The old days of sitting down with a lending agent and poring over multiple pages of documents and having a fairly lengthy conversation about your financial affairs is gone. Thanks to the new technology that is currently used in the lending sector, most or all of application for a mortgage loan can be done online. Quicken Loans has figured out that people are getting used to getting what they want quickly and with the utmost convenience. Their name says it all. Quick loans without the hassle and the public loves it. Although for obvious reasons, this new trend is becoming very popular, is it totally safe? Are there risks for lenders and applicants involved in this process? We’re here to take a closer look at the pros and cons of Push button mortgages.
Big Game Players
We already mentioned the premiere online mortgage lender. Quicken Loans, Rocket Loans leads the pack for issuing these speedy agreements. The Lenda is another popular resource along with Loan Depot and Sofi. Approval is often rendered within twenty minutes of the application, but is this really in the best interest of the lender and the consumer?
The downside of online mortgages explained
Another lender known as 7th Level Mortgage has a CEO that makes some points worth considering. There are certainly drawbacks associated with online mortgages. Each individual applicant is getting approval in many cases without the big picture on their financial situation. Although many lenders require follow up faxing of evidence documents including tax returns, pay stubs and other miscellaneous pieces, the process is fairly mechanical and there is no face to face interaction. The loans still have to go through an approval process which is handled by an underwriter who goes through the information and makes a final decision based on set criteria of that institution. If there are items missing or if for any reason information that disqualifies the applicant surfaces, their hopes and expectations come crashing down around them.
The price of convenience
In addition to this, you pay a price for such convenience. Just because it’s fast and relatively easy doesn’t mean that you’ll get a good deal. You are likely to pay far more for the loan in processing fees and increased rates. In most cases, it’s better to shop around. While it may take a little longer to get approved for a mortgage through a traditional financial institution, you’ll find that the fees and interest rates are likely to be less. As a society have we become willing to pay thousands more over the life of a loan just to save a little time in the application and approval process?
Danger associated with rapid mortgages There is a scenario under which rapid mortgages could lead to financial disaster for the borrower. In the event that the applicant qualifies for an online mortgage and they would not have for a traditional loan, they may not have the financial stability to see the loan through completion. This could lead to severe consequences including defaulting on the loan, losing the home and devastating their credit scores.
Cons of non human financial transactions
There is a tremendous difference in sitting down with a lending agent and submitting an online application. Some institutions will consider the individual circumstances of the borrower which they may discuss during the interview. Borrowers do not have this opportunity with online applications. In some cases, lenders will point applicants in the right direction with regard to improving credit ratings and finding the most suitable lender to get the best rate.
Are easy mortgage applications really beneficial and safe?
Based on the information that we’ve researched, there are a few benefits to using the new technology. These include convenience and saving time and effort, but from where we stand, these are about it. While a borrower may be able to get approval faster, their financial situation may not be as good as it appears at first glance.
Sometimes a loan application decline is a blessing in disguise. Credit reports do not always show the total financial picture and there may be other payments due monthly that significantly reduce the applicant’s ability to pay. Traditional lenders turn over every stone to get the big picture while online lenders are not in a position to do so. It’s better to avoid getting in over your head financially and waiting until you can truly afford the mortgage payments instead of placing your home and financial health in jeopardy.
Benefits of traditional lenders
Online lenders run marketing campaigns that are intended to draw interested consumers in to complete an application. This is not to suggest that they are unscrupulous, but they are running a business and customers fuel their bottom line. They are well aware of the fact that people who have had some issues with their finances and who may not qualify for a traditional loan are more likely to visit them for a chance at financing. Some even offer loans for people who do not have perfect credit, but the rates are based on credit scores with most loan programs. They will not direct the consumer towards other loan programs which may be more beneficial for them. If the applicant qualifies for their program, they will proceed with the loan contract without offering counseling that would serve the best interests of the client down the road.
Securing a push button mortgage by going with an online lender usually ends up costing the borrower thousands more in fees and interest. The question has been asked many times, is it safe? It is safe in the sense that your information is carefully protected in most online environments, but it may not be totally safe for the health of your finances. If you are well able to make the payments and have resources to give you the confidence that it will not be a problem in the months and years to come, you are probably going to be okay. If there is any question about your financial stability then you are probably gambling with your financial future by going with this option.