Flagstar Bank Mortgage Review
Working with Flagstar Bank
Flagstar Bank originates mortgages in 160 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also has 75 retail locations in 24 states, and it operates a wholesale network that allows it to originate mortgages in all 50 states. Just more than half of the mortgages that Flagstar Bank originates are conventional loans. The rest are split equally between government-guaranteed loans (FHA or VA) and the bank’s proprietary jumbo loans.
The vast majority of loans Flagstar Bank issues are to borrowers with credit scores above 660. However, the bank may work with borrowers with credit scores as low as 580 for streamline refinances or 600 for purchase mortgages. The lender will manually underwrite loans that meet certain criteria.
Flagstar bank underwrites loans for single-family homes, fixer-uppers, multifamily homes up to four units, new construction, certain condominiums and manufactured homes.
Flagstar Bank products
- Conventional: Flagstar offers fixed-rate mortgages with terms from eight to 30 years and hybrid adjustable-rate mortgages (ARMs) with fixed rates for 5, 7 or 10 years.
- Jumbo: Flagstar Bank offers fixed- and adjustable-rate jumbo mortgages. Loan limits on these products go up to $3 million. The adjustable-rate jumbo requires 10% down. Fixed-rate borrowers need to put down at least 15%.
- FHA 203(k)
- FHA construction-to-permanent
- FHA 203(h) mortgage: Flagstar is qualified to issue FHA 203(h) loans, which are offered through a federal program that insures zero-down mortgages to victims of major natural disasters. If you’re trying to rebuild after a disaster, this loan program could help you repair your existing home or buy a new one.
- Construction: Flagstar offers a single-close construction loan. Borrowers must meet conventional mortgage borrowing criteria.
- Renovation: This loan allows borrowers to finance a home purchase and extensive repairs into a single mortgage. Flagstar does not specify that it uses the Fannie Mae HomeStyle® loan for its renovation mortgages, but the description is consistent with the HomeStyle® loan features.
- HELOC: The maximum debt-to income ratio for a home equity line of credit (HELOC) is 45%, and the maximum total loan-to-value ratio is 89.99%. Helocs are variable-rate loans with a 10-year draw and a 20-year repayment schedule. You must have a 660 credit score to qualify.
- Home equity loan: The maximum debt-to-income ratio is 43% with fixed-rate loan terms up to 15 years. You must have a 660 credit score to qualify.
- Cash-out refinance
- VA cash-out refinance
Flagstar Bank special programs
- State housing finance agency mortgages. Flagstar is a qualified lender for certain housing finance agencies (HFA). State HFAs often offer low-cost loans, down payment assistance or other financial advantages to qualified borrowers. Flagstar works with HFA programs in Michigan, Connecticut and Wisconsin.
- Investor loans. Investors with too many properties to qualify for conventional mortgages may qualify for investor loans from Flagstar Bank. These are fully amortizing loans with both fixed and adjustable rates.
- Fixed second mortgage. This is a second mortgage borrowers can take out to avoid paying private mortgage insurance (PMI). Sometimes fixed second mortgages are called piggyback mortgages, as they take a secondary position to the primary mortgage. These loans are only available to borrowers who put at least 10% down and close a conventional mortgage with Flagstar.
- Professional loans. Professionals with great upward income potential may qualify for a low down payment, adjustable-rate mortgage from Flagstar Bank. You must have a Flagstar checking or savings account to qualify for this loan. Flagstar does not publish its minimum credit score on these loans. Eligible professionals include: medical residents, medical doctors (MD), doctors of dental sciences (DDS), doctors of dental medicine or surgeons (DMD), doctors of optometry (OD), doctors of ophthalmology (MD), doctors of podiatric medicine (DPM), doctors of osteopathy (DO), doctors of veterinary medicine (DVM), certified public accountants (CPA), attorneys and architects. People who qualify for these loans can use them to purchase or refinance a house.
