> Buyers' Advice
Online Mortgage Shopping Today
by Broderick Perkins
Online mortgage origination never became the home loan assembly line experts once forecast, but mortgage services that are available on the Internet have been a boon to savvy consumers. If the optimistic predictions during the dot com boom era of the 1990s had come true, many more consumers today would be signing for mortgages on the electronic dotted line. Instead most consumers still complete mortgages the old fashioned way, seated at a conference table at the close of escrow. What has changed is mortgage consumers ability to drive a hard bargain. "The majority of consumers use the Internet to shop for mortgages like they shop for real estate," said Warren Myer, CEO of San Jose, CA-based Myers Internet Services, a Web services developer and consultant for mortgage brokers and loan originators. "However, complex, infrequent purchases are not well suited to a pure online process. These decisions are best made through a combination of online and offline processes. For complex decisions, human communication, whether it be face it face or via telephone, is much better than e-mail communication," said Myer. "In addition, the mortgage industry is regulated -- and consumers need to sign an increasing number of complex legal documents," he added. Even something as simple as completing an application can get tricky online. One-in-20 online refinance applications failed due to some online glitch, according to Empirix, a Waltham, MA-based electronic applications tester that studied 15 mortgage companies' online refinance applications. Silver Spring, MD-based mortgage industry consultant MORTECH, LLC surveyed 360 lenders and found 64 percent of them unaware of the software necessary for online mortgages, only six percent actually used such software and only one percent had implemented electronic signatures which are essential for a complete online mortgage process. "The industry is at the middle point of building its electronic infrastructure," says Jeff Lebowitz, president of MORTECH, LLC. At that middle point, however, mortgage consumers have gained a bounty of knowledge -- editorial content about mortgages, mortgage calculators, loan comparison assistance, and other tools that help smooth the decision-making process. "Consumers who go online will find a plethora of useful information. It is definitely a good idea to go online and do independent research. Informed consumers make better decisions. Our research shows that consumers prefer aggregator sites rather than single-lender websites. That's because aggregator sites let consumers shop and compare rates and programs from multiple lenders and brokers easily," Myer said. Myer and others say shopping around for a home loan has never been easier, but it still comes with caveats. On or off line, the fundamentals of studied consumerism applies. Here's what they advise: Attend a mortgage seminar or a face-to-face meeting with a real estate agent or mortgage broker to get briefed on home loans. Visit independent mortgage and real estate websites that are largely informational, content providers, but steer clear of ads they may carry that direct you to lender or broker websites. Use the online learning experience to bolster what you learn from a live mortgage expert. When you've become familiar with mortgages and home loan programs and information, shop both online and offline brokers and lenders -- a total of three, four or more -- for the best rate and terms before you complete an application. A mortgage lender underwrites and delivers the loan. A broker works with many lenders and typically does not underwrite or deliver the loan. Don't rely solely on electronic interaction to ferret out the best loan person for you. Call the mortgage lender or broker and see how responsive they are about your questions. In the end, you'll be across the table from a live person, not a computer screen. Apply online only at secure websites with agreeable privacy policies, both of which you should be able to easily locate on the site. Avoid websites that flash, blink and buzz with promises of low, low interest rates and easy-qualifier terms. If it appears to good to be true, on or offline, it probably is. Avoid spam (unsolicited commercial e-mail) come-ons, telemarketing (offers made over the phone) pitches or junk mail (offers made through U.S. Postal Service mail) offers that tell you to apply online for special deals. The same questionable marketing ploys that occur offline, also exist online. Don't start a mortgage application online if you can't follow through online. Online brokers and lenders often use e-mail for mortgage progress reports or digital technology for online mortgage tracking. Don't double dip. Each application generates an inquiry on your credit report. A wary lender could reject you for too many inquiries and too many inquiries could lower your credit score. Apply only with the lender or broker you chose because of your careful research and homework. If you choose an online broker, choose a local, in-state online mortgage broker licensed and regulated by your state. Problems with outside brokers could be more difficult to solve. Check out the lender. Verify the lender's status with the Federal Deposit Insurance Corp. or other agencies that govern lenders on and off the Internet. The FDIC also offers guidance for online mortgage shopping. Get a rate lock. Get it in writing. Don't sign it until you are 100 percent sure what you are signing. Website guarantees are no better than verbal guarantees. A rate lock should detail the terms of your loan, including the interest rate, the term of the loan, points, fees and all other costs associated with the mortgage and it should also have an expiration date and cost (if any) for the rate lock. The cost may be a separate fee or an extra charge tacked onto the mortgage. Be certain about all your loan costs. |
