The Yahoo view: As a leader in government loans, Pennymac is an obvious choice for borrowers seeking a low-down-payment loan. However, it requires a higher credit score than many FHA lenders.

Pennymac is the second-largest FHA lender by loan volume in the nation — and is rated by Yahoo Finance as the best overall FHA lender and one of the best VA loan lenders. So, the company knows a thing or two about how to make home loans, no doubt. That may seem surprising because Pennymac doesn't have huge name recognition.

The reason: Pennymac is behind the scenes facilitating loans for other banks, credit unions, and independent mortgage brokers across the country. Called correspondent lending, it makes up the majority of Pennymac's loan volume. However, you can still do business directly with Pennymac online.

Dig deeper: Best types of home loans for first-time home buyers

Key benefits

• Pennymac offers a rate buydown that lowers your interest rate by 1% for one year.

• A BuyerReady Certification shows home sellers that you are a serious — and credit-qualified — buyer. Plus, you will receive a $1,000 credit to apply to your closing costs.

• Use a Pennymac-affiliated real estate agent and get from $350 to $9,500 cash after closing.

• If rates go down after you close a home loan with Pennymac, get a $2,000 credit toward your closing costs when you refinance within three years. This is just one reason we consider Pennymac one of the best mortgage refinance companies right now.

Need to know

• While Pennymac confirms to Yahoo Finance that it offers FHA loans at FICO 580 as the FHA allows, advertised FHA mortgage rates require a credit score of 680. That might mislead potential borrowers of the interest rate they could earn.

• Pennymac has a below-average rating for customer satisfaction, according to the 2023 J.D. Power Mortgage Origination Satisfaction Study.

Dig deeper: The credit score needed to buy a house

Pennymac mortgage home loan product offerings

Pennymac Loan Services offers the following types of home loans:

• Conventional loans

• FHA loans

• VA mortgages

• USDA loans

• Purchase loans

• Refinance loans

• Cash-out refinancing

• Fixed-rate mortgages

• Adjustable-rate mortgages

• Jumbo loans

• Second home loans

• Investment property loans

• Buydown loans

• Home equity loans

Pennymac Loan Services does not offer the following types of home loans:

• Interest-only mortgages

• Lot loans

• Construction loans

• Guest house (ADU) loans

• Non-qualified mortgages

• Energy-efficient mortgages

• Renovation loans

• 1% down mortgages

• Bridge loans

• Manufactured home loans

• Piggy-back loans

• ITIN mortgages

• Medical professional loans

• HELOCs

Learn more: How investment property loans work

Pennymac for FHA mortgage home buyers

Pennymac makes the second-highest volume of FHA loans in America. That's expertise. With FHA-backed purchase loans, streamlines, and cash-out refinancing, you get credit history flexibility because these government-sponsored loans serve borrowers who may not qualify for a conventional loan.

The one downside to FHA-backed mortgages is MIP or FHA mortgage insurance premiums. MIP is an up-front charge at loan closing and an ongoing premium built into your monthly mortgage payment. It's the price you pay for getting into a home with a low down payment.

That mortgage insurance ends up in the hands of the U.S. Department of Housing and Urban Development, the agency that runs the FHA loan program. In the event of loan default, the FHA pays a claim to the lender.

That protection serves as an incentive for lenders like Pennymac to take a risk on borrowers who are on the lower end of the credit score band.

Learn more: How to remove FHA mortgage insurance

Pennymac for VA mortgage home buyers

Pennymac is not only a high-volume VA loan originator; it also services hundreds of thousands of mortgages backed by the Department of Veterans Affairs. That eliminates the nuisance of receiving a notice that your monthly payment has suddenly been transferred to a new company for future processing.

Pennymac offers these VA loans:

• Purchase loans, which generally require no down payment

• VA Streamline Refinance (IRRRL) allows you to improve your interest rate or switch from an adjustable-rate to a fixed-rate loan with less paperwork

• VA cash-out refinance lets you access some of the value you've gained in your home over the years

Pennymac for first-time home buyers

As one of Yahoo Finance's best lenders for first-time home buyers, Pennymac excels at helping families buy their first house. It made the list due to its expertise, particularly in government-backed loans.

