SoFi Mortgage Refinance
San Francisco-based SoFi is a peer-to-peer lender that built its reputation with student debt consolidation and consumer loans. They have moved into mortgage refinance lending, although they are not yet licensed in every state for mortgage loans.
They have a proprietary loan qualification process, taking into account applicants employment and education history as well as their income, earning potential and credit rating. SoFi is a true maverick, not requiring private mortgage insurance. They do require a property appraisal, but the loan amount is not contingent on the appraised amount of your property.
Simplified Mortgage Refinance Process
The SoFi mortgage refinance page guides visitors to click through to "Find My Rates" as you scroll down. There is an option to go to the FAQ page, and a phone number you may call for a free consultation. Should you click through "Find My Rates", you are prompted to create an account. There is a "Chat Now" button available on the registration page.
SoFi offers mortgage refinancing with fixed or adjustable rate loans. They favor loans from one to three million dollars, targeting high-income borrowers.
You can shop the site for interest rates and loan products, fill out an application and lock in rates. Applicants can apply and upload documents online, and get an answer to their application within 48 hours. SoFi closes on typical loans in 30 days, speedier than the industry average.
Refinance Rates and Terms
SoFi offers three mortgage options, a 30-year fixed rate, 15-year fixed rate and an adjustable rate mortgage. The bigger your down payment, the lower your interest rate. Here's the range of rates available on a $1 million mortgage, depending on your income, credit history, education and earning potential.
With 50% down on a 30 year fixed rate mortgage, your rate will be between 4 and 5%. Put down 20%, and rates hover around 5% and slightly above. With a 10% down payment, you'll get a rate from roughly 5% to just below 7%. You'll get a better initial rate with an adjustable rate mortgage, but ARMs are subject to changes in interest rates. Interest rates are trending upwards, so an ARM is likely to see higher interest rates in the short term.
Your actual rate depends on your creditworthiness as determined by SoFi's in-house proprietary qualifying formula. Bear in mind that rates are subject to change, depending on whether the Federal Reserve Bank raises rates.
There is no origination fee on SoFi mortgage products, but you do pay for credit reports, and third-party closing costs such as appraisal fees, title insurance, title search, transfer taxes, recording fees and settlement services. There is no prepayment penalty.
The Application and Approval Process
Applying for a mortgage can be an ongoing process of chasing documents and jumping through hoops of fire at the behest of your banker or mortgage broker. SoFi wants the proper documentation in order, but in general offers a streamlined and largely online application process.
With SoFi, the first step to mortgage refinance is pre-qualification, where you find out your chances of approval for the loan, your interest rate and amount of loan you are eligible for. At this step, SoFi uses a soft credit check that does not affect your credit score.
Should you decide to proceed to pre-approval, you'll show a pay stub or other proof of income and other documents. Once you have a property under contract, you proceed to appraisal and closing.
After you are pre-approved for the re-fi loan, you provide the details of the property and SoFi conducts an automated valuation of the property, generating an offer letter for you inside two days in most cases.
Why SoFi for Mortgage Refinance?
SoFi touts the speed and simplicity of their mortgage refinance process, claiming they have redesigned it. They market their ability to save you money on refi's as well. They target young professionals with ample cash flow, looking to buy in expensive markets such as San Francisco. Conventional home affordability guidelines don't always apply in these hot real estate markets. SoFi seeks to step in to qualify earners with high salaries for mortgages who might have a tough time with conventional banks.
SoFi mortgage refinance is an option worth exploring for any qualified borrower, but in particular, it's designed for those with high income who also have student loans, identified as an underserved category. Think of a computer engineer, doctor or lawyer with a six-figure income, but six-figure debt from graduate school. They have a high debt-to-income ratio, but still have enough cash flow to pay a mortgage. A traditional bank will not make a mortgage refinance loan to someone with that debt-to-income ration, but SoFi will. Their proprietary underwriting allows them a view to creditworthy borrows with a higher than usual debt-to-income ratio.
Traditional lenders want to see total monthly debt payments less than 40% - 45% of your income. Even an earner with a $10,000 per month income and $2,000 in student loan payments would have a hard time getting a $3,000 per month mortgage from a typical bank. This is the borrower SoFi is looking for, with their flexible debt-to-income ratios. If you fit this description, you have a better chance of qualifying with SoFi.
SoFi has a dedicated mortgage support phone number and extensive FAQ page. You can find live chat buttons at their site. While SoFi claims a typical loan closes in 21 days, mortgage refinance could take longer to go through according to some consumer reviews. It varies depending on your finances and the documentation process.
Verdict - Great
SoFi is not a huge collateralized bank. The investors in their loans are directly placing money with SoFi to lend. The company successfully implements a new model for mortgage refinancing.
SoFi enjoys high customer satisfaction and employs innovative standards to qualify borrowers for mortgage refinance loans, but they may favor applicants with high incomes who attended top colleges and universities. This pioneering lender is highly recommended.