Rocket Mortgage vs. PennyMac

[Damon Vaughan]

I'm currently in discussion with two lenders to secure a conventional mortgage for a SFH rental property. I have experience with PennyMac, and they are currently offering the better loan estimate. However, Rocket Mortgage is committed to offering the best deal. I've searched the Bigger Pocket forum for feedback on Rocket Mortgage, and I've seen a wide range of reviews, and mostly from at least a year ago. Any guidance would be appreciated.

FYI - Rocket Mortgage is offering the ability to refinance at low/no-cost in the future, which is quite tempting.
  

[Jay Hurst]

Quote from @Damon Vaughan:

I'm currently in discussion with two lenders to secure a conventional mortgage for a SFH rental property. I have experience with PennyMac, and they are currently offering the better loan estimate. However, Rocket Mortgage is committed to offering the best deal. I've searched the Bigger Pocket forum for feedback on Rocket Mortgage, and I've seen a wide range of reviews, and mostly from at least a year ago. Any guidance would be appreciated.

FYI - Rocket Mortgage is offering the ability to refinance at low/no-cost in the future, which is quite tempting.
  

 @Damon Vaughan  Sure, I am biased but you are likely going to better with an independent mortgage banker or even broker then either.  You might even end back up at one of those two but at better overall pricing then going retail.  

[Devin Peterson]

Quote from @Damon Vaughan:

I'm currently in discussion with two lenders to secure a conventional mortgage for a SFH rental property. I have experience with PennyMac, and they are currently offering the better loan estimate. However, Rocket Mortgage is committed to offering the best deal. I've searched the Bigger Pocket forum for feedback on Rocket Mortgage, and I've seen a wide range of reviews, and mostly from at least a year ago. Any guidance would be appreciated.

FYI - Rocket Mortgage is offering the ability to refinance at low/no-cost in the future, which is quite tempting.
  

 You want a real curveball? They’re both gonna sell the loan anyway! I use pennymac and rocket all the time, for someone like yourself just take the better rate/pricing and forget about it. The no/cost refi now commercials don’t mean anything - you’re always gonna have closing costs. Gl!

[Kass Farran]

@Damon Vaughan

I worked for RKT mortgage for 4 years on both as an MLO and Revenue Operations Analyst. The "low-to-no cost" and "loan tracking team" is not what they make it seem. Go with the better deal with which numbers make sense. Don't bank on your next refi with RKT to be low-to-no cost because you'll be disappointed to say the least.

Your best bet is to get a broker that will go wholesale pricing for you instead of retail. Not sure where you're looking to buy but I may have a broker for you.

[Kass Farran]

@Devin Peterson

They both will sell the loan as a MBS but RKT does keep and service the majority of their QMs. So RKT will always be your point of contact. It's a nice service but IMO the convenience does not offset the additional cost.

[Damon Vaughan]

@Kass Farran, @Devin Peterson and @Jay Hurst thank you for your insights! I'm in the final stages of the decision process, so your perspective is gratefully received. 

[Michael K Gallagher]

Quote from @Damon Vaughan:

I'm currently in discussion with two lenders to secure a conventional mortgage for a SFH rental property. I have experience with PennyMac, and they are currently offering the better loan estimate. However, Rocket Mortgage is committed to offering the best deal. I've searched the Bigger Pocket forum for feedback on Rocket Mortgage, and I've seen a wide range of reviews, and mostly from at least a year ago. Any guidance would be appreciated.

FYI - Rocket Mortgage is offering the ability to refinance at low/no-cost in the future, which is quite tempting.
  

You're going to get better service and more flexibility in the offering by working with a local L/O to your market. I had a client this very afternoon drop rapid mortgage and go to a different local L/O and we had not even submitted an offer yet. We had gone back and forth two different time son they buyer was not approved for the property then they were then there were not again, all before we even submitted, and if this had been a new on the market property, my buyer would have missed out because it would already be in contract and they would have missed it. The only reason we are still in the mix is because its been on the market 60 days.

any local lender is going to end up selling it to Penny mac anyway who will service it.  Just my experience from having pennymac on my own properties and working with rocket on several occasions.  I've also found that Rocket tends to promise a lot of "great deals" and then buyers get the settlement statment and there are a ton of extra BS fees that jack up their cash to close.  

[Ryan Kelly]

@Michael K Gallagher I agree with the RocketMortgage comments. All that advertising means they will charge more in fees. It’s not just about the rate. Find a great mortgage broker who can shop around for you. They will be a great asset to your team.

[Mike Singer]

Most LO's at Rocket have been in the biz for a short amount of time. They're great for vanilla refi's but I wouldn't risk an investment deal you found with Rocket. If something goes haywire you're just a #. Work with a mortgage broker that understands your goals. 

[Sasha Mohammed]

If you're going with Rocket directly (calling the 800-number), you're working with their retail side. No BS, Rocket retail is a rip off. And as others have said, you're likely working with someone newer in the business who doesn't have much knowledge on mortgage at all other than selling you a rate and collecting a CC for a deposit. 