- Construction draw mortgage. Flagstar’s proprietary construction mortgage allows borrowers to construct homes worth up to $3 million. Second homes can have a value of up to $2.5 million. During the construction phase, borrowers only pay interest on the amount borrowed (“drawn”) from the bank. Following the construction phase, borrowers must refinance the construction loan to a permanent loan.
The mortgage application process
Flagstar Bank offers multiple methods for starting and completing its mortgage application process. Borrowers who know exactly the type of mortgage they want can complete the entire application online.
- How to apply. Borrowers will first upload a variety of documents to the Flagstar website. If you prefer to meet with a lender in person, you can visit one of Flagstar’s branches in Michigan, Indiana, California, Wisconsin or Ohio. You can also connect with a Flagstar loan officer in your state using the “Find a Mortgage Expert” tab on the loan application page. Loan officers work from a local office that won’t offer all the services that a branch offers, but the loan officers can help you apply for any of Flagstar’s mortgage products.
Borrowers who want to compare multiple loan options can choose to fill out Flagstar’s quick online application. This includes basic information about your income, credit history and the type of loan you’re seeking. Once you complete the application, a loan officer will reach out to you with more questions and instructions on how to complete the full loan application. Applicants can pre-qualify for a home mortgage by completing the online application and allowing Flagstar to check their credit.
- Disclosure process. After pre-qualifying for a mortgage, applicants can start the disclosure process online. Flagstar uses a secure portal to send and receive the necessary documents for loan approval. Flagstar orders appraisals for applicants, and a staff member reviews the report. The staff review typically takes two to four business days. Once disclosure (including the appraisal) is complete, it generally takes about two business days to receive a loan estimate.
- Submitting loan for approval. Flagstar uses an electronic management system to push loans to underwriting. Underwriting loans takes up to three business days. If the underwriter finds conditions to the loans (meaning she needs more information), it may take longer to review any newly submitted documents.
- Final approval. Flagstar’s loan officers can submit closing documents for review electronically.This cuts down on time and cost, so borrowers can get to the closing table faster.
- Closing. Two to three days before closing, you should contact your attorney to review your closing costs with you. At that point, you’ll need to get a certified or cashier’s check to bring to closing. Borrowers and their attorneys must work with the sellers and their attorneys to establish a time and place for closing.
Communication during the process
Flagstar specializes in an online mortgage experience. Most borrowers should expect to interact with Flagstar employees via phone or email. Mortgage borrowers will start the application online but will work with a loan officer throughout the rest of the loan process.
In addition to a loan officer, borrowers may work with a real estate attorney who is not an employee of the bank.
Pros and cons of a Flagstar mortgage loan
- Investor loans. Investors with seven to 10 financed properties won’t qualify for a conventional mortgage. However, they can still work with Flagstar Bank to find reasonable rates and terms on their houses.
- Variety of guaranteed mortgages. Flagstar offers conventional, FHA, VA and USDA mortgages with fixed and adjustable rates (except USDA loans, which must be fixed-rate).
- Variety of construction and renovation loans. Whether you want to renovate an existing home or purchase a fixer-upper, Flagstar may have a loan for you. The bank also has a jumbo construction loan, which isn’t always easy to find.
- Multiple application options. Applicants who feel confident working online can easily complete a mortgage application this way. However, you can connect with a loan officer and complete an application in a branch or retail location if you prefer.
- Works with state housing finance agencies. Qualified borrowers in Michigan, Wisconsin and Connecticut can use a Flagstar mortgage in conjunction with special homebuyer discounts and loans.
- Limited branch access. While Flagstar issues loans nationwide, it only has branches or retail locations in 29 states.
- Higher credit score limits. Buyers need at least a 600 credit score (580 for an FHA loan) to buy a home with a Flagstar mortgage.
Editorial Note: Parts of this article were reviewed by a lender to ensure accuracy prior to publication. The overall conclusions, recommendations and opinions are the author’s alone.
The information in this article is accurate as of the date of publishing.