The Bottom Line: Flagstar Bank embraces government loans and makes it easy to see personalized rates online.
Pros & Cons
Full online application
Considers alternative credit data, like rent payments
Offers renovation and construction mortgages, and all government loan programs
Charges an average $1,000 origination fee
Mobile app has limited loan functionality
If you live outside of the north-central U.S., you may never have heard of Flagstar Bank. But the Troy, Michigan-based savings bank originates home loans in all 50 states and has retail locations in more than half, while deploying a substantial network of more than 1,000 brokers and agents across the nation.
Perhaps more homeowners are familiar with Flagstar in another way: as the payment address for their loans. Most lenders sell their rights to loan servicing — the collection and processing of payments — to providers like Flagstar Bank, which handles the record keeping for nearly 402,000 borrowers.
Here’s how Flagstar works and how it compares with other lenders for new mortgages and mortgage refinancing.
Flagstar home loans
Flagstar Bank has about every mortgage product there is, and it claims expertise in one specific loan offering: renovation mortgages. The bank also recently rolled out three construction loan offerings, as well:
A construction-to-permanent-financing loan with one closing and a single set of closing costs and fees. The loan is interest-only during the construction phase.
A draw-funds-as-needed loan with interest-only payments during the construction phase. When construction is complete, the borrower chooses the type of permanent mortgage that best suits his or her needs.
A Federal Housing Administration construction-to-permanent loan with a one-time close and no payments required during construction. FHA county loan limits apply.
Meanwhile, a professional loan package targets doctors, lawyers, architects and certified public accountants — “borrowers with strong prospects for future earnings growth,” according to Flagstar. Don Bleuenstein, national sales director for retail home lending at Flagstar, says the mortgage allows flexibility in underwriting borrowers who have student loans. It also offers low or no down payments and no mortgage insurance.
With community-based loan officers in so many parts of the country, Bleuenstein says, Flagstar reps are familiar with low-down-payment state bond programs for first-time home buyers and income-limited households, as well as the areas that qualify for rural development mortgages backed by the Agriculture Department.
Bleuenstein says most borrowers looking to qualify with rental payments, utility bills and other nontraditional credit sources will turn to an FHA loan, and Flagstar embraces FHA-backed mortgages.
FHA loans and some entry-level conventional loans use a benchmark 620 FICO credit score or better. Overall, typical Flagstar customers have had an average credit score of just over 720. Average loan-to-value ratios are just over 80% among Flagstar customers, Bleuenstein says.
A leading home equity lender
Flagstar is a top-10 lender in the nation when it comes to home equity products, based on loan volume. With fixed-rate home equity loans and variable-rate home equity lines of credit, you have the flexibility of choosing which best suits your needs.
Home equity loans provide a lump sum and your interest rate will never change. A HELOC offers as-you-need-it withdrawal convenience — and you pay interest only on the outstanding balance.
Flagstar offers credit lines from $10,000 to $1 million.
Flagstar mortgage fees
With such a complicated loan process, lenders can find a lot of ways to charge fees. These costs can come with any number of labels. When asked if Flagstar charges an origination fee, Bleuenstein says no, but then adds, "We have standard processing and underwriting fees, which in most cases is $1,000.
"Most lenders are going to have 'base bank costs,' as they would call them," Bleuenstein says. "And some banks do call them origination fees.”
The Flagstar mortgage loan process
Selecting the “Apply Now” button on Flagstar’s Home Loans page will bring you to what is essentially a contact request page. You enter some basic information: purchase/refinance, type of loan, amount, down payment and so on, along with your contact information, and a mortgage loan officer will contact you.
“If you’re a client that wants to fill out a quick-hit, 14-item field to get a quote,” Bleuenstein says, this is where that happens. Then you can decide whether to proceed to the complete application process. “Borrowers can complete an application digitally or do it one-on-one with a loan officer,” he says. “Even borrowers who opt for digital applications will have a loan officer assigned to help them through the process.”
Flagstar also offers online document uploads, electronic signature and online loan process tracking.
Flagstar customer satisfaction
Customer satisfaction is rising but still falls below the industry average, according to J.D. Power, a customer satisfaction research firm.
It gave Flagstar a score of 813 on a 1,000-point satisfaction index. While that’s up from Flagstar’s 2015 score of 773, it's still below the industry average of 834. Out of a best-possible five Power Circle Rating, Flagstar garnered two circles. That put the bank in “the rest” of lenders category and placed it in the bottom quartile of the 20 lenders included in the survey.
"Last year, we were the most improved. We've improved again," Bleuenstein says. "There's a strong correlation [in the J.D. Power ratings] to the development of technology. Our technology can come further, which will further improve our score."
More on mortgages from NerdWallet
NerdWallet's star ratings for mortgage lenders are awarded based on our evaluation of the products and services that lenders offer to consumers who are actively shopping for the best mortgage. The six key areas we evaluated include the loan types and loan products offered, online capabilities, online mortgage rate information, customer service and the number of complaints filed with the Consumer Financial Protection Bureau as a percentage of loans issued. We also awarded lenders up to one bonus star for a unique program or borrower focus that set them apart from other lenders. To ensure consistency, our ratings are reviewed by multiple people on the NerdWallet Mortgages team.