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Shopping for a mortgage online can and should involve some research. Before making any decisions that could change your life, cross reference several mortgage websites for the best price, make sure they have the type of loan you need, and try choosing a company that is local. Acquiring your loan from an online mortgage website offers many advantages. If the loan you need is priced on a mortgage website, it will be easy to find and compare with other prices. In contrast, price quotes in hard copy media are rarely provided in the details required by most shoppers and are usually out of date. Telephone and email quotes by brokers and loan officers can’t be relied on unless you have good reason to believe they are trustworthy. Lenders acquiring loans through their mortgage websites avoid the costs of maintaining retail facilities, including the commissions paid to loan officers. The competition among online lenders is substantial, which is why you can almost always expect the get a better price online than in a tangible location. The mortgage market is highly volatile. Lenders reset their prices every morning, and sometimes during the day. Unless price quotes from different loan providers are obtained at about the same time, they can’t be comparable. This is a major problem for offline shopping because it takes too much time to obtain reliable price data. With online mortgage websites, this information can be refreshed with the click of a mouse. The term “low-baller” refers to loan providers who ensnare customers by quoting low prices they have no intention of delivering. The client is informed that the price will be locked at the “market price” prevailing at the time of the lock, but the market price is what the low-baller says it is. In many cases, the lock price is higher than the price quoted to a shopper for the identical loan at the same time. Clients who shop on mortgage websites aren’t vulnerable to low-balling because they can check their price online on the lock day. An online lender can’t quote different prices to shoppers and lockers. Some loan providers low-ball third party settlement costs, which they can’t be held to because they are “estimate”. Sometimes they do the opposite, marking them up in order to pocket the difference. These crooked practices usually work offline because information on third party costs typically isn’t provided until the shopper receives the Good Faith Estimate (GFE), which under the rules need not be given until three business days after the lender has received the loan application. The only way to obtain more than one GFE as a check on the estimates is to apply to more than one lender, which is tedious and time-consuming. In contrast, online shoppers can easily collect settlement cost information from multiple lenders at the same time they are shopping lender prices. Having multiple estimates is an excellent defense against low-balling or markups. Some lenders low-ball their own fees, which under the rules are also considered “estimates”. While points, which are charges expressed as a percent of the loan amount, are included in a price lock, fees specified in dollars are not included. Some lenders deliberately inflate these fees as the borrower moves closer to closing. Home purchases are the most vulnerable because they can lose the home if they don’t close on time. Again, this is not a hazard for online shoppers, because the mortgage websites clearly identify their fees and many of them guarantee them. While others don’t explicitly guarantee their fees, displaying them online is almost as good, since the lender would have difficulty defending a different number at the closing table. Shoppers often change their mind about deal. For example, they decide to switch from a 30-year FRM to a 5-1 ARM, pay points to lower the rate, make a larger down payment, waive escrows, etc. If an offline loan provider figures that a customer is committed, the price of the new deal may be higher than the price that would be quoted to a new shopper. This can’t be done to an online shopper who can check the price of the new loan online. Jack Guttentag. “Shopping for a Mortgage On-Line.” The Mortgage Professor’s Web Site. 16 Sep. 2009 [http://www.mtgprofessor.com/a%20-%20using%20the%20internet/single-lender_web_sites.htm].
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