Ally home loans review: Online application, $500 toward closing costs

Ally home loans review: Online application, $500 toward closing costs

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  • Ally Home is a mortgage lender worth considering for people who need a jumbo loan, don’t have much money for a down payment, or who like an online application process.
  • Ally’s helpful payment and affordability calculators make it a strong option for people who want a digital experience. You can get pre-approved for a loan within three minutes.
  • If you are already an Ally customer and get a mortgage through Ally, the company will contribute $500 toward closing costs.
  • Ally operates in 40 states, and it doesn’t process home equity loans, home equity lines of credit, or government-backed loans.
  • Read more personal finance coverage »

Ally Home, the home loan division of Ally Financial, allows you to go through the mortgage application process completely online. Take advantage of Ally’s easy-to-use web interface to calculate your mortgage payments, get pre-approved for a loan in three minutes, and sign and submit documents.

Although the Ally mortgage application process is digital, you can contact a human customer service representative with questions. You will also meet someone face-to-face to sign your closing documents.

You can apply for a first mortgage or refinanced mortgage through Ally Home, but the company doesn’t offer second mortgage options such as home equity loans or home equity lines of credit (HELOCs). 

Ally is a strong option for people who have good credit scores but minimal money for a down payment. You may be able to put as little as 3% down. 

If you need a jumbo loan, Ally allows you to qualify with as little as 10% down. A jumbo loan is a mortgage exceeding the loan limits set by Federal Housing Finance Agency (FHFA). In 2020, a jumbo loan for a single-family home is for an amount greater than $510,400 in most US states, and larger than $765,600 in Alaska, Hawaii, Guam, and the US Virgin Islands.

Should you take out a home loan through Ally?

If you are a first-time homebuyer or don’t have much money for a down payment, Ally could be a good option. Through Ally, you may qualify for the Fannie Mae HomeReady mortgage program, which is designed for first-time homebuyers and people with a low to moderate income.

The HomeReady mortgage program allows you to qualify for a mortgage with as little as 3% down, and you may be able to get discounts on private mortgage insurance, a type of home insurance required for people who put down less than 20%.

If you need a jumbo loan, Ally could be a good fit. Many lenders require a 20% down payment for a jumbo loan, but Ally only calls for 10%, and you still won’t have to pay private mortgage insurance. 

If your credit score is at least 620, you can usually qualify for a home loan through Ally. (The bank is requiring minimum score of 680 during the coronavirus pandemic, though.) If you want a jumbo loan, you’ll need a credit score of at least 700.

Ally does not process government-backed loans, including Federal Housing Administration (FHA) loans, Veterans Affairs (VA) loans, or United States Department of Agriculture (USDA) loans. These loans typically allow you to qualify for a mortgage with a smaller down payment and lower credit score. If you’re looking for a government-backed loan, you won’t be able to go through Ally.

Ally is for people who want a first mortgage. It doesn’t offer home equity loans or home equity lines of credit (HELOCs). However, you can apply for a first mortgage through Ally and go through a different lender if you decide to get a second mortgage down the road.

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There are no physical branch locations, and with the exception of the closing process with a notary, Ally’s entire mortgage application process is conducted online. This is best-suited for people who are comfortable applying for a loan digitally.

You can use Ally only if you live in certain states or the District of Columbia. Ally Home does not operate in Hawaii, Massachusetts, Maryland, Minnesota, New Hampshire, New York, Nevada, Virginia, Vermont, or Wyoming.

Ally Home could be a good fit for homebuyers who already have an account with Ally. The company will contribute $500 toward your closing costs if you’ve had an account with Ally for at least 30 days. This contribution applies to people with Ally Bank or Invest accounts and to those with home or auto loans through Ally.

The pros of Ally mortgages

It’s easy to get pre-approved

When searching for a home, you can apply for pre-approval with multiple lenders. When you apply, the lender checks factors like your credit score and financial history, then determines whether it would like to work with you, how much money you’re eligible to borrow, and the interest rate the lender may offer.

