Once you have decided that the only way forward to make that dream home purchase…
Due to the COVID-19 pandemic, people have been forced to seek online alternatives for things that we otherwise sought out in the real world before. People go on fewer runs to the supermarket since we can get a lot of what we need from online retailers like Amazon.
For mortgages, today, it is now possible to skip the whole process of physically negotiating with your bank to get a home loan through the help of online lenders.
There are generally three ways you can try applying for a mortgage. You can go straight to your bank of choice to find out if you are eligible; you can also get the services of a mortgage broker who will be the one to shop around for your home loan deal, or you can go through the complete application process through an online mortgage lender.
In this article, we’re going to share with you some of the best online mortgage lenders you can find on the web at this time. We’re also going to discuss the pros and cons of using this type of service compared to the more traditional way of applying. We hope that we can help you in your journey to purchase your dream home at this time.
The Loan Application Process
As you might expect from an application, the process will require submitting several pieces of documentation. Since you will be purchasing (or refinancing) real estate, you will be asked to present information regarding the property in question. And since you are trying to borrow money, you will also need to show proofs of employment, bank statements, and other paperwork to help the mortgage lender assess your financial situation.
Based on the lender’s information glean from your mortgage application, you may or may not get approved for the home loan you are applying for.
Pre-approval vs. Conditional Approval vs. Approval
Throughout the loan application procedure, you might hear about approval over different stages. They don’t always mean that you are already assured of a mortgage unless you are already closing the home loan with your lender.
Whether they may or may not have been successful in their mortgage journey before, those who have been through this business will probably tell you, “Getting pre-approval is the best thing you can do before you even look at houses.” And they’re definitely correct too!
Think of getting pre-approval as the dress rehearsal for your actual mortgage when you really need to dot the i’s already. When you get pre-approval from a lender, they basically ask you all the same stuff as in a standard application, only because you don’t have information on the house yet, making you unable to determine the amount you will need, the lender will be the one to tell you how much you are eligible to borrow. They might also be able to advise you about the possible interest rate that can be granted on your loan.
Armed with this information and your pre-qualification letter, you can then more confidently negotiate with real estate agents or sellers because, with a mortgage pre-approval, you show that you bear the confidence of a mortgage lender who’ll be able to finance your home purchase.
Getting conditional approval is the next step of the mortgage process, and this time, you have probably already shopped around for the house you want. As in a job application wherein you are eligible, your employer wants you to submit further requirements. During the conditional approval stage of the mortgage, the lender will probably ask you for more documentation and further proof of financial capability.
Finally, once you have jumped through all the hoops of the conditional process, your application will either be approved or rejected.
Once you and the lender have crossed all the t’s, you’ll be legally required to start payments on your home loan.
Applying Through Online Mortgage Lenders
Right now, as the world continues to weather the COVID-19 pandemic, the traditional way of getting mortgages through mortgage brokers you meet with is getting more and more unpopular. This has been apparent since the Subprime Mortgage Crisis of more than a decade ago when the business practices of a whole industry were brought to the center stage to account for the causes of the recession.
Today, people prefer online mortgage lenders not just because of the 2008 Financial Crisis. Applying for a mortgage online has just proven to be more convenient and efficient. And now, during a pandemic, online mortgage applications have the bonus of safety from the transmission of the virus.
The Best Online Mortgage Lenders Today
Bank of America is a clear shoo-in for popular online mortgage lenders, the second-largest banking institution after JPMorgan Chase. They are also the eighth largest bank in the world. Their mortgage options are great, especially for first-time homebuyers who might need down payment or closing costs assistance. An existing Bank of America customer can also get a discount on origination fees.
Better Mortgage’s website claims that they neither have lender fees nor any commission (really!) so that they can eliminate fees, unnecessary steps, and time-wasting appointments. If you’re worried about encountering a hitch, a good thing about their services is you can still get help from a human when you need it. Just take note that FHA, VA, and USDA loans are unavailable if you apply through Better.
With Fairway, you might have to go through the whole application procedure to determine what rates and fees they offer, as these are not advised online. However, you might appreciate their mobile application that can give you results in just 10 minutes, all done through your smartphone.
Although you might be charged a fee for application, Guaranteed Rate is an attractive option for people doing their best to social distance during this pandemic. With Guaranteed Rate, you can have the option to upload sensitive documents and digitally sign necessary forms securely. Pre-approval can also take as fast as 15 minutes if reviews are to be believed. Guaranteed Rate is a great choice for people looking for a refinancing service as long as their mortgage is not a USDA loan.
LoanDepot is one of those online lenders that also have a stable presence in several brick-and-mortar offices. They also like to reward loyalty by reimbursing the appraisal fees of a refinance for a returning customer. With LoanDepot, you can apply for most of the mortgage loan types except if you are buying rural real estate and are looking to purchase through a USDA loan.
This online lender is a solid preference for borrowers who like a speedier mortgage closing process. Movement Mortgage is 100% owned by a nonprofit supporting a network of free tuition public charter schools. They have a wide selection of mortgage products, making them a go-to option despite the glaring lack of information on their website. According to Time’s NextAdvisor, they have the least number of complaints filed with the Consumer Financial Protection Bureau.
Reali Loans’ website claims that the average Reali Loans customer saves $20,000 over the life of their loan compared to competitors, and there might be some truth in that. This online lender can give customized rates depending on your profile, but only if you live in the 12 states; they can operate in: Arizona, California, Colorado, Florida, Georgia, Illinois, Michigan, Oregon, Pennsylvania, Texas, Virginia, and Washington.
In 2015, Quicken Loans, the largest retail lender in the U.S., ambitiously announced that their newest brand, Rocket Mortgage, only needs 8 minutes of your time to let you know if you are approved for a loan. They say that it only takes 8 minutes for a space shuttle to reach orbit, hence the name “Rocket Mortgage.” Quicken Loans has since backed down on this claim. However, Rocket Mortgage remains a popular choice for people’s preferred online mortgage lenders due to the fully digital experience they can serve. Borrowers can even go through the whole process through their smartphones!
Online Application During The Pandemic
The main hurdle that would probably discourage people from using an online lender is the privacy concern. Especially now, when news of hacks and data breaches are heard on the daily, it can be hard for some to feel at ease submitting sensitive private data over the internet, even for as important a matter as a mortgage application. Still, it is up to the customer to decide based on their understanding of the risk factors and own personal needs.
As you might protect your credit card by keeping it safe from the prying eyes of would-be identity thieves, you can also do your own due diligence when applying for online mortgages. You can compare and contrast what lenders offer online and offline.
When it comes to mortgages, no one deal will be able to satisfy all. It goes the same for how you would like to experience the mortgage process. When in doubt, we recommend you ask around for friends and family’s opinions if they have tried this kind of service. You might be surprised by what you find out!