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. The company is also one of the largest mortgage servicers in the United States, with $564 billion 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.

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. 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.

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).

No lender fee

Not only is PennyMac transparent about its pricing (the 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 5 a.m. to 6 p.m. PST on weekdays and 7 a.m. to 3 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 nine 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, 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.

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.

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.

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 upfront and take a higher rate, which can be a good idea if you think you might sell the home within a few years.

PennyMac's mortgage interest 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 0.7 to 0.84 mortgage discount points as of July 2023. 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, but be sure you're looking at 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 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.