Better Mortgage review: Online-only lender cuts out fees

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Better Mortgage loans at a glance

  • Conventional loans: Yes
  • FHA loans: Yes
  • VA loans: No
  • Refinancing: Yes
  • Jumbo loan: Yes
  • Adjustable rates: Yes (10/1 ARM, 7/1 ARM, 5/1 ARM)
  • Fixed rates: Yes (30-year, 20-year, 15-year)

Backed by Silicon Valley firms such as Kleiner Perkins, Better Mortgage is a direct online lender founded in 2014 with the goal of using technology to make the homebuying process cheaper and more transparent. But an online-only mortgage process comes with its own pros and cons, which we’ll get to shortly.

Better doesn’t pay its loan officers or sales team a commission. Because loan officers aren’t incentivized to push one mortgage solution over another, they may be more likely to help you find the best solution for your situation. Though, the lender isn’t available in all 50 states, so you’ll need to check whether it’s an option based on where you live.

Pros

  • No lender fees or commissions
  • “Better Price Guarantee” offers to beat competitor pricing
  • Realtor program reduces closing costs

Cons

  • Not available in all states
  • No home equity loans or HELOCs
  • Not a great choice for real estate investors

6 things to know about a Better mortgage loan

1. No lender fees or commissions

Unlike most mortgage lenders, Better Mortgage doesn’t charge an origination fee — saving you as much as $3,750 on a $250,000 mortgage. Origination fees can cost you up to 1.5% of the loan amount.

Additionally, Better’s loan officers don’t receive commission, meaning they’re not incentivized to push you toward a more expensive product.

2. Price matching

The “Better Price Guarantee” states that if you can find a cheaper price on a competitor’s loan estimate, Better will match the price and credit you an additional $100. Loan estimates include the interest rate, monthly payment and total closing costs.

3. Help finding agents and possibly cutting closing costs

Better Real Estate offers to match people with real estate agents who specialize in their area of need. If they end up going with Better as the lender, the company says it will knock $2,000 off closing costs.

4. Not available in every state

Better currently originates mortgages in 43 states and the District of Columbia. If you live in Hawaii, Massachusetts, Minnesota, Nevada, New Hampshire, Vermont or Virginia, you’ll need to look for another lender.

5. No home equity loans or HELOCs

Unlike many mortgage lenders, Better doesn’t offer home equity loans (often called second mortgages) or home equity lines of credit (or HELOCs). These are typically options to consider when you own your home and want to borrow against your existing equity. If that’s you, you’ll have to look elsewhere.

6. Not a great choice for real estate investors

Better originates mortgages for investment properties, but it doesn’t offer all of the products a real estate investor tends to look for. Better Mortgage won’t refinance properties owned by LLCs. And Better doesn’t offer loans for bank-owned properties or homes in foreclosure.

Who is a Better Mortgage good for?

Fewer fees and a competitor cost-match program make Better Mortgage a good option if you’re price conscious.

It may be particularly appealing if you’re a tech-savvy homebuyer who’s comfortable with a completely online mortgage experience and eager to move quickly.

How to apply with Better Mortgage

The Better mortgage process is almost completely online. To apply, you start with a short online application form that asks you to submit information about what type of property you’re looking for, where you’re looking and when you might buy. Better then asks for your personal information to run a soft credit check. Better pledges to offer you a basic preapproval with the loan amount you’re likely to qualify for — all within three minutes.

When you’re ready, you can then seek a “verified preapproval” by uploading documents that prove your income, assets and credit history. Better recommends having the following information handy:

  • Most-recent pay stubs
  • Most recent W-2 form
  • Most recent tax return
  • Two months of bank statements

After you’ve found the home you want to buy, you can request a rate quote online and, if you qualify, lock in an interest rate. At that point, Better will assign you to a person who will line up the rest of what’s needed to underwrite your loan, from home appraisals to additional financial documents.

Better currently requires a minimum credit score of 620. Keep in mind that higher credit scores typically result in lower rates.

We always recommend that you shop around to find the best rate for your situation. If possible, apply for preapproval for a mortgage — this won’t have a negative effect on your credit. And since Better offers a price match, it’s a good idea to get loan estimates from multiple players in the mortgage industry even if you’re convinced that Better is the lender for you.

If you’ve already applied with one lender and had your credit pulled, keep in mind that you’ll have a window of time to shop around without your credit being affected by multiple hard inquiries — anywhere from 14 days to 45 days, depending on the credit scoring model.

Not sure if Better mortgage is right for you? Consider these alternatives.

  • Rocket Mortgage: You may be eligible for this company’s online mortgage program with a credit score of 580.
  • Movement Mortgage: Movement has a wider variety of loan programs, including new-construction loans and VA loans. It also offers rate locks that go as long as 360 days.

About the author: Andrew Dunn is a veteran journalist with more than a decade of experience as a reporter and editor at North Carolina news organizations, including the Charlotte Observer and the StarNews… Read more.