Pennymac Mortgage Review: A Streamlined Web Option With Few Fees

Pennymac has served more than 4 million mortgage customers, and is the second-largest lender in the United States. Pennymac is an online-based mortgage lender that offers a variety of loan types and terms, as well as tons of excellent resources to help guide buyers through the process. In this review, we'll dig into Pennymac's lending operation, its pros and cons, and other information to help decide if it could be a good fit for you.

This lender is a good fit for: A variety of borrowers, including those looking for a low-cost conventional loan; FHA, USDA, or VA loans; and people who want the mortgage lender to remain on board as the mortgage servicer.

Top perks

Rate transparency

With a few clicks of the mouse, borrowers can see Pennymac's current loan rates for several loan terms. The tool also shows how paying mortgage discount points could affect their rate. Of course, rates can change after Pennymac actually checks the borrower's credit, but this is a level of mortgage rate transparency many competitors don't offer.

Lock & Shop Program

Pennymac's Lock & Shop program allows borrowers to lock their rate before they start shopping, and also allows them to get a lower rate if interest rates fall before they close on a home. This comes with a $595 fee, but if you're worried about rates rising further, it could be a good shopping tool.

Flex-term loans

Pennymac offers Flex-Term Mortgages, which can have any term length the borrower wants. This can be great for refinancing without extending the term of your loan. It can also be a good fit for borrowers who want to pay off their loan at a specific future date (such as retirement).

Transparent origination fee

Not only is Pennymac transparent about its pricing (the standard origination fee is $1,495), but it is currently offering a $1,000 discount for borrowers who complete a Buyer Ready Certification prior to locking their rate.

Educational tools

Pennymac has a ton of valuable educational resources on its website. They're easy to navigate and useful to many borrowers. For example, Pennymac's Home Value Estimator tool can instantly give borrowers an estimate of their home's value.

In-house servicing

Pennymac is one of the nation's largest mortgage servicers. It's also one of the few that specifically tells borrowers it services of all of its mortgages. Having a mortgage that is sold and transferred to another servicer is a common consumer pain point. Pennymac borrowers don't have to worry about that.

Customer service

For an online-based mortgage lender, Pennymac offers pretty flexible customer service, with its sales center open for phone calls 5 a.m. to 6 p.m. PST on weekdays, 7 a.m. to 1 p.m. PST on Saturdays, and 6 a.m. to 12 p.m. on Sundays.

What could be improved

Few physical locations

Pennymac has some sales offices, but for most home buyers there isn't going to be a Pennymac location near you. The company has nine sales offices in cities including Tampa, Phoenix, and Las Vegas. The best ways to apply for a mortgage through Pennymac are online or over the phone.

Few proprietary loans

Some of Pennymac's competitors offer their own loan products, particularly geared toward first-time home buyers. Pennymac offers a wide variety of standard mortgage types (FHA, USDA, etc.), but unique loans are not its strong suit, with the exception of its flex-term loan. Meanwhile, other lenders have programs like a 3% down payment loan with no private mortgage insurance for low- to mid-income borrowers.

Pennymac makes it easy to qualify for a mortgage through its user-friendly online portal. First, borrowers can check the company's current mortgage rates without having to input any personal information.

Once a borrower decides they want to proceed, they fill out an application through the My Home by Pennymac account center. Borrowers can apply, upload documentation, and check the status of their loan 24/7 through the m.a.c. portal. The platform lets borrowers directly upload W-2 forms from their employer, import bank statements, and more to make the process as easy as possible.

To qualify for a mortgage loan through Pennymac, you'll need a credit score of 620 and a down payment of at least 3.5%, assuming you aren't using a VA or USDA loan, which don't require down payments. It's best if your debt-to-income ratio is no higher than 43%, but many borrowers qualify with a DTI of 50% or higher. Because it offers a variety of loans, the best course of action could be to apply. Pennymac will look at your financial situation and let you know what loan program is appropriate.

Pennymac's refinance rates are competitive and on par with national averages. Also, Pennymac may charge less than other lenders to get the lowest advertised rate. For a conventional loan, Pennymac's low rates come at the cost of less than one point where other lenders sometimes charge two (one point is equal to 1% of your loan amount). You can pay less upfront and take a higher rate, which can be a good idea if you want to minimize your upfront cost.

Pennymac's mortgage interest rates trend a little lower than the national average and they're easy to find on the website. The cost of a loan here is still competitive, even if you choose to pay a higher rate and avoid paying for points. When you compare Pennymac with other lenders, be sure to compare the APR, not the interest rate, for a true apples-to-apples comparison.

• You want a streamlined online process and don't really care about in-person help.
• You want to save money. Pennymac guarantees it will beat any competitor's rate offer.
• You want a mortgage term that isn't a standard option. In other words, if you want, say, a 26-year mortgage, Pennymac could work for you.