Online Mortgages & Home Loans: Good Idea or Potential Disaster?
Have you seen the online mortgage commercials with the little green puppet applying for a home loan in his boxer shorts?
If so, you may have considered checking out one of the online lenders, such as Quicken Home Loans or Lending Tree. Or perhaps you’ve wondered if this approach is a good idea.
Like most everything in life today, finding a mortgage program online has some benefits and some drawbacks.
The Benefits of Finding a Home Loan on the Internet
Like little green Lenny says, you don’t need to put on pants to apply for a home loan online.
In all fairness, however, most home buyers today never visit their lender’s office. Most of the paperwork is processed electronically, through email and online forms.
The process can be less time-consuming (no meetings) and potentially less expensive as the competition heats up among online lenders.
Perhaps the most significant benefit to this approach is that buyers with less-optimal credit scores may be more likely to be approved for a loan with an Internet mortgage lender. If that’s the case, expect to pay for the privilege with potentially high interest rates and fees.
The Drawbacks to Online Real Estate Lending
For those who do prefer to meet their lender face to face, that’s not an option here. In fact, many online lenders never assign a single point of contact for you. Consequently, if you have a question or need help, you’ll receive about the same level of service you do when you call your credit card company or cable provider.
Many clients worry about the security of their personal data, or the potential for identity theft. If you use a name-brand online lender, you’re no more at risk than if you use your local bank. Beware the unknowns, however, as it may be difficult to determine whether they’re a legitimate financial institution or a scammer collecting your financial data.
Some buyers have seen their credit scores take a hit after applying for a loan online. Take care to read and understand the lender’s policies before providing your information. Online mortgage brokers will simply put your information out to dozens of potential lenders, each of whom may run your credit report.
Some Final Words of Advice
When clients make the decision to buy a home — especially first-time buyers — their enthusiasm for getting started can lead to unwise choices.
If you plan to buy real estate in the near future, do your homework and evaluate all of your loan options before you apply with anyone. Although the application process may seem harmless, it can have a significant impact on your financial status.
Know what you’re getting into before donning those green boxer shorts!
If you do opt for the online lending route, never pay fees for submitting an application or obtaining approval. Most legitimate lenders require few, if any, fees in advance of closing. When in doubt, talk to your attorney or real estate agent before paying upfront fees.
The Edie Israel Team has extensive experience with local mortgage brokers and banks. We can refer you to one or more that may be best qualified to assist you in obtaining financing. And although we certainly don’t recommend against using an online lending service, be sure to talk to us first about the benefits and risks of online mortgage.