Better Mortgage Review

Better.com Overview

Better is a digital mortgage lender established in 2016 that claims to cut the average closing time in half.

The company provides 24/7 mortgage assistance through its technology and network of live customer service agents.

They are also known for their competitive rates, quick closing times, and lack of mandatory lender fees.

Although Better primarily provides conventional and refinance loans, the lender also works with various situations that some lenders may reject.

For example, borrowers with rental and restricted stock earnings, student loan debt, and self-employed income are welcome to apply.

Additionally, Better reports that:

• 1 in 3 borrowers are first-time homebuyers
• Nearly 3 in 4 homebuyers put less than 20% down
• Borrowers may submit alternative credit data, such as rent payments, in lieu of a traditional credit history

But this mortgage provider is far from perfect. Like all lenders, Better bases your rate on your personal situation, meaning some borrowers pay more.

Moreover, the company doesn’t offer key government-backed loans, reverse mortgages or construction loans.

Better Mortgages Pros and Cons

Pros:

• 100% online application
• Instant estimates with same-day preapproval
• No mandatory origination fees
• Better Price Guarantee
• Extra perks for using additional Better services

Cons:

• Limited loan menu
• No brick-and-mortar locations
• Not available in every state
• Additional fees for locking your rate
• No home equity or HELOC products (second mortgages)

How Better Mortgages Work

As an online-only lender, the entire Better mortgage process (minus the occasional phone call) occurs online.

You can start on the Better homepage with the “Get Started” button, after which you’ll be prompted to:

• Indicate whether you want to buy or refinance a home, then: Select whether you’re researching or making offers (if you’re buying), or enter a quick overview of your property (if you’re refinancing)
• Enter your email address to receive your basic preapproval letter within minutes
• Complete a “dynamic Q&A” loan application to collect a verified preapproval letter within 24 hours

Note that your basic preapproval letter is just an outline of what Better estimates you could borrow. Your verified preapproval letter will include a more detailed outline of your terms.

If you decide to continue with the mortgage, you’ll also be assigned a dedicated loan officer to walk you through the process.

You can take advantage of Better’s rate lock (for a fee) at any time during the mortgage. Their online portal also makes it easy to upload documents, manage your account, and e-sign your way to the final dotted line.

Moving the mortgage process online and providing only non-commissioned – read: neutral – agents to assist homebuyers, Better boasts that it saves more overhead.

Then, it passes these savings along to you in the form of fewer fees and below-average interest rates. And barring any unusual circumstances, you can close in just 14 days.

Better Mortgage Loan Types and Products

Better offers a variety of conventional, jumbo, and refinanced loan products for primary and investment properties.

The lender also says it’s resumed providing FHA loans in select states following Covid-19-induced pauses.

Better Mortgage Rates and Terms

For borrowers with good credit scores and a down payment of at least 5-10%, Better offers competitive purchase and refinance rates in line with (and often below) its peers.

For instance, according to public records sourced under the Home Mortgage Disclosure Act, Better’s average 30-year fixed-interest mortgage rate in 2020 came in at 3.03%.

As to terms, borrowers can take out both fixed- and adjustable-rate mortgages (ARMs). Fixed-rate options come in 15, 20, and 30-year terms.

If you opt for an ARM, you can lock your interest rate for the first 5, 7, or 10 years, after which your rate will adjust every 6-12 months.

Better Mortgage Fees

Better is an unusual lender in that it charges no origination, commission, underwriting, or application fees.

In 2020, the lender’s total median loan costs came out to $2,440, including rate lock, discount point, and third-party closing costs.

However, borrowers can offset some of these with Better’s incentive programs, which effectively pay YOU. For instance, you can earn:

• Up to $2,000 in incentives for using a Better Real Estate agent and mortgage lender
• $2,000 if Better fails to close your purchase loan on time
• $100 cash if Better can’t beat a competitor’s price by $100

How to Qualify for a Better Mortgage

To qualify for a Better mortgage, you’ll need a median credit score of 620 for conforming mortgages or 700 for jumbo loans.

