In past decades, homebuyers traditionally went to their local bank to get the mortgage needed for their home purchase. In modern day, however, things have changed.
Homebuyers now have far more options when it comes to choosing a home loan, and online lenders are quickly becoming a popular option.
You can accomplish just about anything online these days, so why not a home loan? The obvious advantages are speed and convenience, and Internet lenders may even get you access to better interest rates.
But take caution: online mortgage lenders come with some downsides, such as not having a face-to-face, human contact who can directly answer your questions and concerns. If you’re in need of a home loan and are considering an online lender, here are some things to consider:
Faster and – Sometimes – Cheaper
One of the main reasons for the rising popularity of online lenders is that they offer a simplified version of the mortgage application process. There’s no need to schedule time-consuming, in-person meetings with a mortgage broker.
Online lenders also tend to offer better interest rates and lower fees than traditional mortgage brokers. This is because the online lending world is highly competitive. Online lenders need to find ways to entice skeptical customers who are wary of trusting something as important as a mortgage to an online service.
Low Credit Score
Along with all that, if you have a credit score of less than 700, online lenders may be your only remaining chance of getting a mortgage.
Traditional lenders tend to have strict criteria for mortgage approval, such as a high credit score. Online lenders often use different underwriting investors, so if you fail to secure a mortgage from your local bank, there may still be a chance to get one from an online lender. Just remember, if your score is low, your interest rate will be much higher.
Online Lender Pros
- Faster service.
- Better interest rates.
- Better chance of being accepted.
Balance Pros with Risks
At first, it seems like a golden opportunity. Better interest rates, lower fees, and a better chance of securing a home loan. But all advantages need to be balanced by the risks involved.
As you can expect, using online lenders comes with more risk of fraud, scams and illegal business practices. Most online lenders are reputable, but there are still a few bad apples to watch out for, with more coming onto the scene every day.
Do Your Due Diligence
Make sure to do your due diligence and extensively research the online lenders you’re considering. Check their online reviews and watch for red flags such as bad ratings from the Better Business Bureau.
Don’t forget to read the fine print carefully to fully understand their privacy policies and terms. It can be easy to misunderstand the questions on a loan application. If you misinterpret the questions, you could be left with a higher fee or a problem with your approval later in the buying process. A certified exclusive buyer agent from NAEBA can help you review your options and complete your loan application.
Consider this: just because you can get a mortgage, doesn’t mean you should. If you have a low credit score, you will be stuck with a higher interest rate. Before getting ahead of yourself, be sure you can keep up with the proposed payments. If you’re uncertain, it may be better to pay off your debt, build up savings, and repair your credit before starting your homebuying journey. A NAEBA expert realtor can help you weigh your options.
Online Lender Cons
- Chance of falling victim to a scam.
- Less trust and reliability.
- Limited human interaction available to answer your questions and help you through the application process.
Online Lender: Do or Do Not?
Online lenders offer a quick solution to getting a mortgage. But you need to exercise care and ensure you understand whatever you’re agreeing to.
You can always get mortgage pre-approval online first and then talk with a mortgage broker to see which you feel more comfortable with long-term. With online lenders, you get convenience and competitive rates. With traditional brokers, you get customer service and more assurance.
A NAEBA buyer agent can help you analyze your options and determine the best next steps for you and your family. Contact us today!