I get asked regularly about online lenders, and how reliable they are. Personally, I prefer local, in person lenders who will walk my clients through the process with over-the-top communication, and if you know me, you know that's my M.O. However, let's say you are seriously considering applying for a mortgage online. Here are some thoughts for you.
Online Lending: Pros and Cons
Just log on and you'll see that the Internet is teeming with lending choices, but is online lending for you? Here are a few pros and cons.
1. Great deals abound. Online lenders know that to attract business they must make a good offer, so they usually have competitive interest rates.
2. Less chance of being charmed. If terms and conditions are lacking, you won’t feel obligated to go with someone just because he has become your buddy.
3. User friendly. If your credit profile is good, you are a perfect candidate for online financing. Spending a few hours in front of your PC can lead to multiple email offers. Let mortgage bankers and brokers outbid each other to win your business.
4. A loan is a loan is a loan. Most companies on the Internet stick with traditional methods for application approval and funding. Regardless of where they originate, all mortgage loans are protected by state and federal regulations.
5. Simplistic rate comparisons. When you’re checking only the facts, loans are easy to compare. (Also a con... you might need more info that isn't provided)
6. Easy access to providers. Online, borrowers can skip the middleman.
1. Lack of accountability. Local lenders rely heavily on referrals and repeat business, so when loans go bad, it reflects poorly on the company. Online lenders face less accountability because you're unable to visit their office, and many times, you only have an 800 number with an extension. My local lenders give you their personal cell phone, and are available during non-banking hours if necessary. You will NOT get this with online lenders.
2. A new breed. Since online lenders are a recent addition to the scene, they haven’t earned the reputations of their off-line competitors. New doesn't always mean better.
3. License requirements vary by state. It’s possible that you could select an online lender who isn’t licensed in your jurisdiction. If an online company is placing mortgage loans in your area, make sure they have the legal authority to do so. This could delay the deal significantly, or even kill it.
4. No face-to-face contact. Some online lenders are bad apples, as are some traditional lenders. Though consumer confidence in Internet purchases is rising, Internet suspicion may still be too big a deterrent for you. I usually recommend local lenders vs. online, faceless lenders.
If you are ready to surf for online lenders, take the following precautions:
1. Expect a professional site. A good website doesn’t guarantee a good company, but a poor site is a bad sign.
2. Do research. Many lender sites offer the company’s history and business practices. If you can’t learn anything about the company, try another one.
3. Ask me to suggest reputable online lenders, if you haven't already gotten with one of my preferred lenders.
4. Many online lenders are good, some aren't that GREAT, though! I've had loans go south fast because the lender delayed the deal, and was not local. I personally always prefer my clients go local because they understand the area, and many of your neighbors and friends can vouch for them if/when the time comes.
For any and all of your real estate needs, I hope you'll reach out. We stand ready to help you!
David Jordan, Affiliate Broker
Keller Williams Realty