Taking out a mortgage is one of the biggest expenses most people will make in their lifetime. Even though it is a huge financial responsibility, almost half of new home buyers don't put in the necessary time to compare different lenders to find the best rate.
These days, there are more options to consider than traditional credit unions, banks and mortgage brokers. Many home buyers are turning to the internet to find mortgage lenders. It can be intimidating to think about taking out a huge mortgage from an online lender. Below are some of the pros and cons of using an online mortgage company to take into consideration.
Pros Of Using An Online Mortgage Company
1. Lower Interest Rates Available
One of the main advantages of an online mortgage company is that you will typically find more competitive interest rates to choose from. Mortgage companies get high margins on the loans they make. This allows lenders to be competitive when offering interest rates to their borrowers. Online mortgage lenders don't have to cover the expensive overhead that traditional brick-and-mortar banks and mortgage companies have to. As a result, they are able to pass on their savings to the customers in the form of lower fees and interest rates.
2. Quicker Process
Going to a bank to apply for a mortgage loan can be a huge hassle and time-consuming. Getting a quote online from multiple mortgage lenders can be done quickly and comfortably. You can get multiple loan quotes online in the time it would take you to get a single quote from a local banking institution. The more quotes you are able to receive, the more choices you will have to choose from and be able to find the best rate you qualify for.
3. Easier Approval Process
One of the main determining factors in getting approved for a mortgage is your credit score. Conventional loans have minimum credit scores borrowers need to meet in order to have the best chances of getting approved. Online lenders are able to choose their own restrictions when it comes to which borrowers they deem a credit risk. If you do not have great credit, an online lender may be your best chance at getting approved for a mortgage loan.
Cons Of Using An Online Mortgage Company
1. No Personalized Customer Service
Even with all the advantages online mortgage lenders offer, you will still not be able to get the same customer service experience as you would with a local mortgage company. For some borrowers, one-on-one personalized customer service is something they are not willing to sacrifice. Online mortgage lenders can offer you assistance over the phone. However, it may be more difficult getting through to a customer service representative when you need them most.
2. Hidden Charges
Mortgages come with closing costs that can include fees your lender will charge for funding and processing your loan. Online and offline mortgage lenders will sometimes charge hidden fees to their customers unsuspectingly. It is important to read the fine print on all mortgage documents before you sign to make sure there are no surprises when you close.
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