When it comes to personal finance, you can do just about anything online — including refinancing your mortgage. Not only are existing lending institutions jumping to offer their customers virtual options, more and more online-only mortgage lenders are arriving on the scene daily. Since online commerce is the new norm, homeowners looking to refinance want a less intimidating, more efficient borrowing experience. But what can they really expect from online lenders?
We live in a world that craves instant gratification, and online lending institutions are stepping up to provide it. Online refinancing offers an expedited process — often taking just a few hours to progress from securing a rate to being contacted by a loan officer with the information you need to move forward.
Not only is it quicker, refinancing through an online lender is far more convenient. The majority of the process can be completed online and at your own convenience — everything from the initial application to scheduling your appraisal. There’s no need for multiple in-person meetings, saving you both time and energy.
The lower rates don’t hurt either. Online lenders often undersell traditional mortgage brokers on rates, fees, and closing costs. Thanks to the absence of overhead fees (e.g. multiple offices, staff, etc.), their costs are much lower. This allows the lender to pass those savings on to you.
Any time you’re dealing with e-commerce, there’s an increased risk of fraud, scams, and illegal business practices. Luckily, proper groundwork can keep you from falling prey to con-artists. When refinancing, never pay money for a pre-approval or quote! Most lenders charge an application fee, but it’s not owed until later in the application process.
While the mortgage business is highly competitive, advertised rates that are drastically lower than what other lenders are offering are highly suspicious. Some unscrupulous online lenders will try to lure you in with exceptionally good terms. Once you’ve filled out an application, they’ll tell you that the introductory rate is no longer available, but there are other rates you might be interested in. This is not only incredibly frustrating, it’s also illegal. If you encounter a fraudulent lender, please notify your State Regulatory Board, Attorney General, and the Better Business Bureau.
Finally, when filling out an application online, there’s always a possibility that the data you submit might be stolen. However, it’s highly improbable. You’ll know a website is secure when the URL in the address bar begins with "https," rather than just "http." Depending on your browser, you may also see an icon resembling a padlock in the closed position.
While you can never be completely invulnerable, there are a few surefire ways to protect yourself and your personal information.
Start by using a reputable lender. Ask friends, family, and colleagues for recommendations. Carefully read through consumer reviews of any lending institution you consider. Be wary of companies you’ve never heard of. If you don't know what their track record is or how they do business with customers, how can you be sure they’re on the ball?
Verify that your lender is certified by searching their website for their NMLS (Nationwide Mortgage Licensing System) number. You can also inquire to see if they’re a member of the Online Lenders Alliance, a trade association whose members have agreed to abide by a list of industry best practices. Some major lenders may not belong, but membership is a good sign when dealing with an unfamiliar smaller lender.
Be sure the lender supplies you with federally regulated forms, including the Loan Estimate and Closing Disclosure forms, as these are designed to protect you from fraudulent lending practices.
When shopping online for a mortgage refinance, you’ll find that the convenience and efficiency can make your life a lot easier. However, if you don't take the necessary precautions, it can end up coming back to bite you. As long as you use common sense and ask plenty of questions along the way, your online mortgage refinance is sure to be successful.