PennyMac Mortgage Review: A Streamlined Web Option With Few Fees

by: Matt Frankel, CFP | Dec. 2, 2020

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Founded in 2008, PennyMac Loan Services is an online-based mortgage lender that offers a variety of loan types and terms. It has tons of excellent resources to help guide buyers through the process. In 2019 alone, PennyMac funded over $117 billion in loans and was the second-largest originator of government-backed (FHA/VA) loans in the United States. Additionally, PennyMac is one of the largest mortgage servicers in the United States, with $400 billion of loans in its servicing portfolio.

Ratings Methodology

Best for: Online experience and flexible terms PennyMac Mortgage

Rating image, 4.5 out of 5 stars.

4.5 stars

Bottom Line

By offering rate transparency, online only help, flexible loan terms, and a rate guaranteed to beat competitors, PennyMac is a great place for people to start looking for a mortgage.

Min. Credit Score

580 (FHA)
620 (other mortgage products)

Min. Down Payment

3% (conventional loans)

Key Features

100% online application
Instant rate estimates
Flexible terms
No lender fee

Loan Types

Conventional
FHA
VA
USDA
Jumbo

Fixed Rate Terms

3y, 20y, 15y (some customized terms are available)

Adjustable Rate Terms

3/1, 5/1, 7/1, 10/1

Full PennyMac Mortgage Review

Top perks

Rate transparency: With a few clicks of the mouse, borrowers can see PennyMac's current loan rates for several loan terms. They can even see how paying 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.

Flex-term loans: PennyMac offers "Flex-Term Mortgages" that 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).

Rate guarantee: PennyMac promises better pricing than any other lender, and offers a $250 gift card if it can't match a competitor's offer.

No lender fee: Not only is PennyMac transparent about its pricing (standard origination fee is $1,100), but it is currently waiving its lender fee on purchase mortgages.

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 website can instantly give borrowers an estimate of their home's value, powered by Zillow's technology.

In-house servicing: PennyMac is one of the nation's largest mortgage services. It’s also one of the few that specifically tells borrowers it keeps the servicing 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.

Quick closings: PennyMac aims to close its loans quickly and on time. It offers a $500 close-on-time promise to back this up.

Customer service: For an online-only mortgage lender, PennyMac offers pretty flexible customer service, with its sales center open for phone calls 6 a.m. - 7 p.m. PST on weekdays and 6 a.m. - 5 p.m. PST on Saturdays.

What could be improved

There's no such thing as a perfect mortgage lender for everyone, and PennyMac is no exception. While not all these things may apply to you, here are some potential drawbacks to consider.

Online-only: If you want in-person help, PennyMac is not for you. To be fair, the branchless model helps PennyMac keep its costs and rates low (it's rare to find a branch-based lender willing to waive their origination fee). But some people like getting help from a real-live mortgage professional.

Few proprietary loans: Some of PennyMac's competitors offer their own loan products, particularly geared towards first-time home buyers. PennyMac offers a wide variety of standard loan types (FHA, USDA, etc.), but unique loans are not their strong suit. Meanwhile, some other lenders have programs like a 3% down payment loan with no mortgage insurance (PMI) for low- to mid-income borrowers.

How to qualify

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 PennyMac's Mortgage Access Center (m.a.c.). 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 access W-2s from their employer, import bank statements, and more to make the process as easy as possible.

Alternatives to consider

No homebuyer should choose a mortgage lender without considering more than one. Here are some excellent alternatives you might want to add to your list:

Two of PennyMac's biggest shortcomings are the lack of a physical branch network and no proprietary loan options designed for first-time buyers. CitiMortgage could be worth a look if you want either of those, as it leverages Citi's massive banking branch network. It also offers the Citi HomeRun Mortgage, which lets qualified borrowers make a down payment of as little as 3% with no mortgage insurance.

If you are a fan of the streamlined, online approach and want one of the standard mortgage types, Better.com could be a smart option to consider. Better.com prides itself on having the most streamlined process and quickest closings, and it doesn’t charge origination fees (even on refinances).

PennyMac Loan Services is right for you if:

You want a streamlined online process and don't really care about in-person help.
You want to save money. PennyMac has no origination fees on purchase mortgages and 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.

About the Author

Matt Frankel, CFP

Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice for The Ascent and its parent company The Motley Fool, with more than 4,500 published articles and a 2017 SABEW Best in Business award. Matt writes a weekly investment column ("Ask a Fool") that is syndicated in USA Today, and his work has been regularly featured on CNBC, Fox Business, MSN Money, and many other major outlets. He’s a graduate of the University of South Carolina and Nova Southeastern University, and holds a graduate certificate in financial planning from Florida State University.

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