Mortgage lending today is rapidly joining the realm of new websites and mobile apps aimed at streamlining financial processes and making it easier for people to take control of their money.
New online-only mortgage lenders and online options for existing lending institutions are available to the public every day. As virtual tools become the new norm, homebuyers looking to finance their big purchase should expect a less intimidating and more efficient borrowing experience.
The timing may be right for these additional options. Real estate markets across the country have largely recovered from the housing crisis that began nearly nine years ago, with the Federal Housing Finance Agency reporting that home prices rose in every state in the first quarter of 2016, making it the fourth consecutive year home prices increased more than 5 percent nationally. At the same time, lenders report buyers are entering the market with greater confidence due to low mortgage rates and an expectation of a trustworthy, simplified mortgage approval process.
Regis Hadiaris, product lead at Rocket Mortgage, a subsidiary of lender Quicken Loans, notes there has been a “huge first-time homebuyer influx” for the online mortgage process, which features a streamlined system to make borrowers more confident with the personal details they’re sharing. Rocket Mortgage reports two-thirds of clients use the service to purchase a home, and of those 72 percent are first-time homebuyers.
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But the move to online isn’t restricted to lenders who specialize in technology. Mark Raskin, a senior loan officer and branch manager for PrimeLending in Dallas, says the majority of his work with clients happens without an in-person meeting.
“I rarely meet with folks face to face, unless it’s a first-time homebuyer that has that need or desire because of nervousness. We certainly offer it to anyone who wants to, but it’s not necessary,” Raskin says.
Whether you prefer a sit-down meeting with the person handling your mortgage or would rather keep the details in a strictly virtual format, you’ll continue to have more options as the world of mortgage lending evolves.
Here are five things to know before getting a mortgage online, and how you can navigate the right path for you.
Don’t fear the mortgage. A key message in all mortgage lending today, and online lending in particular, is that homebuyers should not hesitate to begin seeking a loan because they aren’t sure what to expect, even when they have solid financial footing.
“People think the mortgage process is confusing, complicated and slow,” Hadiaris says.
Online options, whether they’re the basis of the lender’s operations or not, help you complete at least some of the process where you’re most comfortable and when you’re most available. And if you begin seeking a loan and find you're unprepared to take on the cost of a mortgage, it's something you can discover privately.
Expect a streamlined process. As is part of the expectation with any new technology, making applying for a mortgage easier and more understandable becomes increasingly important as competing lenders also strive to simplify their online offerings. Online applications and document upload portals allow homebuyers to get their financial and personal information together in one spot without having to carry them anywhere.
With online lender Backed, which specializes in loans with a cosigner, the company’s first jump into residential lending focuses on personal loans for buyers of tiny homes. The application process is automated to help borrowers know their financial standing and what else is needed for approval as they input personal details.
Backed CEO Tal Yatsiv explains the goal is to provide a friendlier, more enjoyable aspect to applying for a loan. “As enjoyable as it could be for entering a lot of personal and financial details,” he says.
And applying online could actually play a large role in determining which home you buy, since a quicker process can mean the difference between a seller accepting your offer and competing with other bids. Hadiaris points out you could be preapproved or prequalified for a loan through Rocket Mortgage on your phone.
“Today you can get approved and walk in and show your Realtor,” Hadiaris says.
Keep the deal in mind. Knowing how important preapproval is to a deal's success, be sure you shop around for a lender that takes the right details into account – like your type of employment and whether you're paid hourly, on a salary or commission – to follow through with your preapproval.
“When offers are made they have a prequalification or preapproval letter attached, and that is – for the more savvy or experienced listing agents – just as important as the offer amount itself as who the lender is,” Raskin says.
Make them earn your trust. Coming out of the subprime mortgage crisis that began in 2007, borrowers have been hesitant to purchase some mortgages, choosing to go with 30-year, fixed-rate mortgages over adjustable rate loans. ARMs made up just 5 percent of total mortgage applications in early June, down significantly from March 2007, when ARM application rates comprised 21.9 percent of loan applications, according to the Mortgage Bankers Association.
As a result, mortgage lenders strive to be more transparent with the lending process to help borrowers understand, and then trust, the institution they borrow from. “Today’s homebuyers do ask a ton of questions, and they expect us to earn their trust – which is why we’re so transparent in our processes,” Raskin says.
Federal regulations are another reason for added clarity. The TILA-RESPA Integrated Disclosure rule implemented in October 2015 and other regulations require lenders to provide specific forms with mortgage details, with time for the borrower to review and discuss prior to closing on a home. With many new online lenders launching recent products, the platforms are developed with federal rules included from the beginning.
Particularly with newer and online-only lenders, be sure they provide the federally regulated forms, including the Loan Estimate and Closing Disclosure forms. As with any other service you're looking to hire, ask for referrals and check out reviews online – and if you're seeing any red flags that make you concerned, don't take the chance.
Go with what makes sense to you. Putting information online isn’t for everyone. So if you don’t like the virtual mortgage process, seek out a loan officer who can meet with you in person.
On the other side of things, if you’re a person who prefers an automated method, you have a growing number of options, with exclusively online lenders, traditional banks and everything in between.
Corrected on June 9, 2016: A previous version of this incorrectly identified the type of loan Backed issues for tiny homes, which is a personal loan.
She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at firstname.lastname@example.org.