Flagstar Bank mortgage review

Best for: Borrowers with lower credit scores

Some lenders require a minimum credit score of 650 or above for a mortgage loan, but Flagstar has more relaxed credit requirements. FHA borrowers can qualify with scores as low as 580; most other Flagstar Bank mortgages require a minimum credit score of 620.

Flagstar’s debt-to-income ratio (DTI) limit is also higher than most — as high as 55% for some loans. These unique attributes make Flagstar Bank a good choice for borrowers whose credit and debt levels may be less than optimal but are otherwise prepared to handle a mortgage.

Methodology 

To determine the best mortgage companies, Fox Money evaluated lenders based on several different categories: rates and fees, reputation, eligibility, efficiency, customer experience, and discounts and perks. We also looked at the types of loans offered by each lender for research purposes only, they did not factor into the overall score. We assigned a score out of five stars to each lender based on our findings. 

Learn more about how Fox Money rates lenders by checking out Mortgage Lender Rating Methodology. 

Flagstar Bank: Pros and Cons 

Like all lenders, Flagstar Bank mortgage loans come with advantages and disadvantages. Here is what you should factor in when making your decision:

In addition, the company recently underwent a rocky merger. The stability ratings of Flagstar and its new parent company New York Community Bank are in the B range according to Moody’s Ratings — not awful, but not optimal either.

What to consider before applying 

When you get pre-approved for a mortgage, Flagstaff Bank will do a hard pull on your credit, which could cause your credit score to take a small dip. If you're shopping around for multiple lenders in a short time frame, all of the lenders’ credit pulls should only count as one. 

When comparing rates, note that most lenders quote home loan interest rates that include a rate buydown. When shopping, make sure to get the annual percentage rate without the buydown so you get an apples-to-apples comparison between lenders.

How to apply for a loan with Flagstar Bank

To apply for a mortgage with Flagstar Bank, you'll need to do the following:

1. Create an online account: You'll need to supply all your personal information, including your Social Security number, address, and phone number. 
2. Fill out basic information online: You'll enter the price of the home you want to buy, your approximate down payment amount, your credit score, etc.
3. Talk to a loan officer: Flagstar Bank will contact you by phone to chat about your mortgage needs and the type of loan you're looking for. You can get an interest rate quote based on the information you provide. This is the prequalification phase which gives you an idea of how much house you can afford and what your monthly payments will be.
4. Fill out a complete loan application: For this step, you’ll need to submit documents to substantiate your claims of income and liabilities, such as tax returns and bank statements. This allows Flagstar to verify your information and show you the exact amount you can borrow. This is the preapproval phase.
5. Complete loan review: Once you make an offer on a house, Flagstar will issue conditional approval along with a list of criteria that must be met in order to close.
6. Await final approval: Submit any final paperwork needed to verify income or property, and ensure that all details are in order.
7. Close on the home: It’s time to sign on the dotted line for your new home. Be prepared to review and sign purchase documents, which could take a few hours. Remember to bring your ID and certified funds for your down payment and other costs. 

How to qualify for a loan with Flagstar Bank

The qualification criteria for a Flagstar mortgage will vary based on your loan product. For example, FHA loans require borrowers to have at least a 3.5% down payment, whereas conventional loans require a minimum of 3% or 5%, depending on the borrower’s income. Jumbo loans require 10% or more down. VA and USDA loans do not require a down payment.

The minimum credit score set by the government for an FHA loan is 500, but Flagstar Bank requires FHA borrowers to have a minimum score of 580; borrowers with borderline scores can apply for an exception on a case-by-case basis. VA borrowers typically need a score of 620 or above, but Flagstar Bank only requires 600 for a VA loan. Similarly, many lenders require a score of 640 for USDA loans, but Flagstar’s minimum is 620. Conventional and other types of loans all require a score of 620 or higher. 

Your debt-to-income (DTI) ratio also determines whether you qualify for a Flagstar mortgage and at what rate. FHA loans have the most liberal DTI requirement at 56%. Conventional loans require 45% or lower. Flagstar Bank offers more flexible requirements for USDA and VA loans, though the DTI for these loans rarely exceeds 55%. 

How to refinance with Flagstar Bank

Many homeowners opt to refinance their mortgages to reduce their interest rates, move from a variable rate to a fixed one, eliminate the need for private mortgage insurance (PMI), lower their monthly payments, or cash out equity for other financial needs. Refinancing is essentially rewriting a loan on the same property but with potentially different rates and terms. An appraisal is usually required to determine the current value of the property.

Refinancing a mortgage with Flagstar requires an 80% loan-to-value ratio (LTV). This means if you cash out any of your equity in the refinance, the loan must represent no more than 80% of the property’s value once the loan closes. If you recently took out a mortgage with a low down payment, you may not be eligible to refinance until your equity reaches at least 20%. However, if you have a VA loan, Flagstar Bank allows refinancing of up to 100% of the property’s value. 

How Flagstar Bank compares 

Flagstar Bank could be a good choice if you’re looking for more lenient DTI limits and lower credit score requirements for specific loan types. The website doesn’t provide rate estimates, so if you’re looking for a rate quote, you’ll need to speak to a mortgage originator first. Here’s how Flagstar Bank compares to other lenders.