Better usually requires a 3-10% down payment (depending on the loan type) and a debt-to-income (DTI) ratio of 43%.

But bear in mind that these are just averages. As such, your exact thresholds may vary based on your situation.

For instance, Better also works with borrowers who have thin or no credit files using alternative credit data.

And if you put more money down or have a higher credit score, you can qualify for a home loan with a DTI as high as 50-55%.

Better Mortgage Features and Benefits

Every mortgage lender comes with its pros and cons. Let’s look at what makes Better worth consideration first.

Unwavering Commitment to Transparency

Better prides itself on its “radically transparent” approach to the lending process. The lender offers plenty of information about its process and rates, a basic rate quote in minutes, and a verified preapproval letter within 24 hours.

Entirely Online

As an online-only lender, Better prioritizes its digital services, such as its:

• Mobile-friendly digital support
• Online application, loan tracking, and e-signature process
• Blog packed with FAQs, calculators, and articles on key homebuying topics

And while a lack of face-to-face communication hinders some, in an increasingly technological and socially distant world, Better’s forward-facing approach to mortgage lending stands out.

Consistent Low Rates and No Mandatory Fees

While your personal circumstances may affect your rates, Better’s average fixed interest rates tend to fall in line or below the national average.

And with no mandatory application, origination, commission, or underwriting fees, you can save thousands on closing costs. You’ll still have to pay for third-party services.

Fast Preapproval and Closing Time

Better can provide a basic preapproval in “as little as 3 minutes” online with a little information.

If you complete a full application, Better will send you a verified preapproval letter within 24 hours (for most borrowers). That’s quite a bit faster than the 1-3 days many of its peers offer.

Once you’ve submitted your application, Better claims that its online-only process can see you close on your mortgage in 14 days. That’s over twice as fast as the average 30-60-day period!

The Better Price Guarantee

Better promotes its “Better Price Guarantee,” which states that:

“If you think another lender has a more competitive price, just send us their loan estimate within one business day from the date it was issued. We’ll either do better by at least $100 or send that $100 to you; you win either way.”

Still, you have to navigate the fine print to collect your cash.

For instance, you must close your mortgage with the same company and loan offer you used to challenge Better’s pricing.

That means your loan amount, sales price, and interest rate can’t change even a cent. Plus, you have to furnish proof of your funded loan within 30 days.

Refinancing with Better Mortgage

Better offers average refinance rates similar to or below other large mortgage lenders. But even when its rates sit higher, its lack of fees can still potentially save you thousands of dollars.

Plus, low-income borrowers can participate in the Fannie Mae RefiNow and Freddie Mac RefiPossible programs through Better, providing help to the homeowners who need it most.

>> More: How to Refinance Your Mortgage

Better Mortgage Limitations

I’ve waxed plenty poetic about Better’s upsides. Now, let’s dive into the nitty-gritty underbelly.

Limited Loan Products

Better’s loan menu is admittedly limited – in fact, the lender’s list of what it doesn’t offer is longer than what it does.

For instance, Better borrowers can’t access HELOCs, VA Loans, USDA, home improvement, or home equity loans.

Moreover, Better doesn’t fund purchase loans for:

• Co-ops
• Manufactured or modular homes
• Mixed-use properties
• Multi-family homes with more than four units
• New home construction

Fees for Locking Your Rate

While Better doesn’t list a price for locking your rate, borrowers have reported that the service isn’t free.

Typically, lenders that charge for rate locks – and not all of them do – charge less than 0.5% for the initial lock, plus 0.38% or less per extension.

No Branch Locations

If you’re searching for an online mortgage, chances are, a lack of branch locations isn’t a big deal.

But if you run into trouble during the process, you’ll have to be content with online and over-the-phone communication – even if a face-to-face meeting makes more sense.