Having the ability to choose from a wide range of loan options ensures that you don't overlook the best borrowing opportunity.

Pennymac's First-time Homebuyer Guide is a well-structured digest of what you'll want to know when navigating the home-purchase world as a novice.

Read more: First-time home buyers — What you need to know

Pennymac for home equity lending

Getting your home's equity paid out in a lump sum is Pennymac's option for homeowners looking to get cash out of their home without selling it or refinancing their mortgage. That's especially important if you already have an interest rate below today's prevailing rates.

The Pennymac home equity loan has a fixed interest rate and is available to owners with at least 15% equity in their homes.

Pennymac does not currently offer home equity lines of credit (HELOCs).

Pennymac home equity loan fees

Yahoo Finance was unable to find fee information specific to home equity loans. A "Fees" page detailed some fees for a HELOC, which Pennymac is not currently offering.

Dig deeper: The differences between HELOCs and home equity loans

Pennymac mortgage rates

With Pennymac, you don't have to hunt for mortgage rates; they're right on the homepage. Three popular loan interest rates are featured: 30-year fixed rates for conventional, FHA, and VA mortgages. Discount points are also clearly revealed and adjacent to the mortgage APR.

At the time of this review, the FHA interest rate assumption was for a $250,001 loan on a primary residence in Los Angeles with 3.5% down and a 680 FICO score. The FHA only requires a minimum 580 credit score on FHA loans with 3.5% down, and many other lenders accept this lower score.

You can also drill down deeper with a mortgage rates page that displays additional loan terms on the three major mortgage products as well as jumbo loans. For even greater rate accuracy — but still not a final-approval interest rate — you can input:

• Property use (primary residence, investment property, second home)

• Preference (lower payment or lower down payment)

• Credit score range

• Property value

• Down payment

• ZIP code

With that information, you will see the three mortgage options with additional loan terms that more closely align with your credit and financial profile.

All without providing a bit of personal information.

This would be the perfect mortgage rate page; however, discount points are prepopulated and not adjustable. We would prefer having the option to price a loan with zero discount points.

Other than that, though, nicely done, Pennymac.

Read more: How to get the lowest mortgage rates

How Pennymac scores on mortgage rates and loan costs

Yahoo Finance uses 2023 Home Mortgage Disclosure Act data comprised of 10 million home loan applications to score mortgage lenders on issued mortgage rates and total loan costs. We score each lender on a scale of 1 (lowest) to 5 (highest).

For example, with mortgage rates, a lender with a lower score charged a higher-than-median mortgage interest rate for loans issued in 2023. A higher score would indicate a lender granted lower-than-median home loan interest rates to borrowers in 2023.

With total home loan costs, a lower score would indicate that a lender charged higher than median total home loan costs in 2023. A high rating would mean that a mortgage lender offered lower than median all-in home loan costs in 2023.

Pennymac home loan rates score: 5 out of 5 stars

Pennymac total loan costs score: 2 out of 5 stars

What this means: Pennymac loan services offered a much-lower-than-median mortgage rate of 6.25% but a higher-than-median total loan cost of $8,621.13 to borrowers in 2023.

Pennymac mortgage application

With an online application system, Pennymac lets you upload documents and even snap photos of required items. Using logins from your financial institutions, you can add savings account balances and existing loan information to complete an asset and liability profile.

Pennymac mortgage preapproval

Once you submit an online application, a loan representative will contact you to guide you through the process.

Dig deeper: How to get a mortgage in 2024

Pennymac mortgage calculators and home-buying tools

There are ample home-buying tools on the Pennymac site. Calculators include:

• How much can I borrow?

• How much will my payments be?

• Am I better off refinancing?

• Am I better off renting?

• How much is my home worth?

• How much should I put down for a new home?

• How advantageous are extra payments?

There are also hundreds of helpful articles in the Learning Center. Very impressive.

Read more: How much house can I afford? Use our home affordability calculator.

