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Money’s Top Picks
As the most populous state in the Union, and one of the largest economies in the world, California has long been a desirable place to live. U.S. Census Bureau data show that more than half a million out-of-state residents relocated to California in 2017, behind only Florida and Texas. The same data show, however, that over 600,000 residents moved out, the highest number in the country.
Home costs might account for some of that out-migration. The median home value in California for 2020 is $578,267 compared to the national median of $248,857. It’s no wonder that a whopping 13.5% of mortgage originations in California in 2018 were jumbo loans, much higher than the national average of 4.9%.
Jumbo loans are mortgages that exceed the conforming loan limits set by the Federal Housing Finance Agency. These limits can vary by county, so a high-value market such as Orange County has a conforming loan limit of $765,600 while for most other counties in California and the U.S. it’s $510,400. This means that any mortgage over those amounts is considered a jumbo loan.
Jumbo loans are generally used to buy luxury homes and homes in competitive markets, of which there are many in California. Due to the greater risk lenders assume, jumbo mortgages come with stricter credit requirements such as higher interest rates and larger down payments.
California, like the U.S. and most of the world, has been economically devastated by the coronavirus pandemic. April saw the state’s unemployment rate hit an all-time high of 16.4%, with Los Angeles County one of the worst affected. Likewise, home sales in May were down 41.4% across the state compared to the same month last year. And while there were signs of improvement in the labor and housing markets during June, the recent surge of coronavirus cases across the U.S. has tempered recovery expectations.
But even with the uncertainty surrounding COVID-19 and its continuous effect on the economy, potential buyers are still taking advantage of historically low mortgage rates to purchase a home. We picked the best mortgage lenders for popular loan types to serve the needs of all Golden State residents from San Diego to the Bay Area, and all the way up to Eureka.
More on Money’s Top Picks
Chase Home Lending: Best for Jumbo Loans
For California’s high-value housing markets, jumbo loans are almost a necessity. According to a Mortgage Banking Associations report on mortgage originations, Chase Home Lending was the second-largest jumbo loan originator in 2018. When you factor in that JP Morgan Chase is the largest bank in the United States, you know that the lender is a significant player in the mortgage industry.
Borrowers who already have a relationship with Chase, such as deposit accounts, credit cards, or investments, can save time during the mortgage process since the lender already has most of their personal and financial information.
For those looking into jumbo loans, the Chase Mortgage Rate Program offers Chase Private Clients discounts on mortgage rates, varying from 0.125% to 0.25%, depending on how much money they have deposited or invested with the bank. When considering jumbo loan amounts, any discount can potentially save thousands of dollars.
But Chase’s mortgage offerings go way beyond jumbo loans. Existing Chase customers can still take advantage of other exclusive mortgage benefits, such as the Chase Closing Guarantee, which promises an on-time closing in as little as three weeks or the customer gets $2,500. Borrowers who work for one of Chase’s corporate partners can also receive a $750 credit at closing.
Chase’s DreaMaker product is a 30-year fixed-rate mortgage with a 3% down payment option, although mortgage insurance may be required. Qualified borrowers could also receive up to $3,000 in assistance towards down payment or closing costs.
As for customer service, the number of complaints registered with the Consumer Financial Protection Bureau against Chase is relatively low. Out of 24,166 mortgage originations in 2018, only 0.8% resulted in a registered complaint, better than other big banks including Bank of America (1.5%) and Wells Fargo (1.2%).
Quicken Loans: Best for Conventional Mortgage Loans
Even though jumbo loans are more common in California than almost anywhere else in the country (except Washington D.C.), conventional conforming mortgages are still the most common home loans in the Golden State. With that in mind, we chose Quicken Loans as our choice for the best conventional mortgage lender in California.