How Does Better Mortgage Compare to Other Lenders?

#1. Better.com vs. Rocket Mortgage

Rocket Mortgage is the digital lending site for Quicken loans. Despite a longer-than-average closing time, it remains popular for its:

• Online, in-person, and hybrid mortgage options
• Widespread acceptance – Rocket Mortgage is licensed in all 50 states
• Same-day preapproval
• Document and asset retrieval software
• 90-day interest rate locks

That said, its limited loan menu, minimum credit score, and down payment requirements aren’t much different from Better’s.

>> More: Rocket Mortgage Review

#2. Guild Mortgage vs. Better Mortgage

Guild Mortgage offers online mortgages in 48 states and in-person mortgages in 31.

The lender claims that it can take borrowers from preapproval to close in just 17 days (despite a longer preapproval window). It offers a robust product menu, including:

• Conventional, government-backed, and jumbo mortgages
• Refinance and reverse loans
• Loans for primary, secondary, manufactured, and investment properties

Guild Mortgage’s minimum credit score falls about 20 points below the competition, with a minimum down payment of 0-3.5%.

That said, the lender is also less transparent about its rates online.

>> More: Guild Mortgage Review

#3. Better Mortgage vs. LoanDepot

LoanDepot’s claim to fame is its proprietary mello smart loan software, which can shave 17 days off the average closing period.

Borrowers can qualify for various conventional, government-backed, and refinance loans with a credit score of 580-620 and a down payment of 0-5%.

Plus, the lender’s “Lifetime Guarantee” ensures you don’t pay a dime in lender or appraisal fees if you refinance the same property they mortgage.

That said, LoanDepot’s average mortgage rates and origination fees sit higher than the national averages.

Moreover, prospective borrowers have to contact a loan officer and hand over their contact information to receive a rate quote.

>> More: LoanDepot Mortgage Review 

Is Better a Good Choice for Mortgages?

Better.com is an ideal mortgage lender if you’re looking for an online-only approach to taking out a home loan.

They offer transparency, competitive rates, low to no fees, and quick closing times. Plus, they’re willing to work with borrowers who have unusual financial circumstances and higher levels of debt.

Better Mortgage FAQs

How Do Better’s Rates Compare to the National Average?

Better’s mortgage rates tend to fall slightly below the national average in a given year. But to get the best rates, you’ll need a decent credit score and (may need to pay for discount points).

What Types of Mortgages Does Better Offer?

Better offers a sparse loan menu, including fixed- and adjustable-rate, conventional, FHA, and jumbo loans.

And while you can buy investment properties, you can’t buy manufactured, co-op, mixed-use, or large multi-family units, among others.

Does Better Offer Mortgage Refinance?

Yes! Better does offer mortgage refinance loans. It also participates in the Fannie Mae RefiNow and Freddie Mac RefiPossible programs for lower-income borrowers. These are just a few reasons why Better is the best place to refinance a mortgage.

Is it Safe to Use Better Mortgages?

Yes! Better.com has a B rating with the Better Business Bureau and is fully BBB-accredited.

What Credit Score Do You Need to Qualify for a Better Mortgage?

You need a minimum credit score of 620 and a 3% down payment for most conventional mortgages. Jumbo loans typically come with much higher minimum limits.

Where is Better Mortgage Available?

Currently, Better.com offers loans in 46 states, and Washington, D.C. Buyers in Nevada, New Hampshire, Hawaii, and Massachusetts will have to find another lender.

Bottom Line: Better Mortgage Review

Better.com is a good lender if you want a fully online (or hybrid online over the phone) mortgage experience.

The lender offers a transparent view into its practices, few to no fees, and incentives worth up to $4,100 or more for going with an all-Better experience. Plus, they’re willing to work with borrowers who have unusual financial circumstances.

That said, Better also has a limited loan selection and no branch locations. And because it doesn’t service every state, some borrowers won’t be able to take advantage of what Better has to offer.