With many lenders, it can take up to three days to hear back about your pre-approval application. Ally gives you an answer in three minutes.

Ally will also send you a pre-approval letter, which you can show other lenders to prove a competing company has approved you for a certain loan amount and interest rate. 

Pre-approval is not the same as approval. You can apply for pre-approval at the beginning of the home buying process so you can shop around for lenders. You apply for approval after you have chosen the home you want to buy, and depending on the home and your financial situation, the details of your pre-approval are subject to change.

The process is almost entirely online

There are no physical branch locations, so Ally operates online. Some homebuyers may find this more convenient than driving to an office to speak with an agent.

The one exception to this rule is the closing process. You will sign the closing documents in person so they can be notarized. Ally will let you know where to go when the time comes, but you shouldn’t have to travel too far — you just need to find a notary.

Ally provides helpful payment and affordability calculators

The math behind buying a home can be confusing. Ally has put together two easy-to-understand calculators to help people understand what they’re signing up for.

The mortgage payment calculator shows you how much you’ll pay per month, depending on factors such as home price, neighborhood, property type, amount for a down payment, and term length.

The affordability calculator shows you how much you can afford to pay for a house. This is determined by factors such as your annual income and monthly expenses.

Ally bank members receive $500 toward closing costs

If you already have an account with Ally (including accounts with Ally Bank or Ally Invest, or an auto or home loan), Ally will contribute $500 to your closing costs. You must have had account for at least 30 days to qualify for the $500 contribution.

You may be able to put down as little as 3%

Through Ally, you may be able to enroll in Fannie Mae’s HomeReady mortgage program. This program is available for first-time homebuyers and people with low or moderate income levels. If you qualify, you can put down as little as 3% upfront.

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The HomeReady mortgage program may also give you a discount on private mortgage insurance, a type of insurance you’re typically required to get if your down payment is under 20% of your home value.

You have to complete an online homeownership course to qualify for the HomeReady mortgage program.

Ally is a good option for jumbo loans

Ally offers a wide range of term options for jumbo loans, including fixed-rate and variable-rate mortgages, giving people who need jumbo loans more term options than some banks offer.

Many lenders require a down payment of at least 20% to receive a jumbo loan, but you’ll only need a 10% down payment with Ally. Even with only a 10% down payment, you won’t have to pay for private mortgage insurance for a jumbo loan.

Ally makes it easy to find your rate

On its website, Ally provides an easy tool to enter information about your neighborhood, home type, down payment, and credit score, and you can see customized rates for fixed- and variable-rate loans.

The cons of Ally mortgages

Ally doesn’t offer government-backed loans

Ally does not process government-backed loans, including loans by the Federal Housing Administration (FHA), Department of Veterans Affairs (VA) or the Department of Agriculture (USDA).

These loans are available to people with lower credit scores and smaller down payments. If you’re looking for a government-backed loan, you’ll have to apply at a company other than Ally.

You can only apply for a mortgage if you live in certain states

Ally does not process loans for homes in Hawaii, Massachusetts, Maryland, Minnesota, New Hampshire, New York, Nevada, Virginia, Vermont, or Wyoming, so you can’t use Ally Home if you live in these 10 states.

There are no physical branch locations

Because Ally is an online company, there are no physical offices. If you prefer working with an agent face-to-face, you may want to apply for a mortgage with another lender.

Ally doesn’t offer home equity loans or home equity lines of credit

You can apply for a first mortgage through Ally, or you may refinance. But Ally doesn’t offer second mortgages, including home equity loans or home equity lines of credit (HELOC). 

If you decide to take out a second mortgage after taking out a first mortgage with Ally, you have the option to do so through a lender other than Ally when the time comes.

Ally mortgage features

You can apply for home loan pre-approval online, and Ally will provide an answer within three minutes. Ally will determine your eligibility based on factors like your income and credit score, but it will only do a soft credit pull, meaning its credit check will not affect your credit score.

