About Better Mortgage
If you’re looking for a mortgage, you’ve entered the arena at a pretty good time in history.
Instead of doing hours of research online before making your first phone call to a lender, you can use a service like Better Mortgage and get pre-approved for a loan in a matter of minutes.
Not only that, but if you’re on the hook for an existing mortgage, you can use Better.com to find a refinance offer.
That’s a pretty big sigh of relief, especially considering the stress that comes with the money, responsibility and information of buying a home or refinancing.
Thankfully, Better.com and similar sites say, they’ve come up with a better way of finding a lender who can get you a loan based on your credit score, income, down payment and price of the home you want. But this nearly automated world of lending isn’t always what it seems.
For instance, a site like LendingTree.com provides you (literally!) dozens of mortgage quotes in less than 15 minutes. But customers have complained that they have no control over who calls them, or, in some cases, who taints their credit score by running hard checks.
Does Better.com offer a “better” solution? How exactly does it work? Are there drawbacks?
We’re going to answer these questions in one way or another over the next few minutes.
Note: Better.com’s real name is Better Mortgage, so we’ll use those names interchangeably throughout this article.
How Does Better.com Work?
We did a test run on Better Mortgage’s site to get a feel for what the average consumer can expect. Right off the bat, Better Mortgage’s home page says they can quote you competitive mortgage rates in 3 seconds.
So, we put that claim to the test with a dummy quote for a home in Florida. It didn’t work. Why? Because Better Mortgage only provides financing for homes in California, Oregon and Washington.
So, we redid the quote by entering a California zip code (92115), along with our credit score (740-759) and our down payment amount ($100,000 on a $500,000 house).
The results came in less than five seconds. We had 18 different options across six types of loans: 30-, 20-, and 15-year fixed rates and 10/1, 7/1 and 5/1 adjustable-rate mortgages. We found this refreshing, as most lending sites lure you in with low percentages for adjustable rate mortgages (ARM). ARM’s are usually a bad idea because you pay lower rates for a period of five, seven or 10 years, but after the higher rates kick in many homeowners have a hard time making their payments.
Let’s get back to the quotes: two of the three included points payments. What that means is that they calculated our monthly payment based on us paying a percentage point of our APR up front, rather than spreading it out over the life of the loan.
The reason that’s interesting to us is that buying points is a hotly debated topic and there’s no one answer as to whether or not it’s the right thing to do.
Now, points aside, we appreciated how simple Better Mortgage makes the rates page.
Better.com’s rates page is simple and easy to understand.
The refinance option worked exactly the same way.
To get a pre-approval for a mortgage or refinance, you choose which offer you like the best and fill out additional information, including the address of the home you want to buy/refi.
Quick note: It’s common to confuse Better Mortgage with a site like LendingTree.com who connects you to “direct lenders”. However, the two aren’t the same. Lending Tree connects you with direct lenders. Better Morgtage is a direct lender. You’re basically cutting out the middleman (and a lot of annoying emails and phone calls…check our Lending Tree review for the details) by skipping Lending Tree-style sites and going directly to Better Mortgage
Where Do the Loans Come From?
As a direct lender, Better Mortgage provides your loan via an investor. Once your loan is finalized, you’ll be making payments to the investor who services the loan until it’s paid off.
I asked Mike Pepin, a marketing analyst at Better.com, about this process. Here’s what he said:
- Better Mortgage analyzes your income, debt, credit history and the value of your home as compared to its price tag.
- They come up with a loan amount and interest rate you get to see.
- Meanwhile, Better.com finds investors who are willing to buy the loan and service it.
In other words, Better.com is like a guy who has a lot of friends who like to lend. You ask the guy to borrow some cash. He says yes, based on how much you’re asking for and how able you are to pay it back. Since he’s done the research and knows you are reliable, he can go back to his lend-happy friends and say, “This borrower checks out. Who wants to lend to him?”
Once they find an investor (lender), Better.com works out the details and, eventually, you start making payments to the investor. According to Mike and Chief Marketing Officer Peter Scherr, those investors include reputable big banks.
What Kind of Fees Can I Expect?
When you secure a mortgage, you end up paying what’s known as “closing costs.” That’s cash out of your pocket, so to speak, that you need to pay up front. You can’t roll it into your mortgage.
According to Better.com’s FAQ page, closing costs for 2015 typically ranged from $1,500 to $3,500. We double checked these closing costs with Bankrate.com’s figures for California. They calculated the average closing costs on a $200,000 home to be about $900, which falls into the $1,500-$3,000 range for a $400,000 mortgage.
Even though you’re buying your home with money you secured through Better.com, you still have to pay third-party costs like appraisals, title changes and other fees common to the homebuying experience.
