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Online Mortgage Advice for Best Mortgage Rate

If you’re looking for the best mortgage rate, online mortgage brokers and lenders provide a convenient method by which to obtain home financing, and may even be able to get you a lower interest rate than you might find at your local bank or lending institution. BUT BEWARE! If you choose the wrong online mortgage broker or lender, or even if you choose a good one, you could be signing a death warrant for your personal finances and your good credit rating.

I dislike having to make such a negative statement, but it is a sad fact that disclosing personal and financial information over the internet can be like playing Russian Roulette. Most companies doing business on the internet are both honest and reputable, but some are not, and the financial arena has attracted the wolves, because that is where the money is. This warning applies not only to online mortgage brokers, but to all types of online lending and financial institutions.

This does not mean that you should completely avoid doing business on the internet, or even that you should avoid online mortgage brokers. Use common sense when seeking the best mortgage rates, avoid being gullible by refusing to jump at exceptionally generous offers, and do (or don’t do) the following:
  1. Never, EVER, respond to ANY email solicitation for any sort of financial transaction. The majority of email solicitations are bulk mailings of a highly dubious nature. Some of these simply seek to confirm that your email address is active by attempting to gain a response from you, after which your address will be sold to other email solicitors. Others are more sinister phishing expeditions. Phishing is a tactic whereby you are coerced into providing personal information which may then be sold to other lenders or used for the purpose of identity theft.
  2. If you receive an email from a known institution or one with which you routinely do business that solicits financial or personal information, you should call the institution or log on to your account THROUGH THEIR WEBSITE. DO NOT use any link within the email, which could lead to a fraudulent website masquerading as a legitimate financial institution. Find out whether the financial institution has actually solicited this information and report the suspicious activity to them if they have not. NO BONA FIDE FINANCIAL INSTITUTION WILL EVER SOLICIT PERSONAL INFORMATION THROUGH AN EMAIL LINK; they will instead ask you to go to their website independently to perform such a transaction.
  3. Read Home Buyer Beware by Consumer Reports® WebWatch. Follow this by reading Privacy:  Tips for Protecting Your Personal Information from the Federal Trade Commission. These are must-read articles that will help you avoid questionable lenders and safeguard your personal information.
  4. Invest in a good spyware blocker to help secure personal financial information on your computer. A firewall is also a good idea, but start with a spyware blocker to prevent keystroke logging, a method by which information you enter into your computer can be transmitted to a remote location without your knowledge. We use Spybot Search&Destroy, an absolutely free spyware blocker which just happens to be one of the best available, and update it regularly.
  5. Insure that any lender or online mortgage broker with which you choose to make inquiry or do business either has a brick-and-mortar location (physical office with address and phone number) or is VERY WELL KNOWN. Check with the Better Business Bureau® to determine whether the lender is legitimate and whether they have any complaints lodged against them. It is a good idea to choose a licensed lender with an established history who belongs to one or more lending associations and can provide verifiable references.
Having been properly cautioned about at least some aspects of internet security relating to online mortgage brokers and lenders, is it truly to your advantage to choose an online mortgage broker over the loan officer at your local bank? Well, yes and no. There are advantages and disadvantages to both online mortgage brokers and local lenders.
  • Mortgage brokers do not actually fund your mortgage themselves; instead, they act as freelance agents to bring borrowers and lenders together. Online mortgage brokers may work with many dozens of lenders. Because they have access to multiple lending sources, you might think that the mortgage broker can procure you a much better deal than your local bank. This is not necessarily true. While an online mortgage broker usually has access to a large number of lenders, the broker is most often paid by the lender, so there may be a tendency to choose a lender with whom they can negotiate the highest fee. A good mortgage broker should negotiate the best mortgage rate and, overall, the best mortgage deal for you, knowing that fair lending practices and client goodwill result in more clients in the long run.
  • It is true that local bankers have better knowledge of situations indigenous to the local housing market than do online mortgage brokers. Unanswered questions relating to the local market or the local economy may delay the processing of an online mortgage application. Larger online mortgage brokers may have regional or even local representatives with whom they can interact to iron out problems quickly.
  • Online mortgage brokers will usually be able to acquire a mortgage much more easily than a bank if you have problems with your credit or if you are seeking to purchase a unique or commercial property.
When selecting an online mortgage broker, ascertain whether the broker intends to charge you a fee. Avoid brokers that charge upfront fees, since there is no guarantee that they can deliver a satisfactory mortgage solution. Ask the broker what services they offer both during and after the mortgage transaction. Ask for a comparison of any mortgage recommendation the broker makes to satisfy yourself that you are getting a loan that is right for you.

Be aware that multiple or frequent credit inquiries can reduce your credit rating, resulting in a less than optimal mortgage solution. If you opt to utilize a mortgage broker, or if you must talk to multiple lenders, you may want to take steps to insure that multiple pulls of your credit records are kept to an absolute minimum.

Authored by Kenneth L. Anderson.  Original article published 4 May 2005, updated 21 February 2006.

Follow links to the right to learn more about online mortgage brokers and lenders offering online mortgage loans, licensed mortgage broker services, mortgage refinancing, home improvement loans, home equity loans and related services. At the left margin, Related Links address topics of interest pertaining to personal finance and money-saving resources. View the Personal Finance SiteMap for a complete list of personal finance and financial services topics.

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