As I captured on deciding which company to use for a mortgage, I elected to go with Ally. They don’t offer mortgages directly, but instead partner with better.com to drive the process. They provide an incentive to existing customers to select their option. In my case, it ended up with no lender fees as well as a $500 credit towards closing costs. Win!
They use a three phase process to handle all of the tasks. As you move through the various phases, you get handed off to specialists who collect the information they need to get the phase wrapped up.
Going through the pre-approval process was as easy as could be. After doing the normal customer identity/KYC stuff, it took me a couple of minutes to provide some details and get the pre-approval. The numbers were laughably high for what they’ll pre-approve versus what I would feel comfortable actually purchasing. One perk is that you can customize the pre-approval letter to your situation for inclusion with offers. For if you’re pre-approved for $700,000, but only plan to bid on a property priced at $375,000, you can adjust the letter to say you’re only eligible for up to $400,000. In the current environment that is the housing market in 2021, I’m not sure how useful that really is… but it’s nice to know it’s an option.
The other thing I really liked about the better.com user interface (UI) was the ability to update the terms and points to see your update rates. Want to go from a 30-year to a 15-year? No problem, just change the values and you’ll see the rates get updated. Plus, you’ll can see the various choices you have for rates based on whichever discount points you want to pay. These rates update regularly based on the market pricing. I created a spreadsheet to track the ups and downs in order to get the situation I wanted.
If you opt to purchase discount points costs, you bring more money to closing (on top of whatever your down payment is) but then get a reduced interest rate. With Ally/better.com, you could also opt for a higher interest rate and get additional money credited towards closing. It was cool to see the options, and I used them to build another spreadsheet to make my choice. My goal was to minimize the cost of financing where possible, but there’s a cost to paying points as well as there is a breakeven point. Although I intend to be here for a while, it didn’t make too much sense for me to purchase discount points (even if the idea of having a mortgage at 1.875% is cool).
Everything in this point is part of the first phase of the loan. It was all done online and I didn’t have to speak with anybody, although the option is there. My experience is that most everything you need is documented right there, and there’s always an Internet search option if you’re missing something.
Getting started with the mortgage is straightforward. In order to lock a rate, you need to use a credit card to fund an appraisal. This seems scary, but it isn’t really. My thought is that it’s used to clear out the riff raff and lookie loos because you’re putting actual cash down. After that, you use the UI to indicate you’ve made an offer and then upload a copy of it for review. Everything is task based, so as they need more information they ask you for it. My circumstance was fairly easy I think, so this was painless.
One thing I found to be a little confusing was the initial rate lock process. The information on the site almost made it seem like you were locking the whole array of rates and could adjust your final rate up and down by changing the points paid. But nope, once you locked it, your terms were completely set. Not a big deal, and I made the assumption it probably would lock.
The other item that was confusing to me was the title service options. Seems they partnered with a company called Spruce to do online title services. I had planned to go with a local option, but would have considered the online one if it was more obvious. But it was presented as Spruce out of New York, and I didn’t feel like going to New York.
For account validation, they provide the option to use Plaid to connect to your accounts and validate your details. For income validation, they pull information from the IRS as well as my employer. Compared to the documentation I had to gather the last time I purchased a home, this was a piece of cake.
One unexpected plus for me was that they ended up not requiring an appraisal. That fee ended up getting refunded to my credit card about 10 days before closing.
There were a few phone calls during this process, but they were short and honestly just reinforced the information I was already seeing on the site.
Closing / Funding
I got to the closing phase almost three weeks before closing. This was probably the bumpiest part for me, because the UI wasn’t nearly as up front as during the previous phases. I ended up having to speak to the closing expert once or twice to make sure everything was on track. One of the assigned tasks was to determine when the appointment for closing should be, but it wasn’t clear if the closing expert would schedule or if I needed to. Turns out the closing expert took care of it, but it was just weird. I suspect that using the Spruce service might have smoothed this out as well.
When it came to the closing appointment, I was in and out in under 30 minutes. I did wet ink signatures on a bunch of paperwork, and off I went.
This financing option worked great for me. My situation was pretty standard, so I think that helped to make it easy. I’m an employee who can document my income, my down payment was easily documented. There were a few minor paperwork items needed for the sale document and my personal situation, but those were easy to manage. I’ve read some accounts of other who weren’t happy using these folks, but based on my experience I suspect they had some mitigating circumstances that didn’t easily fit into the model that Ally/better.com expects.
The numbers changed a bunch through the process, to the point where the amount of cash I had to bring was way under what I had personally estimated. I might have considered buying the rate down a bit had I realized it was going to come down, but I’m not sure how that estimate could have been made better based on the framework they have to operate in.
My loan was sold pretty quickly, as expected. There was a tiny bit of confusion on the communication as two different letters arrived on the same day, but I sorted it out. No major complaints!