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PennyMac has originated more than 2 million mortgage loans and is the second largest lender in the United States. The company is also one of the largest mortgage servicers in the United States, with almost half a trillion dollars of loans in its servicing portfolio.
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.
Best for: Online experience and flexible terms
PennyMac Mortgage
Rating image, 4.5 out of 5 stars.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
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.
Full PennyMac Mortgage Review
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.
Pros
- Rate transparency
- Rate guarantee
- Flexible terms
Cons
- Limited low down payment options
- Limited physical presence
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 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).
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 as well as providing a credit at closing equal to 0.50% of the loan's principal amount, which can be a very valuable perk.
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 servicers. 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.
Customer service
For an online-based mortgage lender, PennyMac offers pretty flexible customer service, with its sales center open for phone calls 6 a.m. to 7 p.m. PST on weekdays and 6 a.m. to 5 p.m. PST on Saturdays.
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 eight sales offices in markets like Tampa, Phoenix, and Las Vegas. Plus, the sales offices are designed for in-person customer service -- the only ways to apply for a mortgage through PennyMac is online or over the phone.
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 mortgage types (FHA, USDA, etc.), but unique loans are not its strong suit. Meanwhile, some other lenders have programs like a 3% down payment loan with no private mortgage insurance for low- to mid-income borrowers.
Alternatives to consider
No home buyer should choose a mortgage lender without considering more than one. Here are some excellent alternatives you might want to add to your list:
Better could be a smart option to consider if you are a fan of the streamlined, online approach and want one of the standard mortgage types. Better prides itself on having the most streamlined process and quickest closings, and it doesn't charge origination fees (even on refinances).
Citi Mortgage could be worth a look if you want a physical branch network or proprietary loan options designed for first-time buyers. Citi Mortgage leverages Citi's massive banking branch network and offers the Citi HomeRun Mortgage, which lets qualified borrowers make a down payment of as little as 3% with no mortgage insurance.
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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-2's 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.
How are PennyMac's refinance rates?
PennyMac's refinance rates are competitive and on par with national averages. Also, PennyMac's low rates come at the cost of one mortgage discount point where other lenders sometimes charge two (one point is equal to 1% of your loan amount). You can pay less up front and take a higher rate, which can be a good idea if you think you might sell the home within a few years. The FHA loan and VA loan refinance rates are also displayed and are very fair.
How are PennyMac's rates compared to the national average?
PennyMac's mortgage rates trend a little lower than the national average. PennyMac's rates are easy to find on the website once you spot the "Rates" link in the footer. The low advertised rates assume you'll be willing to buy one mortgage discount point. That fee would need to be paid in cash or rolled into the loan. PennyMac's rates are low enough that the cost of the loan is still competitive even if you choose to save that money and pay a slightly higher rate instead.
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.
FAQs
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PennyMac's interest rates trend lower than the national average. Also, the lowest advertised rate is available for the cost of one mortgage discount point. Some other lenders charge more.
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Yes. PennyMac offers very good pricing and has a reputation for great customer service. Also, some people like that PennyMac services the loans it makes. After your loan closes, you won't be dealing with a different company when you make your payments.
If, however, you are looking for a low down payment conventional loan with no private mortgage insurance (PMI), you will have to keep shopping. PennyMac doesn't currently offer those programs.
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Yes. PennyMac offers very competitive refinance loans and can help you lower the interest rate on your conventional, FHA, VA, or USDA loan.
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You'll need a credit score of 620 and a down payment of at least 3.5%. (If you qualify for a VA loan or USDA loan, you won't need a down payment.) 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. PennyMac will look at your financial situation and let you know what loan program is appropriate.
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PennyMac offers these types of mortgage loans:
- Conventional loan
- FHA loan
- VA loan
- USDA loan
- Jumbo loan
- Investment property loan
- Fixed-rate mortgage
- Adjustable-rate mortgage
- Refinance loan
- Cash-out refinance
About the Author
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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