Quicken originated the most mortgages in California in 2018 according to the Mortgage Bankers Association, with many of those being either conventional purchases or refinances of any type. In addition to being the top originating lender, Quicken Loans ranked first in JD Power’s Primary Mortgage Origination Satisfaction Study for the 10th year in a row. Further, Quicken had fewer customer complaints registered with the Consumer Financial Protection Bureau than other similar-sized mortgage lenders.
Aside from their mortgage origination volume and their highly-rated customer service, Quicken provides unique mortgage options to their customers, such as their YOURgage program. This service allows borrowers to choose their fixed-rate mortgage terms between eight to 30 years, with some qualified homebuyers able to put down as little as 3% for their down payment.
LoanDepot: Best for Refinancing
With mortgage rates near all-time lows, many borrowers are taking the opportunity to refinance. Whether that’s a good idea or not depends on each homeowner’s situation, and we encourage anyone thinking about it to do the math before deciding. But for those in California who wish to pursue this route, LoanDepot is our pick for best refinancing lender.
LoanDepot ranks sixth in total mortgage originations in the state of California, fifth for conventional loans and refinancing, and in the top ten for jumbo loans.
With over 1,700 licensed lending officers across the nation, LoanDepot does not incentivize their officers to sell one loan over another, therefore reassuring customers that their needs come first. LoanDepot also offers a “lifetime guarantee” which states that once a customer has refinanced with them, they will reimburse appraisal fees and waive lender fees for any future refinances done through them, which is important with mortgage rates steadily declining.
For borrower’s new to refinancing, LoanDepot’s website offers tools and resources to guide them through the process. Everything from answering common refinancing questions to mortgage calculators can help make it easier to navigate through the steps.
Apart from their refinancing, LoanDepot stands out with its Mello Smartloan product. With it, LoanDepot can expedite certain processes, such as credit checks and income, employment, and asset verification. A quicker process means a quicker closing, particularly useful in competitive California markets.
How We Picked the Best Mortgage Lenders in California
Using loan origination data from the Mortgage Bankers Association, we looked at loans issued nationally, per state and per lender, as well as the average loan amounts and types of loans. However, the size of the lender was not the determining factor on our list.
In contrast to much of the rest of the country, California has a high rate of jumbo loans, so we decided to consider only lenders that provided jumbo mortgages. Since these types of loans are riskier for lenders, many of the leading jumbo loan providers are large, national banks.
In addition to the MBA’s originations report, we used JD Power’s 2019 U.S. Primary Mortgage Origination Satisfaction Study. The study gauges the customer’s overall satisfaction related to the application, approval, and closing process, as well as the company’s communication and product offerings. The study’s findings provide a broad consumer’s perception of each lender’s products and services.
Other important sources were the Consumer Financial Protection Bureau’s registered complaints against mortgage lenders and all regulatory actions reported by the Nationwide Mortgage Licensing System. Lenders with high amounts of complaints in relation to their mortgage volume or with major penalties or sanctions were penalized in our ranking. This is especially relevant when considering so-called “big box lenders” since they process a substantial amount of loans and therefore generate a high volume of complaints.
Finally, to determine the best mortgage company in California, we zeroed in on three specific factors: the loan products offered, the customer experience, and the lender’s reputation and transparency.
We looked at companies that presented a host of mortgage options, such as conventional and non-conventional, fixed- and adjustable-rate, varying term lengths, and government-backed loans. Companies should have a comprehensive range of mortgage products, but for California, we focused on those that also offered jumbo loans.
To excel in customer experience, companies should have accessible customer service representatives available through as many avenues as possible such as phone, chat, email, and in-person.
A well-rounded customer experience also includes user-friendly web pages and mobile apps. These should include tools and resources that help borrowers with their mortgage questions.
Lenders that offer simpler and quicker processes, for mortgage applications and closings, were given high marks, particularly during the current global pandemic.
Reputation & Transparency
The previously mentioned CFPB complaints and regulatory actions reported by the NMLS were our primary information sources to establish a lender’s industry reputation and openness.