Pennymac pros and cons

Pros

• Pennymac earns our highest 5-star score for offering much-lower-than-median mortgage interest rates. (However, as mentioned below, loan costs should also be considered.)

• Scores well — 4 stars — in our Affordability category for offering a multitude of loan options, including a home equity loan program.

• Earns 4-star appreciation for its rate transparency, putting it among our best in class.

• Stands out for deep online learning resources: another 4-star score.

Cons

• Pennymac garnered a low 2-star rating for higher-than-median total loan costs. It's good to remember to strike a balance between a low interest rate and total lender fees.

How Pennymac compares to other mortgage lenders

Pennymac vs. Rate

Pennymac is the nation's largest FHA lender because of its vast network of affiliated mortgage brokers. However, as an independent business, it's not always easy to find a local Pennymac lender near you. Thankfully, the loan process can be handled online and remotely.

Rate (previously Guaranteed Rate) is also an FHA lender with an online mortgage process — and one of Yahoo's best lenders for first-time home buyers. And home buyers looking for face-to-face service may want to know that Rate has hundreds of branch locations across the nation.

Rate mortgage review

Pennymac vs. Amerisave Mortgage

Pennymac's Lender-Paid Buydown lowers your interest rate by 1% during the first year of a mortgage, effectively reducing your monthly payments. That helps temporarily offset fees that you may have financed into your loan.

AmeriSave offers FHA loans without mortgage origination fees. When loan offers vary between lenders, you'll want to run the numbers to determine the most advantageous. In this example, a 1% rate reduction for the first year versus a loan without origination fees.

Shopping and comparing are essential when you're buying and financing a home.

AmeriSave Mortgage review

Pennymac mortgage FAQs

What is the Pennymac loan services phone number?

If you're working through the application process for a new mortgage and need help, the phone number to reach a Pennymac loan officer varies by location. If you have a loan application in progress, call (844) 917-3669 to speak to a member of your loan team. And if you have a loan payment question on your existing mortgage, you can get assistance at (866) 545-9070.

Will Pennymac let you skip a payment?

If you are struggling to stay current on your mortgage payments, Pennymac will talk you through your options. There are assistance programs, counseling agencies, and loan modifications to consider. Call Pennymac at (866) 545-9070 or visit their Mortgage Relief & Assistance page.

Is Pennymac reputable?

Yes. Pennymac is one of the nation's largest lenders and has an A+ rating with the Better Business Bureau. It's been in business for 16 years.

Who is Pennymac backed by?

PennyMac Financial Services, Inc. is headquartered in Westlake Village, California, and is publicly traded on the Nasdaq exchange (PFSI). David A. Spector is the CEO and Chairman. The company has over 4,000 employees with annual revenue approaching $2 billion.

Methodology:

Yahoo Finance reviews and scores mortgage lenders with quintile scoring in five primary categories: 1) Interest rates. Using 2023 Home Mortgage Disclosure Act data comprised of 10 million home loan applications, we score mortgage lenders on issued mortgage rates below or above the annual median of reporting lenders. 2) Affordability. A measure of loan product availability and the willingness of a lender to offer government-backed loans, low down payments, down payment assistance, and consideration of nontraditional credit. 3) Loan costs. HMDA data is again analyzed, and lenders are rated based on total loan costs compared to the annual median. 4) Rate transparency. The ability of a website user to obtain a mortgage interest rate estimate. We score lenders based on whether rates are enhanced with discount points or high credit score requirements, disclaimers revealing rate assumptions, sample advertised rates, and whether adjustable or no discount point rate estimates are available. 5) Online features. An analysis of the educational material, calculators, and additional resources available to users.

Review of Nationwide Multistate Licensing System (NMLS) data on regulatory actions can trigger a penalty to the score of any lender with a consumer mortgage-related administrative or enforcement action within the past five years.

Advertisers or sponsorships do not influence ratings.

Editorial disclosure for mortgages:

The information in this article has not been reviewed or approved by any advertiser. The details on financial products, including interest rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the lender's website for the most current information. This site doesn't include all currently available offers.

This article was edited by Laura Grace Tarpley