Whoa. In an unexpected turn of events, online real estate brokerage Redfin has launched a new mortgage service called, you guessed it, “Redfin Mortgage.”
Well, maybe it wasn’t so unexpected, seeing that the mortgage trend is decidedly moving from refinances to purchases. Just ask Motto Mortgage…
So it’s a very smart move for Redfin to get their hands on all that mortgage business, while also gaining more control of the many moving parts involved in the typical home purchase.
In announcing the news, and the new website, the company noted that Redfin Mortgage “is the next step in our mission to put customers first.”
Redfin Agents and Redfin the Lender Will Work Together
- Redfin’s goal is to streamline the home loan process
- By creating a unified team from within the same company
- It can seamlessly integrate its lending platform with Redfin’s home-buying service
- To both speed things up and provide a smoother loan closing
The goal seems to be harmony, and also savings, something Redfin introduced as an online real estate brokerage many years ago.
They only charge a 1.5% commission to sellers, which they refer to as “half the usual listing fee.”
In reality, it might be a little less as 2.5% is a typical fee these days, but still, they don’t charge as much as a full-service real estate brokerage.
And with many, if not all, home buyers using Redfin to peruse homes for sale, Redfin-listed properties get prominence as they’re always found at the top of the list.
That doesn’t mean they’ll sell faster or for more, just that they’ll be assured to get plenty of exposure.
Redfin Mortgage Will Begin as a Purchase-Only Home Loan Lender
- At the moment they only offer home purchase loans
- Though they might dip their toes into the refinance waters eventually
- You must use a Redfin real estate agent if you want to take advantage of their home lending platform
- But it’s not a necessity to use Redfin Mortgage if you work with a Redfin real estate agent
Initially, Redfin Mortgage will only dole out mortgages to help customers purchase homes, with mortgage refinances perhaps coming later, depending on how things go.
In terms of loan type, they only offer the 30-year fixed, 15-year fixed, and the 5/1 adjustable-rate mortgage. So it’s pretty vanilla.
But you can get a conforming loan or a jumbo loan, which is helpful if you’re looking at an expensive property.
The good news is Redfin Mortgage will originate mortgages for both home buyers represented by a Redfin agent and those using an outside real estate brokerage.
By the way, Redfin credits back some of their commission for buyer’s closing costs too, which can make the mortgage process run a bit smoother (and cheaper).
Redfin will not bar its people from continuing to work with other mortgage lenders or brokers that they have relationships with.
And I’m sure the buyer can always use whichever broker or lender they choose – this is simply another option.
Redfin hired Jason Bateman, no, not that guy from Juno and Arrested Development, but the former executive vice president of mortgage operations at BBVA Compass, to spearhead the operation.
Bateman will run Redfin Mortgage out of a new Dallas-based office, with software engineers providing support from up in Seattle.
A Streamlined, Tech-Heavy Digital Operation
- Redfin Mortgage rates seem fairly competitive
- Especially since they don’t charge lender fees to drive up the APR
- But loan options are limited to 30-year fixed, 15-year fixed, and 5/1 ARM
- They also provide a fully-underwritten pre-approval reviewed by an underwriter
One thing that might give home buyers a head start is their fully-underwritten mortgage pre-approval, which is actually reviewed by a loan officer and an underwriter.
They expect a streamlined operation thanks to a “single system” that can be accessed by Redfin Mortgage advisors, real estate agents, title companies, and the customer.
This, they hope, will lead to on-time closings, something that is paramount in the home purchase world of lending.
The portal will notify all parties when something comes up, such as a low appraisal, so time isn’t wasted sending emails and making phone calls to get everyone in the loop.
Automating the process should also lower costs, which could allow Redfin Mortgage to offer more competitive mortgage rates.
Seen above is a screenshot of a sample scenario from June 8th, 2018 to give you an idea of what rate might be offered by the company.
It’s a hypothetical home purchase with 20% down on a primary home valued at $250,000 with excellent credit. Basically a vanilla scenario. Rates seem to be quite competitive, especially with the lack of lender fees.
Also, their mortgage advisors will not be paid a commission for offering a certain loan product or rate because they’ll be paid based on customer reviews.
Additionally, Redfin real estate agents won’t receive any incentives for recommending a Redfin loan over outside options.
Redfin Mortgage Offers 30-Day Closing Guarantee
- They offer a 30-day closing guarantee
- In which they’ll credit $1,000 toward closing costs
- If they aren’t able to fund your mortgage in 30 days
- But pay attention to the restrictions and read the fine print
Redfin Mortgage also recently announced a so-called “30-day closing guarantee” in which they will give the home buyer a $1,000 credit toward closing costs if they’re unable to fund a mortgage in 30 days.
So aside from keeping costs down, they also aim to close loans as quickly as possible, which is always important when it comes to a home purchase.
However, there are a lot of deadlines the borrower must abide by along the way to ensure the closing guarantee remains in place, including one fairly aggressive one.
They require borrowers to lock their mortgage rate within six days of the purchase contract and pay for the appraisal.
Additionally, some loans are excluded from the promotion, including jumbo loans. Read the fine print to ensure you’re eligible.
Where Redfin Mortgage Operates
At the moment, Redfin Mortgage is only available to customers in 20 states and the District of Columbia.
Those states include Arizona, Colorado, Delaware, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Wisconsin, and Washington D.C.
They plan to expand to additional new markets in 2020 and beyond, with the goal likely full national coverage sooner rather than later.
Should be interesting…
Redfin Mortgage Highlights
- Only offer home purchase mortgages (no refinances yet)
- Available to buyers represented by Redfin real estate agents and outside brokerages
- No incentive to agents whose buyers work with Redfin Mortgage
- Totally digital, online process with 90-minute pre-approvals and quick closings
- Single portal for lender, agent, title company, and customer
- Mortgage advisors paid on customer reviews, not commission
- Low rates thanks to savings related to streamlined technology
- Goal to save buyers money and close on time