice to consider. Likewise, Flagstar Bank Mortgage can meet your needs if you're a borrower who qualifies for a VA loan or a USDA loan.

Flagstar Bank Mortgage is also a great fit for a low- to moderate-income borrower who wants help with the down payment, or for anyone who needs a low down payment loan. Flagstar also helps first-time home buyers and anyone who wants to learn about the mortgage process equip themselves with the information they need to make educated decisions and ask the right questions.