Applying for a mortgage online is becoming increasingly popular
these days. But you may be wondering just what it involves and what
to expect.
Most lenders allow you to initiate the mortgage process online
these days, regardless of whether you're buying a home,
refinancing, seeking a home equity loan or another type of home
loan product. Some, such as Quicken Loans, are known primarily as
online lenders, although you can still contact them in other ways
if you prefer.
Convenience is key
As a borrower, the main advantage of applying online is
convenience. You can obtain and compare loan quotes from multiple
lenders in a fairly short time, rather than having to visit their
offices in person or place several phone calls, possibly waiting on
hold while you do. You also receive your loan quotes and other
information electronically, rather than having to jot down notes
while talking on the phone.
What many borrowers don't understand is that there are several
types of companies offering mortgage services online. Each operates
in a different way and offers certain advantages to borrowers.
Before you go looking for a mortgage online, it's helpful to
understand the differences so you can recognize them and decide
which type works best for you.
Types of online mortgage companies
The first type is mortgage lenders, such as banks, credit
unions, savings and loans, and correspondent lenders. Wells Fargo
and Navy Federal Credit Union are two prominent examples. When you
apply online with a lender, you're dealing directly with the people
who issue the loan and can approve your mortgage. They can tell you
what sort of rate you qualify for and discuss your various mortgage
options.
Dealing directly with a lender allows you to get detailed
information about the loan products they offer and your various
loan options. However, those are the only products they can give
you information on. If you want to shop around for the best deal,
you'll need to contact other lenders to get information from
them.
Mortgage brokers
Mortgage brokers, on the other hand, are in the business of
arranging loans between lenders and borrowers. You provide them
with your loan information and they try to match you up with the
lender that offers the best rate and terms for someone in your
situation. They act as an intermediary between the borrower and the
actual lender, and typically handle all the paperwork.
Mortgage brokers provide the benefit of shopping around for you,
so you don't have to research and compare a bunch of different
lenders. However, they do charge a premium for this service,
typically in the form of a slightly higher interest rate than you
would otherwise get from the same lender.
Mortgage referrals
The third type you're likely to encounter online are mortgage
referral services. MortgageLoan.com falls into this category;
LendingTree and Bankrate.com are other examples. With a referral
service, you enter your borrower profile and the type of loan
you're seeking, and the service refers you to several different
lenders that match your profile. You then compare their offers to
choose your best deal.
Referral services offer the advantage of putting you in touch
with several lenders who are looking for borrowers that match your
credit profile, and you don't pay additional fees for the service.
However, you do need to sort through the separate offers and come
to your own determination of which best meet your needs.
Tips on comparing loan offers
When comparing loan offers online, you want to make sure you
look at more than just the interest rate. Pay careful attention to
the fees that will be charged in addition to the loan and
particularly to discount points - these are a way of lowering the
interest rate by paying interest in advance, with the fee for each
point equaling 1/10
th
of 1 percent of the loan amount.
A handy way of comparing loan offers is to look at the Annual
Percentage Rate, or APR, for each. This figure, which must be
included with any mortgage loan offer, expresses the total cost of
the loan in terms of a figure similar to an interest rate. Be aware
though, that the APR is based on the life of the loan, so it won't
be completely accurate is you eventually refinance or sell the home
before the loan is paid off.
First published at:
http://www.mortgageloan.com/applying-mortgage-online-9174