The pros and cons of online mortgage lenders

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If you are applying for a mortgage loan, you no longer have to go to a physical bank and meet with a lender to get the loan you need – now you can go through the process entirely online. However, is the easiest way still the best? Not necessarily.

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Before using an online mortgage lender, be aware of the pros and cons.

Benefits of using an online mortgage lender

There are several advantages to using an online mortgage lender.

It can be a faster and more streamlined process

“We made it easy to do everything from your couch,” said Tabitha Mazzara, director of operations at NGC, a direct-to-consumer mortgage lender. “Even though we don’t have walk-in branches like the old-fashioned banks, that doesn’t mean we don’t have personalized service. This means that we offer a streamlined process that allows you to have shorter processing times and accurate approvals as we connect directly to your bank to get accurate information about your finances. Your pre-approval is faster, which increases your chances of getting the home you want.

“The digital signature also avoids delays, and that’s important in such a competitive market,” she continued. “Unsigned documents are one of the most common reasons transactions are delayed, but we’re avoiding that altogether. ”

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You can get lower rates

“As a direct-to-consumer lender, we also avoid mortgage brokers altogether – in the same way that you probably skipped the use of an old-fashioned travel agent and booked your last flight on your own.” , Mazzara said. “It saves costs.”

These overhead savings are often passed on to customers.

“Online lenders charge less and have lower fees, making this a great deal for their clients,” said Dan Belcher, Founder and CEO of Mortgage relief. “They often offer rates with lower percentages, helping you save money.”

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It may be easier to get approval

“FHA, VA, USDA and other direct lender loans require minimum credit to be approved. However, individual online lenders may raise the bar at their own risk, ”said Seth Williams, co-founder and real estate broker of Ledge & Young Immobilier. “So it may be easier to get approved for a loan online. ”

Disadvantages of Using an Online Mortgage Lender

In some cases, it may be better to go the traditional route. Here is an overview of the possible disadvantages of using an online mortgage lender.

You may not be eligible for the advertised low fares

“The vast majority of these online mortgage companies carry on their business by advertising insanely low rates,” said Samantha Kalla, a real estate agent at Kalla Bay Homes Group. “This seems to be their preferred method of hooking consumers, and much later my clients were struck by the ‘ballast’. They often take them through the majority of the qualification and underwriting process and then inform the customer that they do not qualify for the advertised rate and instead end up with a higher rate than if they had chosen the traditional banking channel.

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You don’t have the convenience of having human touch if something is wrong

When you go the traditional route, you will be working with a human loan officer, which has its advantages.

“The process of buying a home is stressful enough – the last thing you want to do is find out where your loan file is,” Kalla said. “The consequences of a default on a contract (that is, a buyer who does not close on time) are often longer and more expensive than choosing a traditional lender with whom you have a direct connection, as well as someone who can be held responsible when underwriting is taking too long, or a back-end service messes up your name on loan documents.

Even if there are no issues, you might want to have a human touch that you can turn to with any questions during the process.

“I’ve worked with homebuyers who started applying online, then moved on to a local and reputable lender who can provide them with the advice and answers they need with a more personal touch,” said Jason gelios, a real estate agent with Community Choice Realty. “That’s not to say that online lenders aren’t perfect for some people, but they tend to be better suited for those who are more familiar with the mortgage process. ”

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Online lenders may be less secure

“There is an unfortunate possibility of working with crooks,” Belcher said. “Do your research ahead of time and seek recommendations from people you trust. Read reviews before contacting an online lender. A disreputable online mortgage lender may have cases of fraud, so be careful when looking for one.

You are more likely to make a mistake during the application process

“While filling out a form from the comfort of your own home may seem easy, online loan applications can be difficult,” said Chris McGuire, real estate agent and founder of Ninja Real Estate Review. “The chances of making a mistake are higher than if you were guided by an expert. Making a mistake because you misunderstood a question can cost you extra money or cause a problem later.

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Last updated: October 20, 2021

This article originally appeared on The pros and cons of online mortgage lenders

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