Many folks appreciate the ease and convenience of online banking accounts, so it is only natural to wonder about the pros and cons of online-only mortgages. In general, the news is bright, but you do need to watch out for potential scams.
Pro: Interest Rates and Fees
Online-only mortgages tend to carry lower interest rates and fees than their in-person peers. In fact, this is one main selling point of online mortgages.
Pro: Closing Costs
In-person mortgage brokers must pay more overhead expenses — expenses that online-only brokers need not worry about. As a result, they offer lower closing costs.
Filling out online loan forms yourself means you are more prone to misunderstanding a question and making a mistake. This could mean issues later on in the process that have the potential to cost you lots of money. Always be sure you understand the information you are asked to submit, and take advantage of any contact avenues such as 1-800 numbers.
Because you can fill out your online loan application while you’re watching TV or the kids and do not need to go in for lengthy meetings, the time savings are obvious. However, do not let distractions get in the way of accurately filling out your forms.
Some online-only mortgages seem legitimate and like great deals to boot. However, be cautious of offers that require you to pay up front for quotes or preapprovals, since they are usually scams. While it is normal to pay fees for credit checks, appraisals and other costs, you pay them later.
Also, look out for misleading rates. Some online lenders flash an appealing low rate only to say that you no longer qualify for that rate after they’ve run your credit history and other vitals.
Pro/Con: Credit Scores
The upside is that online-only mortgages can be more flexible than their in-person counterparts. If your credit score is lower than traditional in-person lenders would like, you could still qualify for a decent loan. The downside is that your interest rates are likely to be higher and you might be buying a home you cannot afford.
If you know exactly what you are doing, an online-only mortgage may make a lot of sense. It certainly has the potential for cost savings and less hassle. If you are new to the mortgage process, you can still do online-only. However, do plenty of research before applying in order to cover all of your bases. Consider using a site such as Lending Tree to compare a number of interest rates in one place.