Flagstar Bank Mortgage Review 2020
Editor’s note: The overall conclusions, recommendations and opinions are the author’s alone. The information in this article is accurate as of the date of publishing.
Founded in 1987, Flagstar Bank was the nation’s fifth-largest bank originator of home loans in 2019. It is a subsidiary of Flagstar Bancorp, which is publicly traded.
Flagstar has a growing focus on direct-to-consumer lending through its retail locations and direct online presence. But Flagstar also works with independent brokers who match many borrowers with the bank.
When working through brokers, Flagstar Bank works as a wholesale lender. This means it underwrites and funds mortgages but doesn’t directly interact with borrowers. During the wholesale lending process, borrowers work with their brokers rather than with Flagstar employees.
Working with Flagstar Bank
Flagstar Bank has its headquarters in Troy, Mich. The bank has mortgage loan officers in 88 retail locations in 27 states and two call centers. The count includes mortgage lending branches that are branded as Opes Advisors and Flagstar’s stand-alone home loan centers in the following 17 states:
Despite its limited retail presence, Flagstar works with 2,450 third-party mortgage originators, or mortgage brokers, to provide loans in all 50 states. In 2019, it originated more than $17 billion in purchase loans and $15 billion in mortgage refinance loans. The bank also services $214 billion in mortgage loans.
Flagstar Bank borrowing requirements
Like most mortgage lenders, Flagstar, when making loans, considers a borrower’s income, assets, current debts and past credit history. The bank does not list credit score minimums on its website.
Flagstar underwrites loans for the following home types:
- Single-family homes
- Multifamily homes (up to four units)
- Investment properties
- Planned unit developments (PUDs)
- Warrantable condos (those that can be financed with a conventional loan, rather than riskier financing)
Flagstar doesn’t underwrite loans for manufactured homes, except when refinancing those loans it already owns.
Flagstar Bank mortgage products
- Conventional loans. Flagstar offers a variety of conventional loans with fixed-rate terms ranging from 10 to 30 years and adjustable-rate mortgages (ARMs) with fixed periods of three, five, seven or 10 years. It also offers conventional mortgages for investment properties, including loans for borrowers with seven to 10 properties.
- FHA loans. Flagstar advertises a 30-year, fixed-rate option, but its FHA loan offerings include fixed-rate mortgages with terms ranging from 10 to 25 years, as well as 3/1 and 5/1 ARMs.
- VA loans. Flagstar advertises both fixed-rate and adjustable-rate, no-down-payment VA loans with limits up to $2 million.
- USDA loans. If you’re looking for a home in a rural area, the zero-down, fixed-rate USDA loan from Flagstar could be a low-cost option.
- Jumbo mortgages. In the past, Flagstar offered jumbo loans with a variety of terms for borrowers, but it has now temporarily suspended many of these offerings due to the COVID-19 pandemic. However, the company still advertises an adjustable-rate mortgage for jumbo loans up to $3 million.
- Cash-out refinance. In addition to typical cash-out refinances, Flagstar offers special provisions to help borrowers use a cash-out refinance to pay off student loans.
- Limited cash-out refinance. This option is typically for people seeking more favorable loan terms and access to $2,000 or less in cash (except in Texas).
- FHA cash-out refinance. Flagstar limits FHA cash-out refinances to $100,000 of cash in hand.
- FHA streamline refinance. This is only offered to current FHA mortgage holders who have their loan serviced by Flagstar. It provides borrowers with better loan terms while requiring less documentation and fewer closing costs.
- VA interest rate reduction refinance loan (IRRRL). This streamlined refinancing option often lets mortgage holders skip an appraisal — and lower their principal and interest payments on an existing VA loan.
- VA cash-out refinance. To learn more about terms for this type of loan, you can apply online and speak with a Flagstar mortgage advisor.
- VA rate-and-term refinance. As with the VA refinancing loan above, apply online to speak with an advisor.
Home equity products
- Home equity line of credit (HELOC). Flagstar’s HELOC includes no bank fees if the loan is open for at least 36 months. It allows for a line of credit ranging from $10,000 to $500,000 with variable interest rates starting at 3.99%. It has a 10-year draw period and a 20-year repayment period.
- Flagstar does not offer reverse mortgage products.
Flagstar Bank special mortgage programs
- State housing finance agency mortgages. Flagstar is a qualified lender for housing finance agency (HFA) loan programs offered in certain states. State HFAs typically offer low-cost loans, down payment assistance or other financial advantages to qualified borrowers. Flagstar works with HFA programs in Arizona, California, Connecticut, Idaho, Michigan, Nevada, Ohio, New Mexico, Virginia, Washington and Wisconsin.
The mortgage application process
- How to apply. Borrowers can start a mortgage application online, over the phone or in person. At its website, Flagstar lets you connect with a loan advisor in your area to help you with the process.
- Disclosure process. During the preapproval stage, a representative from Flagstar will collect financial documents from you, pull your credit and keep you updated on the progress of your loan.
- Submitting loan for approval. With Flagstar, you may receive a conditional approval of your loan. This approval will tell you what requirements you need to meet before the loan is fully approved.
- Final approval. Your loan agent will send your loan documents to underwriters who will determine whether your loan can close.
- Closing. Following the final approval, Flagstar will work with you, the property seller and the title company to schedule a closing.
- Servicing. Flagstar services more than $200 billion in mortgage loans. If Flagstar services your loan, you’ll be able to make payments or view your loan through the company’s online MyLoan portal. Flagstar Bank also purchases mortgages from banks and mortgage companies that do the loan underwriting and funding. When Flagstar Bank buys the loans, it may take over servicing the loan.
Communication during the process
During the lending process, your loan application will change hands multiple times, but your primary point of contact will be your loan officer. The loan officer will guide you through Flagstar’s lending process, so you can submit all of your documentation correctly and close on time. When it comes time to close, Flagstar will also connect you with a title company.
Pros and cons of a Flagstar Bank mortgage
- Variety of loan terms. Flagstar offers a huge variety of loan terms with mortgages ranging from 10 to 30 years. It also offers a variety of fixed- and adjustable-rate products to help borrowers find something that fits their needs.
- Several ways to apply. Applicants can start a loan application online, over the phone or, if possible, in a face-to-face meeting.
- Nationwide service. While Flagstar Bank doesn’t have branches in every state, it works with wholesalers and brokers to serve borrowers across the country.
- Reduced loan offerings. With the onset of the COVID-19 pandemic, Flagstar dramatically scaled back its loan offerings. Its offerings are now in line with those of most conventional lenders.
- Tighter credit limits. Borrowers with lower credit scores may now find it harder to obtain a loan from Flagstar.