Over the past decade, the Internet has revolutionized the way we conduct business. More and more people are using the Internet to pay bills, to shop, and now to apply for mortgages. In today’s world, consumers in the market to buy a new home can find homes, take virtual tours, apply for and close mortgage loans without ever leaving the comfort of their own homes. But, while all of this convenience is great, applying for a mortgage loan online can be a bit tricky. Here are a few tips that will help you navigate through the online mortgage application process.
The first and probably most important step in applying for an online mortgage is to understand your current financial situation. When it comes to getting a mortgage, the most important aspect of your finances is your credit report. Your credit report contains a detailed history of all the accounts you’ve maintained in the past and chronicles your payment history. It is important to know that many credit reports contain inaccuracies and correcting them is vital to the success of your mortgage application endeavor. You are entitled to one free credit report from each of the three major credit reporting agencies (Equifax, Experian, and Trans Union). To get this report, simply request one online at each of the agencies’ websites.
The second step in applying for an online mortgage is to understand how much you qualify to borrow. The easiest and most efficient way to do this is to utilize the mortgage calculators that are available online. You can find a bevy of calculators on real estate sites as well as mortgage lender and other financial sites. In order to get accurate results using these calculators, you will need to know how much money you make before taxes and how much money you pay out to your other creditors each month. Then, plug in the sales price you think you can afford and let the calculator reduce this down into monthly payments. Using these calculators will also give you a chance to play around with interest rates. This will give you a realistic view of what you can expect to pay each month for the mortgage you choose.
Next, make a list of lenders you wish to review. This list can include traditional lenders that allow applicants to apply for mortgages online as well as web based lenders that lack a traditional brick and mortar presence. The main idea here is to create a list of well-established lenders that you can compare rates and terms. It is best to stay away from newly established mortgage lenders or lenders with weaker reputations as con artists like to utilize the relative anonymity of the Internet to separate you from your cash.
Complete the screening process with the lenders on your short list in order to whittle down your list of lenders to two or three. Most online lenders will ask you to complete some basic information in order to screen out applicants who simply don’t qualify for their mortgage products. This is a good thing since the screening process does not affect your credit rating like hard inquiries do. Plus, it gives you the opportunity to rule out lenders with whom you can’t work with before completing the lengthy application process.
After you have completed the screening process, many online mortgage lenders will send you a list of products you qualify for and their associated interest rates. Now, interest rates may change slightly after you apply, based on your creditworthiness and length of your loan, but you will be able to get a real sense of what the lender has to offer during this period. Interest rates are not the only factor to consider when applying for a mortgage, it is one of the most important, so eliminate lenders from your short list who are not offering as good an interest rate as some of the others.
Next, compare other elements of the mortgage between the remaining lenders. This will include closing costs, prepayment penalties, and other fees assessed by the lender. Obviously, the goal here is to find the most cost effective mortgage solution.
Complete the online application with the lender who is offering the best deal and be sure to get everything in writing. Mortgage loans are much more complicated than other types of loans and having everything in writing ensures that there is no room for confusion. It is important to know that lenders, whether online or not, are required to forward this information to you within two days of the submission of your application. If your lender seems hesitant to forward anything to you in writing, then find another lender.
