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 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 DTI.

Top perks

Specialty loan options

Flagstar Bank 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 mortgage offers several 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 $8,000 if your income is low or moderate for your area, you are a first-time home buyer, and you contribute $1,000 of your own money toward the purchase.

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 section is called the Mortgage Information Center, and it 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 homeowner, 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.

What could be improved

Wow factor

Flagstar Bank earns below-average ratings on the J.D. Power 2020 U.S. Primary Mortgage Servicer Satisfaction Study™ and the J.D. Power 2019 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.

Nationwide HELOC option

If you're considering a home equity line of credit (HELOC), you probably need to look elsewhere. A HELOC is only available to borrowers in a very small number of zip codes. Flagstar does not offer home equity loans in all cities where it has a physical presence.

Guild Mortgage. If you're looking for down payment assistance, check with Guild Mortgage. Guild is great for first-time home buyers. This lender offers low down payment mortgages and programs for people who need help getting into homeownership. Guild Mortgage also offers a 17-day closing guarantee, which can be helpful for buyers who need a fast loan closing.

SunTrust Mortgage. If you need a specialty loan, take a look at SunTrust for comparison. Like Flagstar, SunTrust is a full-service financial institution that offers bank accounts as well as mortgages. It also has a full menu of home loan options, as well as HELOCs.

Qualifying for a loan from Flagstar Bank 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, the minimum is 620. For a jumbo loan up to $3 million, you need a 700 or higher.

Your debt-to-income ratio (DTI) represents is 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 you can qualify for a higher monthly mortgage payment. Qualifying for a bigger payment could put more (or nicer) homes on your to-see list.

Expect to make a 20% down payment for a conventional loan from Flagstar Bank mortgage. But don't worry if you can't. Flagstar Bank 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.

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 right at or below the national average. They are slightly higher than 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 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 can meet your needs if you're a borrower who qualifies for a VA loan or a USDA loan.

Flagstar Bank 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.