Internet lenders: Take a pass

I love buying stuff online. Here’s some of the things I’ve bought on the internet recently: a living room couch, a rowing machine and a 10 speed road bike (fully assembled). I trust online buying and hardly ever have any problems.

The one thing I would NOT get online is a mortgage.

About 25% of the buyers that I see use an  internet lender. I specifically recommend against selecting a lender online when I describe the closing process to new buyers.

The advantage of getting a loan online is that the rate is usually pretty low.

There are many reasons not to get a mortgage online. First, almost every time the approval and closing process turns into a semi-nightmare.  With online lenders, there is no single responsible party who can answer questions and resolve issues. The online lenders use a team approach, but usually no one knows what is going on. Our Illinois closing process is kind of quirky compared to other states and funds need to be at closing when it starts, not 10 hours after closing. Online lenders often don’t wire the funds to closing under after the loan is ‘”funded” at closing rather than sending the funds before closing.

If you are near a computer, go ahead and google “best mortgage rate.” Near the top will be Quicken loans, Bankrate.com and Lendingtree. Lendingtree takes you through a series of screens that ask you questions about the loan you are seeking and then suggests some lenders for you. Click here to read some reviews of Lendingtree. They are absolutely scathing. Same here for Quicken loans. Brutal reviews. There are many accusations of pulling credit reports without authorization and endless complaints about lack of communication. Many complain of constant spamming the minute they enter data on the site.

Go ahead and scan through them and I doubt that you will have a warm fuzzy feeling about internet lenders.

My recommendation is to pick a good, local lender referred by someone you trust. The online mortgage market is not ready for prime time. Do you really want to be a beta tester?

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