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My Mortgage Blog

On average, it takes between two and six weeks to get a mortgage from the initial application to signing the final paperwork. That may seem slow; however, mortgages are complicated legal agreements. The approval process is rigorous therefore, it takes time. In the age of instant gratification, financial technology companies have begun to spring up on the internet, offering faster, easier mortgages. Some even claim to offer approvals in only a few clicks. These alternative mortgage lenders evaluate mortgages differently than traditional lenders, using sophisticated algorithms to help determine the risk of lending to you. Online lenders collect your information through forms on their websites. Then the numbers are crunched, giving you an almost instant pre-approval. Finalizing the mortgage takes a little more time but is generally faster than a traditional mortgage lender. 

So what's wrong with online mortgage lenders? The added speed makes online mortgages attractive to some busy homebuyers, even if they aren't perfect for all.

Online Isn't for Everyone

If you're doing or homework when looking for a mortgage, you'll end up applying on several different online mortgage websites. That could mean lots of time spent filling out online forms. Other than the tedium of data entry, there are other reasons why online lenders may not be suited to every prospective borrower.

Telling Your Story Matters

Online forms may not allow you to add as much information as you would like to share to convey your financial situation accurately. For example, if you are self-employed or a contract worker, your employment status may not fit the pre-defined definitions provided on the form. Unless your credit history is spotless, it may hurt your chances of approval without allowing you to explain your circumstances to ensure you get approved at a reasonable rate.

Interest Rates Matter

Online lenders promise to provide low-interest rates. Does that mean the rates are lower than what your bank or another traditional lender would offer? You won't know unless you compare. Like traditional lenders, online mortgage lenders base their interest rates on risk. So once your application is evaluated, the rate offered may not be the low rate advertised.

Hidden Costs

Online mortgage lenders may have hidden fees and costs that are not immediately obvious. While the fees are necessary for the company to operate, they can add up and make the mortgage more expensive than expected. Be aware and look for the hidden costs to decide if they make the mortgage worthwhile. 

Help May Not Be Close at Hand

First-time homebuyers especially have a lot of questions about getting a mortgage. Online mortgage lenders may have a library of resources to educate yourself or a chat feature where you can ask questions. However, it can be difficult to be well informed when you don't know what to ask. You may find it challenging to get advice or recommendations on what type of mortgage you should consider or any support after the deal closes. 

Online mortgage brokers can be a good solution In the right circumstances. They offer the opportunity to get a mortgage finalized quickly by applying online and offer competitive interest rates. However, online lenders don't always have the lowest interest rates, the most flexible lending criteria or the personal touch needed to help inform and advise.

The best way to ensure you have access to as many mortgage options as possible is to work with a mortgage broker. Compare what an online lender can do for you, then talk to a mortgage broker to see if they can do better. A mortgage broker will be available to answer your questions and help you decide on the best type of mortgage. They can also help you gather the proper documentation to apply for a mortgage when you are self-employed or rebuilding your credit history.