If you call a mortgage broker, and they're working with Rocket for the loan they're offering you, you will get substantially better terms -- brokers get wholesale pricing. AND you'd be able to leverage the broker's knowledge and experience, which is USUALLY significantly more than the boiler-room employee at Rocket direct. 

Talking with a broker will eliminate your wasted time shopping around, as the broker would be able to place you with the best lender to meet your specific goals. 

[Kass Farran]

I agree with @Mike Singer to a certain extent. The average tenure for regular retail refi is definitely on the newbie side, but then again regular refi's are not too complicated and for anything that does get complex they have directors and RVPs that can handle it. 

If you want the biggest advantage to working with RKT, work with a Schwab banker. You will need to have assets in a Schwab account but that isn't hard to do. The Schwab bankers have an average tenure of 10+ years, with most of them working under the Schwab specialty. They handle the clients that hold millions in assets which are usually investors and they have access to products that retail AND wholesale can't touch. When RKT made a deal with Schwab, Schwab got the better end of the deal there. Pricing is great, underwriting is different and the products they can provide are top tier.  

[Erik Estrada]

Quote from @Damon Vaughan:

I'm currently in discussion with two lenders to secure a conventional mortgage for a SFH rental property. I have experience with PennyMac, and they are currently offering the better loan estimate. However, Rocket Mortgage is committed to offering the best deal. I've searched the Bigger Pocket forum for feedback on Rocket Mortgage, and I've seen a wide range of reviews, and mostly from at least a year ago. Any guidance would be appreciated.

FYI - Rocket Mortgage is offering the ability to refinance at low/no-cost in the future, which is quite tempting.
  

 I agree with the others. Working with a Mortgage Broker will definitely save the headache 

[Damon Vaughan]

Thank you so much @Mike Singer, @Michael K Gallagher, @Sasha Mohammed, @Erik Estrada, @Kass Farran and @Ryan Kelly! This is really helpful!

[Alan Lacey]

They’re all kinds of good lenders local or not, and broker or not. What you don’t want to do is base what loan you get on what the promise is on cost to refi in the future. For the last 6 months lenders have been pitching low cost refi as the rates drop, and guess what recent changes to loan level price adjusters will be adding a .125 to .5 percent to most rate and term refinances. All the consumers who took higher cost deal from referral partners or heavy advertisers thinking they will just refinance are going to face a very annoying reality which is that the future is always unpredictable so take best offer you can from reliable lender.

[Paul Gimmarro]

Rocket Mortgage is notorious for high closing costs fees as well. I'd recommend finding a local lender. 

[Russell Brazil]

Both those lenders suck

[Jon Puente]

Hey Damon,

As a mortgage broker, PennyMac does have strong pricing, but I work with A TON of other lenders who have just as good, if not better pricing.  Mortgage Brokers in general have the ability to shop around for the best deal for you, whereas retail lenders like Rocket only show what Rockets pricing is for that given scenario. 

FYI - No such thing as a free refinance! It's a gimmick that seems to be working. They just increase the rate to cover your costs for you as a lender credit, and its surely not coming out of their pocket!

Great Question!

[Chris Mason]

Quote from @Damon Vaughan:

FYI - Rocket Mortgage is offering the ability to refinance at low/no-cost in the future, which is quite tempting.
  

 A lot of good comments already, the only thing I'll add is that this isn't a thing. When rates drop (as they are broadly expected to), ANYONE doing mortgages would be happy to offer you a low/no-cost refinance. This is basically: "FYI - the car salesman told me that if I buy a car from him today, he'd be happy to sell me another car in the future, which is quite tempting." 

In the hypothetical case that some big institution did a bunch of mortgages with a bunch of "we'll cover some/all of your fees when you refinance!" promises out there, all that tells me is that they plan to offer slightly higher rates (or some other gimmick) in the future to offset it. 

We'll use Rocket, since you mentioned them. Their latest marketing campaign is "we'll cover the cost of lowering your rate by 1% in year 1!" OK, great. Interest rates are annualized, so the cost of that is basically going to be 1%, or equal to 1 discount point. They call it the "inflation buster," and it relies basically on the financial illiteracy of the American consumer (who doesn't get a "personal finance 101" class in high school, or in college, most of the time). So what's the gimmick?

The average mortgage right now is being done at a cost of about 1 discount point (note that the average mortgage is for an average buyer, who is an owner occupant, not an investor). Their website says that they're running TWO discount points, when the national average is somewhere between (long term) 0.5% and (more recently) 1%.

So that "1% off your rate in year 1!" is simply collecting 1% extra from you at closing on the front end, and giving your own money right back to you. It's a a shell game, no different than prices of things on amazon going up by 20% three months before Black Friday, only so they can tell you that their stuff is "20% off for Black Friday!" when they reduce the price to what it used to be, to begin with. It's so gimmicky that you don't even need a 3rd party, you could do it yourself: put 1% of your new loan balance in a savings account, and each month move 1/12th of it into the checking account you pay your mortgage from. That's literally the exact. same. thing.

Snip below:

[Damon Vaughan]

Thank you, @Chris Mason! I appreciate the perspective.

[Melvin List]

Any company telling you that they will refinance you when rates drop is just giving you a sales pitch.