Online mortgages are becoming increasingly popular. While these loans are a good fit for some, they’re not right for everyone. To that end, I’ve laid out five things that you should know about online mortgages before submitting an application. Read them over so that, if you decide to go that route, you can go in feeling prepared.
The application process will be streamlined
The biggest draw for online mortgages is how simple and streamlined the application process has become. Many companies boast that you can get approved for a loan in just minutes. What’s more, the data backs them up. The Federal Reserve reports that, on average, these loans take 20% less time to process than traditional mortgages.
Typically, when you apply for an online mortgage, you’ll be asked a series of financial questions. Then, if you need to provide documentation, often copies or photos can simply be uploaded onto a secure online platform.
It may be possible to get a lower rate
Since online mortgage services don’t have the same overhead costs as a brick-and-mortar lender, their overall costs are lower. This means that they can often pass some of that savings on to you by offering you lower rates and fees than you might find at a traditional lender.
Still though, you’ll want to shop around for the best rate. Be sure to check your rate options with at least three lenders before you make your final decision. Luckily, there are a wealth of online mortgage comparison tools that you can use to compare rates rather than physically traveling from lender to lender.
There’s less of a personal touch
One of the biggest advantages of going with a traditional lender is that much of the process is face-to-face. While online mortgage companies do usually have lenders available if you have questions, your session will likely be over the phone and during business hours.
Many traditional lenders offer more flexibility such as night and weekend hours, which can be very useful if you need a pre-approval right away. Most traditional lenders also typically take the time to come to closing, which may or may not be the case with an online option.
They’re not ideal for complicated loans
The downside to a streamlined loan process is that there’s less flexibility in who gets approved. Online mortgages tend to be a better fit for people with traditional 9-5 jobs, little debt, and decent credit scores. However, they may not be ideal for someone who someone whose income varies each month or who has an otherwise complicated financial situation.
With a traditional lender, there’s a bit more wiggle room. Since the fate of your application is being decided by a person rather than an algorithm, traditional lenders have the have the ability to look at applications on a case-by-case basis. If you’re not approved for a loan right away, they can also give you advice on how to improve your chances.
You need to read the fine print
Last but not least, if you’re going to go with an online mortgage, you need to read the fine print. When you work with a traditional lender, you have someone in the room with you who can explain all the ins and outs of the application. With an online mortgage, it’s up to you to make sure that you understand the terms and conditions.