If you’re pre-approved for a loan, Ally will tell you how much you’d be approved to borrow and the interest rate it would offer. It will send you a pre-approval letter that you can show other lenders when you’re looking for a mortgage.

If you shop around and decide you want to officially apply for a loan with Ally, you can do the whole process online. The exact documents you need to apply can vary person by person, but Ally recommends you come prepared with the following forms:

  • Bank statements
  • Tax returns
  • Pay stubs
  • Employment history

You may also need to show the following documents:

  • Proof of additional income or assets
  • Separation agreement or divorce decree
  • Proof that all your judgments or liens have been paid in full
  • Letter of explanation for gaps in employment greater than 30 days
  • Landlord contact information
  • Proof of your student loan payments
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You may choose a fixed-rate loan, which locks in the interest rate you’ll pay for the entire length of the loan. Or you can choose an adjustable rate, which locks in the rate for the first five, seven, or 10 years, then fluctuates every year. You can also choose between a fixed and variable rate for a jumbo loan.

You will need a credit score of at least 620 to qualify for an Ally home loan, and a score of at least 700 to get a jumbo loan. Government-backed loans such as FHA, VA, and USDA loans are often available for people with lower credit scores, but Ally does not process any government-backed loans.

During the coronavirus pandemic, the minimum credit score has been increased to 680, but the Ally team intends to lower it back to 620 once the pandemic settles down.

The minimum credit score for a jumbo loan is still 700 during the coronavirus outbreak. Instead of changing the minimum credit score for jumbo loans, Ally has changed the required loan-to-value ratio, or ratio of your mortgage amount compared to the appraised home value. The loan-to-value ratio for jumbo loans can usually be as high as 90%, but during the pandemic, it can’t be higher than 80%.

If you’re a first-time homebuyer or have a low to moderate income level, you may qualify for Fannie Mae’s HomeReady mortgage program. This program allows you to put as little as 3% toward a down payment and provides a discount on private mortgage insurance, a type of insurance you need to buy if you put down less than 20%.

To qualify for a jumbo loan through Ally, you’ll need to put down 10%, but you won’t have to pay private mortgage insurance.

Ally compared to similar mortgage lenders

  Ally Better.com Quicken Loans
Online or in-person refinancing Online Online Online, with the option for in-person
Rate-and-term refinancing Yes Yes Yes
Cash-out refinancing Yes Yes Yes
Government-backed loans None FHA loans FHA, VA, and USDA loans
US states 40 states 43 states 50 states

Ally vs. Better.com

Both Ally and Better.com provide an online mortgage application process, and both can give you an answer about pre-approval within three minutes. Both companies will accept a down payment as low as 3% for a mortgage and 10% for a jumbo mortgage.

Neither company offers home equity loans or HELOCs. Neither Ally nor Better.com process VA or USDA loans, but if you’re interested in a government-backed loan, Better.com does process FHA mortgages.

Ally operates in every state except Hawaii, Massachusetts, Maryland, Minnesota, New Hampshire, New York, Nevada, Virginia, Vermont, or Wyoming.

Better.com operates in every state except Hawaii, Massachusetts, Minnesota, New Hampshire, Nevada, Virginia,  or Vermont. If you live in Maryland, Nevada, or Wyoming, you can use Better.com, but not Ally.

Ally vs. Quicken Loans

Both Ally and Quicken Loans provide online experiences, but Quicken Loans gives you the option of working with an agent in person.

Both companies allow you to apply with a down payment as low as 3%, or as low as 10% for a jumbo loan. Neither company processes home equity loans or HELOCs.

Quicken Loans offers more variety than Ally. It has custom fixed-rate terms, ranging from eight to 30 years. Unlike Ally, it processes government-backed loans, including FHA, VA, and USDA mortgages.

Quicken Loans operates in all 50 US states, so if you live in a state Ally doesn’t service, you can apply through Quicken Loans.

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