Unless you’ve got a lump sum of cash to put down, getting a mortgage is part and parcel of buying a home. Luckily, there are plenty of different mortgage products and sources available these days to accommodate the varying types of buyers out there and the unique financial situations they’re in. And online mortgages are just one of them.
It should come as no surprise that borrowers can get their hands on a mortgage – or any other type of loan – via the internet given the rise of digital technology taking over the world as of late. And there’s no doubt that applying for a mortgage online can be incredibly convenient.
The question is, are online mortgages the right avenue for you to take? Or should you stick with the conventional in-person method of applying for a mortgage?
Let’s go through some of the advantages of getting a mortgage online as well as some of the potential drawbacks to help you make that important decision.
Pro #1: Comparing Mortgages is More Convenient
It’s always recommended to compare different mortgage products from different lenders to see what they offer and what would be more suitable and affordable for you. But instead of going through all the legwork needed to do that, shopping online can make this process much simpler and faster.
These days, online lenders post all of their pertinent information online in regards to terms, interest rates, and fees. They’ll also provide you with a good-faith estimate that itemizes all of the info related to the mortgage to help make comparison shopping rather straight-forward.
Pro #2: The Application Process is Quick
Generally speaking, online lenders are known for their relatively quick mortgage applications. Borrowers can quickly fill out and submit an online mortgage application and supply all pertinent financial documentation needed for the lender to assess all the information provided to make a decision.
Borrowers can simply scan all the paperwork required and submit it online rather than having to gather it all up and supply it in person. The application can be filled out in mere minutes thanks to simplified applications that online lenders have refined.
Thanks to such a quick application process, the actual approval process also tends to be faster compared to the average route.
Pro #3: Lower Interest Rates and Fees May Be Possible
Since online lenders don’t have the same level of overhead costs that traditional lenders do, they may be in a better position to offer lower fees and interest rates as a result. Even a fraction of a percentage point on your interest rate can translate into tens of thousands of dollars in savings over the life of your loan.
Pro #4: Approval May Be Easier
Online lenders have made a name for themselves in terms of helping borrowers increase their odds of mortgage approval. While conventional lenders may have stringent lending criteria that they have to follow, online alternative lenders may a bit more lax in terms of credit requirements.
Borrowers who may have a tough time getting approved for a mortgage the traditional way because of their sub-par credit scores may find more success by applying with an online lender.
Con #1: Scammers May Be Lurking
While there are plenty of legitimate online lenders out there, there are also some scammers who may in business solely to take advantage of unsuspecting borrowers. The world of the web is filled with all sorts of different scammers and hackers, and the lending sphere is not immune.
You need to do your due diligence when it comes to applying for an online mortgage. Use common sense to help sniff out predatory lenders. Basically, anyone guaranteeing mortgage approval and offering terms that seem too good to be true should probably be avoided.
Con #2: Online Lenders Are Only Suited For Simple Real Estate Transactions
Online lenders can be great for mortgages and real estate deals that are streamlined and simple. But they may not be suitable for transactions that are more complex in nature. If you have a good job, good credit, and are buying a typical home, an online lender might be a decent avenue to take.
But if your income is complicated, you have some sort of credit complication, and the home you plan to buy is not comparable to any other homes in the area, online lenders might not be seasoned in dealing with these situations. In this case, you might be better off working with a conventional lender or mortgage broker who can help you work through all the wrinkles in the loan process.
Con #3: You Won’t Get the Same Level of Service
At the end of the day, there’s no comparing personalized face-to-face service that you get from a traditional lender from an online lender. The type of customer service you’ll get from either one is just not the same.
If you’re the type who has no problem dealing with a lender via the internet, then an online lender might be for you. But if you appreciate one-on-one contact with a professional, a conventional lender or mortgage broker might be best. This is especially true if you like the idea of being able to communicate outside of traditional business hours, which many mortgage brokers are willing to do, but cannot be said for online lenders.
The Bottom Line
Online lenders are capitalizing on the digital world that we’ve become immersed in, and they’re providing many homebuyers with a quick and easy way to apply and get approved for a mortgage. They certainly have their perks, but there may also be a handful of drawbacks associated with taking this route. Ultimately, the choice you make will come down to your comfort level and what you expect and need from your lender.