What to Know Before Using an Online Lender

There is no doubt that the internet makes life easier. From having your groceries delivered and paying your bills, to scheduling appointments and chatting with friends, we can do it all online. While there is little risk in using the world wide web for these day-to-day activities, the stakes are much higher when it comes to something as big as obtaining a mortgage.

Over the years, online mortgage companies have become an increasingly significant force in the home loan industry. And while they may offer some advantages, it’s important to understand that there are also disadvantages to using a web-based lender.

Convenience
One of the biggest pros of using an online mortgage provider has always been time savings. Online lenders can sometimes make the mortgage process less difficult to navigate and this convenience has led to their growth in popularity, especially among younger buyers.

Bryan Clark, senior vice president of mortgage banking for Dart Bank, began his career in the online mortgage space. Because of this, he truly understands the pros and cons, but says that as far as convenience, traditional lenders have really caught up.

“Online lenders’ competitive advantage in this area has diminished quite a bit in recent years,” he said. “Most traditional banks and mortgage companies now have platforms that allow borrowers to handle a lot of the home loan process online.”

Interest rates
Unlike a brick-and-mortar bank, online lenders often operate without much overhead. This may allow them the ability to pass some savings to their customers in the form of lower interest rates or lower fees.

But Clark says it’s important to really understand the fine print when it comes to promised savings.

“If you’re new to the mortgage process or aren’t accustomed to reading a loan estimate, you can easily end up paying more than you think,” he said. “And, with some companies, the interest rates aren’t guaranteed. So, you could be several weeks into a transaction and suddenly find out you aren’t eligible for the rate you expected.”

It’s also important to note that the internet is rife with scams, and the online mortgage industry is no exception. Definitely check if an online mortgage lender is registered with the Better Business Bureau before you start the process of entering information.

Customer Service
No matter how much they try, online mortgage companies just can’t provide the same kind of one-on-one service you get when working with a local lender. And, for many homebuyers, walking into an office and getting face-to-face customer service means more than anything.

It’s true that many online companies employ loan officers you can speak to on the phone, but beware that with some companies, the person you’re speaking to isn’t necessarily experienced in the mortgage industry. You could also find yourself being passed from person to person, and when entering into one of the biggest financial contracts of your life, having a single, trusted point of contact is invaluable.

“Purchasing a home is a complex process, and when you enter into an agreement, you’re on the clock,” said Clark. “If you’re having trouble reaching your online lender and for some reason they don’t meet your timeline, you could be looking at a rate lock extension fee, fees from the seller, etc.”

Another benefit of working with a traditional lender is that you’ll have access to their local network. They have relationships with area appraisers and REALTORS^®, which can put them in a better position to resolve conflicts quickly.

While online mortgage companies can make it easier for consumers to comparison shop, and they may, in some cases, be able to offer a small savings, Clark says customer service still remains a top priority for many borrowers.

“In all the studies we have read, we’ve found that consumers want high technology, but they also want high touch,” he said. “Which means they want the ability to digitally upload documents and communicate online, but they want a human on the other end who they can call when they need to. The trick is providing both, and I think local lenders are meeting that challenge well.”

For a listing of area professionals, visit the Greater Lansing Association of REALTORS^® at www.lansing-realestate.com.