Online Mortgage Lending Explained

You've seen the ads on TV. You've heard people talking about it. You've even encountered the websites when surfing the Internet. It's known as online mortgage lending, and it can help you find a home loan while saving time and energy in the process.

But what is online lending and how does it work? Is it safe? And how much of the process actually takes place on the Internet? These are common questions among mortgage shoppers, and rightfully so. Here's what you need to know about online lenders and the services they offer.

Online Lenders - What's In a Name?

The first thing you need to realize is that different lenders use the word "online" in different ways. For example, one company might claim to offer online mortgage lending services when they are actually just a regular "bricks and mortar" lender with a basic company website. Other companies, such as LendingTree and E-Loan, truly specialize in Internet lending and offer a variety of web-based services to back that up.

When I refer to online mortgage lenders in the context of this article, I'm referring to the latter example -- I'm talking about the new breed of home loan websites.

How the Process Works

It's also important to realize that only a certain part of the lending process takes place online. In most cases, it's just the "front end" of the transaction that happens through the website. This includes the mortgage application and the initial review by one or more brokers.

To get the ball rolling, you would visit the company's website and fill out a form with some basic information about (A) yourself and (B) the type of loan you want. After that, you'll typically get email offers from lenders or brokers, and you can then review those offers to see which one has the best terms.

Keep in mind that the offer is not an actual loan approval, and the terms presented will depend on your level of qualification (income, credit score, etc.). This is something that often confuses people about online mortgage lending websites. They fill out the form and they receive several offers from the lenders on the other end, and they think: "Wow, I just got approved for a loan!" But this is not the case.

After the initial online application / review, you will still go through an in-depth financial review, wherein the lender looks at your current income, debt levels, credit score, etc. The final approval comes after all of that ... and after you have found a home you want to buy.

Related articles:

• How to get mortgage quotes from the web
• How to protect your identity during the process

So let's sum up what we have discussed in this lesson:

Today, there are some companies that specialize in the online lending process and offer a variety of web-based tools. Getting mortgage quotes online can save you time and money. In most cases, only the initial steps of the process take place on the Internet, and this will be followed up with phone calls, emails and possibly even an office visit to a local broker or lender's office.

During the online mortgage lending process you should also take certain steps to protect your identity (see the second link provided above for more on this). If you would like to get started with the quote process, refer to the yellow box at the top of this blog.