PennyMac Mortgage Review: Standard Value and Service

PennyMac Mortgage Review: Standard Value and Service

PennyMac specializes in low-rate FHA loan offerings and a strong online experience but suffers from an average customer service rating and a lack of jumbo loans.

Good for

  • Competitive rates on FHA and conventional mortgage loans
  • Excellent online tools for searching and comparing loans

Bad for

  • Doesn't provide jumbo loans in any state
  • Average customer satisfaction ratings

Editor's Rating

3.5/5.0

Although PennyMac offers useful online tools for estimating your potential mortgage rate, in the end its rates and level of customer satisfaction are no better than average. If you're looking for jumbo loans or happen to live in New York state, PennyMac won't have any home loans available for your needs. While PennyMac's name has similarities to Fannie Mae and Freddie Mac, the lender has no connection to either of these government-sponsored organizations.

PennyMac Review: Average Value and Service

PennyMac isn't much better or worse than the typical mortgage lender when it comes to the value of its products and its customer satisfaction. While the rate comparison and customized quote tools on PennyMac's website are superior to anything we've seen from other direct lenders, the information shown in these tools don't indicate that getting a home loan with PennyMac will save you much money. While the company's mortgage rates seem low at first glance, the assumptions built into the tools mean that only the most highly qualified customers will be able to borrow at those rates.

PennyMac's rate of complaints and consumer satisfaction scores also show a fairly average performance in the category of customer service. We considered publicly available data from the CFPB on mortgage-related complaints filed against PennyMac, as well as survey-based ratings from JD Power. Although PennyMac does less business than any of the banks we compared it to, the data suggested that its smaller scale won't make your borrowing experience any better.

How Do PennyMac Mortgages Compare?

While PennyMac may be a good choice if you prefer researching your options online rather than in person, it doesn't deliver any advantage on either your rates or your closing costs. Our comparison of estimates showed that PennyMac's interest rates for a 30-year mortgage are no better than the average rates at major banks.

30-Year Fixed Rate Mortgage Estimates at Major Banks

PennyMacChaseBank of AmericaWells Fargo
Interest Rate3.88%3.88%3.63%3.88%
APR4.22%4.13%4.00%4.12%
Discount Points0.40-0.250.820.00
Monthly P+I$838$838$813$838

In fact, the cost of a PennyMac mortgage actually increases if you account for the points required to obtain the interest rates above. Mortgage discount points offer a tradeoff between higher upfront costs and a lower rate on the loan. In our comparison, PennyMac was only able to offer a standard rate after the purchase of points. Wells Fargo matched that rate with zero points, while Chase actually offered lender credit —the reverse of discount points.

PennyMac's online tool didn't provide any information on its closing costs, which made it difficult to get a realistic comparison of each lender's quoted APR. However, our reviews of many other direct lenders have shown that closing costs are more often similar than not. Whether you go with PennyMac or another company, most of your closing costs won't change. If you want to make sure that your fees are fair, you should obtain full Loan Estimates from PennyMac and at least one other lender so that you have a basis for comparison.

Customer Service and Mortgage Servicing

We found that PennyMac is in the middle of the pack for customer satisfaction with mortgage servicing. Both the frequency of complaints against PennyMac and its latest JD Power rating show that the company's customers give it a solidly average rating for its management of loan applications and monthly mortgage payments.

Mortgage-Related Complaints at Major Banks, 2013-2017

CompanyMortgage OriginationsCFPB ComplaintsRatio2017 JD Power Rating
PennyMac57,5541,2012.09%754
Chase948,00014,7781.56%764
Wells Fargo2,155,22225,1821.17%745
Bank of America1,172,11328,1872.40%767

PennyMac's website claims that being a direct lender allows the company to focus on customer needs more effectively than competitors who do business through branch locations. However, dividing the number of CFPB complaints aimed at PennyMac by its total loan volume revealed that this lender actually performed worse than Chase and Wells Fargo, both of whom rely on huge networks of branch offices. In the end, you should think about whether you'll be able to work around PennyMac's limited access to brick-and-mortar service.

Our Customer Experience With PennyMac

PennyMac does excel at providing current rate information through its website. While most direct lenders are reluctant to share their current mortgage rates, PennyMac's website includes a custom rate tool that allowed us to obtain precise and up-to-date quotes for both purchase and refinance mortgages. This level of customization saves you a great deal of time by providing accurate estimates for your purchase price, location and credit score.

Unlike PennyMac, other lenders will typically ask you for personal contact information in order to convey the same information by phone. While we usually include a phone conversation with mortgage loan officers as part of our lender review process, the unusually generous amount of information on PennyMac's website allowed us to get a fair picture of its loan products without the need for a call.

Mortgage Loan Products at PennyMac

PennyMac covers most of the standard mortgage options for purchasing a new property or refinancing your current mortgage, but this lender doesn't offer any jumbo loans. In addition, its rates aren't as competitive as they seem at first. The live rates tables for each product category on PennyMac's site can help you get a quick idea of the cost associated with each loan type. However, these rates reflect several best-case assumptions about the borrower.

PennyMac Conventional Loan Rates

Mortgage ProductInterest RateAPRPoints
30 Year Fixed3.63%3.84%2.00
15 Year Fixed2.88%3.23%2.00
5/1 ARM2.99%4.03%2.00

With an assumed purchase price of $275,000, credit score of 740 and a down payment of 20%, PennyMac's rate table for conventional mortgages gives you the most optimistic estimate possible. This makes it more appropriate to treat the lender's advertised rates as more of a minimum than an example of a typical mortgage. And finally, the inclusion of discount points in these rates move them even farther from a realistic estimate. PennyMac's customized rate tool will be more reflective of the rates you qualify for in your current situation.

PennyMac FHA Loan Rates

Mortgage ProductInterest RateAPRPoints
FHA 30 Year Fixed3.63%3.84%2.00
FHA 15 Year Fixed2.88%3.23%2.00
FHA 5/1 ARM2.99%4.03%2.00

For FHA loan rates, PennyMac assumes the minimum down payment of 3.5% on a $275,000 property, with credit at 740 and points included. As with conventional loans, PennyMac beat the current market average for FHA rates. However, you should be prepared to see a much higher rate on your Loan Estimate from PennyMac if your credit score is below 740, or if you don't plan on buying any points.

Where Can You Get a Mortgage With PennyMac?

PennyMac is licensed to originate and service mortgages in every state but New York, and it doesn't provide jumbo loans at all. If your home purchase exceeds the typical conforming loan limit of $424,100, you'll need to consider a different mortgage company—although the loan limit may be higher if you're in a more expensive area.

How Does PennyMac Compare to Today's Mortgage Rates?

If you're interested in comparing PennyMac to different lenders in terms of rates and fees, see the table below to discover today's mortgage rates.

LenderAPRMonthly PaymentLoan Fees
Homestead Funding Corp4.793%$834.64$795.00Inquire Now
Citibank, N. A.5.179%$858.91$3,207.00Inquire Now
HomeDirect Mortgage5.000%$858.91$0.00Inquire Now
First Internet Bank of Indiana5.038%$858.91$690.00Inquire Now
Ally Bank5.125%$871.18$0.00Inquire Now

Rates assume a home purchase of $200,000 in New York with a 20% down payment and credit score of 740. Estimates include origination fees and points but don't include other closing costs.

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