A new lender has entered the mortgage space, but this one’s a little unique, and its offerings are too.
You see, they’re a “marketplace lender,” otherwise known as a peer-to-peer lender, meaning everyday investors can provide funds to borrowers seeking mortgages.
The lender in question, San Francisco-based Social Finance, or “SoFi” for short, says individuals and institutional investors have the ability to “create positive social impact on the communities they care about while earning compelling rates of return.”
In other words, you can be the mortgage lender and make some money in the process. Oh yeah, and earn some good karma if you think peer-to-peer lending is an act of goodwill.
Anyway, the company has already doled out over $1 billion in student loans and now has its sights set on the mortgage market, which some seem to think has become too restrictive. Just ask Ben Bernanke…
The idea here is to target early-stage professionals (recent graduates) who need help financing their home purchases (they also offer refinancing). They are known as “HENRYs,” or High Earners, Not Rich Yet.
Basically, they have the income, but they may not have the savings for a down payment yet, thanks to student loan debt and a lack of earnings history.
SoFi Offers Interest-Only and 10% Down Mortgages with No MI
I dug into their website and found some interesting stuff. For one, they offer interest-only mortgages, which are considered non-QM and somewhat harder to come by these days.
Additionally, they offer loans with as little as 10% down without mortgage insurance, which again is slightly unconventional but probably just collected via a higher interest rate.
Still, they offer IO mortgages with loan amounts as high as $3 million, meaning they’re a jumbo peer-to-peer non-QM mortgage lender.
SoFi Mortgage Rates Seem Pretty Competitive
I took a look at SoFi mortgage rates on January 31st, 2018 and they appeared to be fairly competitive relative to what else is out there.
The assumptions were for an 80% loan-to-value ratio, which means 20% down payment or 20% in existing home equity. If you’re putting down less or have less equity, expect a higher interest rate.
Additionally, the 5/1 ARM assumes a 75% LTV, so you need at least 25% equity or down payment.
Sample rates were as follows:
– 4% for the 5/1 ARM with an interest-only option
– 4% for the 7/1 ARM
– 3.875% for the 15-year fixed
– 4.125% for the 30-year fixed
They seem pretty close to what traditional lenders are offering these days, though keep in mind that SoFi doesn’t charge loan origination fees, so you need to factor in the lower fees as well, which can be a game-changer.
SoFi’s Loan Underwriting Is Supposedly Quick and Easy
Are you an ambitious professional? If so, you might be the right fit for SoFi. Even more intriguing than their product offerings is their underwriting process.
SoFi claims that they can fund a mortgage in less than 21 days, as opposed to the industry average of 30-45 days. And they promise not to ask for “useless details.”
Part of their speediness be related to the fact that they use AVMs instead of appraisals for loan approval, which can certainly save some time. However, they eventually conduct an in-person appraisal as well.
They also ask applicants to apply and upload documents online, which allows them to complete loan approvals complete with automated valuations in less than 48 hours.
SoFi Cares Where You Went to School and What You Majored In
Of course, there is a major caveat. In order to qualify for a SoFi mortgage, you need to have graduated from a selection of Title IV accredited universities or graduate programs.
This might have something to do with the fact that they were a student loan lender before jumping into mortgages.
Not sure which schools/degrees qualify, but I think the expectation is that even if you aren’t making much money now, you’re expected to be in the near future.
I went through the beginning of the loan application process online and noticed that only certain degrees were listed. It’s unclear if it’s an exhaustive list, but they certainly take schooling seriously.
However, SoFi refers to their debt-to-income limits “flexible,” so you might be okay if income is a little light as long as you went to Stanford.
They also determine loan eligibility by credit history and employment status, and require that applicants be at least the age of majority in their state. So I take that to mean no child doctors. Sorry Doogie.
At the moment, SoFi mortgages are only available in California, DC, New Jersey, North Carolina, Pennsylvania, Texas, and Washington on owner-occupied properties, but they’re expected to reach other states soon.
For the record, if you want to become an investor in SoFi mortgages, you need to be an accredited investor, which generally means you need to have a net worth of over $1 million (excluding your primary residence) or make $200k per year.
So no, not every Tom, Dick, and Harry can become an individual mortgage lender, but those with money can.
It’ll be interesting to see if P2P lending gets more popular in the mortgage world as prospective homeowners look beyond traditional banks and lenders for financing. Stay tuned.
SoFi Is Offering Free Avocado Toast to Mortgage Customers
This just in…in a bid to be the silliest mortgage lender out there, and perhaps appeal to disgruntled Millennials, SoFi is offering free avocado toast to customers who take out a purchase mortgage with the company in July 2017.
While it’s hardly a reason to buy a home, or take out a mortgage with SoFi specifically, it is kind of funny.
The back story is that Millennials have been accused of wasting all their money on trendy foodie things like avocado toast, dashing their hopes of homeownership.
To combat this myth, or perhaps reinforce it, SoFi is giving away a month’s worth of avocado toast to its customers for a limited time, delivered straight to their new door.
Curious how much a month’s worth is? Apparently three shipments of bread and avocados. Oh, and you get to select gluten-free or regular bread, but you have to toast it yourself…