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The Real Deal
Shopping for loans online can be useful
Using the Internet as an information resource, shopping tool and research vehicle has allowed millions of people to simplify things in their life. Now, shopping for a mortgage can be as easy as a click of the mouse--if you know what you are looking for and are willing to do some homework.
One thing consumers should keep in mind when shopping rates and packages online: As with traditional lending, the lowest-priced online mortgage isn't necessarily the best deal. Evaluate closing costs, calculations and how will the Web site handle the loan through closing. Do they handle the complete process or hand it off to a lender? In addition, is their a "live body" who will be able to answer any questions that arise?
A recent survey from Gomez.com, a Lincoln, Mass.-based online research firm, cited LoanWorks, E-Loan Inc. and LoansDirect as the top three online-mortgage sites based on their ability to lock in rates and provide customer services and other measures. If, however, you are only interested in getting the lowest-rate mortgage, the survey points to Keystroke.com, InfoLoan.com and InstaMortgage.com as having the best rates.
There are more than 100 mortgage lenders online, but according to Gomez.com, there are 10 top sites that rate an "overall best" on the survey. In addition to the three mentioned above, the survey mentions HomeAdvisor.com, Mortgagebot.com, iOwn.com, MortgageIT.com, InfoLoan .com, InstaMortgage.com, and Countrywide.com.
The tradeoff that comes with using an online mortgage site is the lack of face-to-face customer service you get with more traditional lenders. Since buying a home is probably the single, most expensive purchase anyone will make in their life, customer service is no small aspect in the process. If you are someone who doesn't require as much 'in-person' time with a qualified lender, then online mortgages might be for you. If, on the other hand, you are more comfortable with having a name and a face associated with your transaction you would do best to consult with your neighborhood bank or mortgage lender.
Many traditional brick-and-mortar companies like Countrywide and Wells Fargo Home Financial have online services for loan shopping. One way to narrow the field is to shop the various sites for rates, services, etc. and then meet two-to-three of them in person for a more detailed discussion. All of the sites allow you to enter basic loan information such as down payment amount, terms of the loan desired (such as 30-year fixed, 15-year fixed, 5-year ARM), and cost of the home to finance. Once the data is entered the computer will calculate best rates on various scenarios and some sites will provide other company loan options as well.
There is one caveat to shopping for a lone online--Try to keep the shopping anonymous, meaning don't provide the site with specific loan application information about yourself. Every time a loan application is submitted, the lender is required to do a credit inquiry and the more inquiries you have the more it affects your credit score. Each inquiry brings your score down a point or two. Your credit or FICO (Fair Isaac) score is a calculated number that reflects payment history and the number of credit cards and loans. Scores range between 300 and 900, the higher the number the better the mortgage rate.
As we move farther and farther into the "virtual" world, we all just need to be aware of the conveniences and the pitfalls. Sometimes, there is no substitute for the traditional method of doing business, but the online mortgage sites do offer an alternative for shopping rates and evaluating the various options available in the market.
Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors. Send questions on any topic to: Ask Your Realtor, c/o SILVAR, Los Altos District, 345 San Antonio Road, Los Altos, CA, 94022; call 650.949.9115; or send email to ppompei@siliconvalley-realtors.org.
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