You won’t have to pay an origination fee, though, which is basically a charge for processing your application. In most cases, that fee is 0.5 or 1% off your loan amount. In the example we used ($400K), that would total out to between $2,000 and $4,000.
How Sure Are the Rates I’m Quoted?
Rates are a way for lending companies to lure you in. In many cases, they’ll plaster a landing page or home page with a low interest rate. Come to find out, that rate is actually for a 5/1 adjustable rate mortgage and not the traditional 30-year fixed rate mortgage (which typically has a higher percentage rate than ARMs).
Better Mortgage, as we pointed out, doesn’t do that. They give you the 30-year fixed rate as the first result when you ask for a quote. And, according to their FAQs, that rate will remain the same if your answers are consistent.
Once that rate is locked in, Better Mortgage claims you’ll have your funding in an average of 26 days. Normally, they say, it takes about 47 days.
Word to the wise: Be very straightforward about your credit score, income and other related numbers. The more truthful you are, the better the chance that your final rate will be the same as, or close to, what you were first quoted. Better.com will check do a basic credit check and income verification, so fudging the numbers won’t help you.
What Are Other People Saying About Better Mortgage
Because Better.com is a relatively new company (registered in New York in 2014), there aren’t many reviews of the company. We did find five reviews of the company on LendingTree.com.
All five reviews were 5-star, with customers saying “love the online process from start to finish and everything was so open and clear” and “I felt like I was dealing with true professionals.”
The Final Word: Is Better Mortgage a Good Choice?
Based on the research we’ve done on Better.com, we think the site offers some advantages you won’t find on a bigger site like LendingTree.com.
For example, LendingTree connects you with a bunch of companies who lend. Better.com is actually one of those lenders, so you don’t have to go through the hassle of picking one lender out of many.
Another factor which works to the consumer’s advantage, in our opinion, is that Better Mortgage does research to understand exactly what kind of borrower you are. So, when they give you a rate quote, you most likely won’t see a big rate jump, according to Mike and Peter.
It’s kind of like how car companies say they’re selling cars with 0% APR, but when you read the fine print there are certain requirements you must meet to get that amazing interest rate.
From what we’ve seen in our research, Better.com doesn’t do that. In fact, when you go to their site, you aren’t hit with ARM rates that try to lure you in.
Though what we’ve read and heard says that Better.com is a reliable site, we can’t say with certainty that consumers are happy with the service. That’s not because there are bad reviews; there just aren’t that many out there.
Also, Better Mortgage only offers loans and refi’s in California, Oregon and Washington.
If Better.com’s lack of reviews, reach and history give you pause, there are many other online lending options you can check out.
1 out 1 people found this review helpful
Quick and Easy Refinancing
It's a Quick and an Easy Rffi. I locked in at the end of Aug 2016, funded by end of September, and application and "paperwork" all online. Having a scanner really helps! I answered a few questions and loan approved.
They did ask a couple of questions that I thought were kind of trivial, but, I did answer them and all went smoothly.
I did choose to pay some points to lower my rate. I really liked that they displayed all the choices and I was able to choose the loan and rates that I wanted.
Bottom Line: Yes, I would recommend this to a friend
1 out 3 people found this review helpful
Horrible Waste of Time
Waste of time and money. Better Mortgage approved me right out of the gate and strung me along for a month making me jump all sorts of hoops and provide crazy documentation, which I supplied all of.
I had to remove inaccuracies in my credit report also which was a huge pain. After a month of them saying “just do this one more thing and we will be good”, they denied my loan and set my project back at least 30-60 days.
Better Mortgage is not better and I suggest you stay away.
Bottom Line: No, I would not recommend this to a friend
1 out 1 people found this review helpful
I just closed the refinance loan today after a little over 3 weeks. Working with Sathi Roy and team was smooth and professional. Got a great rate and terms. Highly recommend!
Bottom Line: Yes, I would recommend this to a friend
4 out 10 people found this review helpful
Don't waste your time
Please don't jump through all the hoops as I did. This has been my worst refinancing experience. Even when all the documentation is provided, there is another form that must be filled out. I ended up pulling the plug on the loan even after I had paid for an appraisal.
Bottom Line: No, I would not recommend this to a friendView all 1 commentsHide comments
Sep 20, 2016
I'm so sorry to hear that you had a frustrating experience working with us. We're working every day to make the mortgage process simpler for all Americans, so feedback like yours is very valuable as we constantly improve our process. We would love to hear more about your experience so that we can explore how we can improve in the future. Please reach out to email@example.com if you'd like to discuss your experience with a representative from our team.
The Better Team