IN THIS CHAPTER
Looking at some safe surfing ideas
Checking out mortgage sites
Computers, tablets, and smartphones are amazing tools. Used wisely, they may save you time and money. However, like other tools (such as a hammer), used incorrectly (remember the last time you whacked your finger with a hammer?) or for the wrong purpose (tapping a glass window comes to mind), today’s technology can cause more harm than good.
Some people have mistaken assumptions about using their computers and tablet or phone apps to help them make important financial decisions. Some believe and hope that fancy technology can solve their financial problems or provide unique insights and vast profits. Often, such erroneous musings originate from propaganda put forth through “fake news” or social media about how all your problems can easily be solved if you just have the right app, spend more time on particular websites, and so on.
As computers, technology, and apps continue to proliferate, we take seriously our task of explaining how, where, and when to use the Internet to help you make important mortgage decisions. In this chapter, we highlight key concepts and issues for you to understand as well as list a few of our favorite websites.
Obeying Our Safe Surfing Tips
Before we get to specific sites that are worthy of your time, in this section we provide an overview of how we suggest using (and not being abused by) your mortgage-related web surfing or cure-all app. Specific sites, and especially apps, will come and go, but these safe surfing tips should assist you with assessing any site or app that you may stumble upon.
Shop to find out about rates and programs
The best reason that we can think of to access the Internet when you’re looking for a mortgage is to discover more about the going rate for the various types of loans you’re considering. Despite all the cautions we raise in this chapter, shopping for a mortgage online has some attractions:
-
No direct sales pressure:
Because you don’t speak or meet with a mortgage officer (who typically works on commission) when you peruse mortgage rates online, you can do so without much pressure. That said, some sites and apps are willing to give out specific loan information only after
you reveal a fair amount of information about yourself, including how to get in touch with you. However, on one site where you must register (with all your contact information and more) to list your loan desires, take a look at how the site pitches itself to prospective mortgage lenders: “FREE, hot leads! Every lead is HOT, HOT, HOT because the borrower has paid us a fee to post their loan request.”
Although the advantages of online shopping are many, being savvy and discrete with who and how you contact prospective lenders is worthy of a cautionary reminder. You may think you’re the one shopping, but on many sites and apps, you are the one being “sold” to aggressive marketers of loan products that may not be what you need. Worse yet, many of these unscrupulous hucksters don’t even have the loan products and terms they tease on their website and their real goal is to lure you in and then turn around and sell your information to others. You’ll soon find yourself inundated with unwanted emails, texts, and even phone calls.
-
Shop when you like:
Because most people work weekdays when lenders and mortgage brokers are available, squeezing in calls to lenders is often difficult. Thus, another advantage of mortgage Internet shopping is that you can do it any time of any day when it’s convenient for you. Just be careful that you don’t provide personal information to anyone unless you’re sure you want him to contact you.
Quality control is often insufficient
Particularly at sites where lenders simply pay an advertising fee to be part of the program, you should know that quality control may be nonexistent or not up to your standards. “We make your loan request available to every online lender in the world,” boasts one online mortgage listing service. We don’t know too many borrowers willing to work with just any old mortgage company! Some sites don’t check to see whether a participating lender provides a high level of service or meets promises and commitments made to previous customers.
Again, if you’re going to go loan shopping on the Internet, examine each site to see how it claims to review listed lenders. One site we’re familiar with claims to demand strict ethics from the companies it lists — no lowballing or bait-and-switch tactics — and says it has removed several dozen lenders from its list for such violations. That makes us think that the site should do a better job of screening lenders upfront!
Beware simplistic affordability calculators
Be highly skeptical of information about the mortgage amount that you can afford. Most online mortgage calculators simplistically use overall income figures and the current loan interest rate to calculate the mortgage amount a borrower can “afford.” These calculators are really spitting out the maximum
a bank will lend you based on your income. As we discuss in Chapter 1
, this figure has nothing to do with the amount you can really
afford.
Such a simplistic calculation ignores your larger financial picture: how much (or little) you have put away for other long-term financial goals such as retirement or college educations for your children. Thus, you need to take a hard look at your budget and goals before deciding how much you can afford to spend on a home; don’t let some slick Java-based calculator make this decision for you.
Don’t reveal confidential information unless …
Suppose that you follow all our advice in this chapter, and you find your best mortgage deal online. You may find yourself solicited to apply for your mortgage online as well. However, as you gather your confidential financial documents, you may have an unsettling feeling and wonder just how safe and wise it is to be entering this type of information into an Internet site.
We applaud your instincts and concerns! Here’s what you should do to protect yourself:
-
Do your homework on the business.
In Chapter 7
, we suggest a variety of questions to ask and issues to clarify before deciding to do business with any lender — online or offline.
-
Review the lender’s security and confidentiality policies.
On reputable lender websites, you’ll be able to find the lender’s policies regarding how it handles the personal and financial information you may share with it. We recommend doing business only with sites that don’t sell or share your information with any outside organization other than for the sole purpose of verifying your creditworthiness needed for loan approval. Be sure to choose secure sites that prevent computer hackers from obtaining the information you enter.
If you’re simply not comfortable — for whatever reason — applying for a loan online, know that most online mortgage brokers and lenders offer users the ability to apply for their loan offline (at an office or via loan papers sent through the regular mail). They may charge a slightly higher fee for this service, but if it makes you feel more comfortable, consider it money well spent.
Be sure to shop offline
You may find your best mortgage deal online. However, you won’t know it’s the best unless and until you’ve done sufficient shopping offline as well. Why shop offline? You want to be able to see all your options and find the best one. Online mortgage options aren’t necessarily the cheapest or the best. What good is a quote for a low mortgage rate that a lender doesn’t deliver on or that you won’t qualify for because of your specific property, location, or financial situation?
Remember:
Personal service and honoring commitments is highly important.
You may be able to save a small amount of money by taking a mortgage you find online. Some online mortgage brokers are willing to take a somewhat smaller slice of commission for themselves if they feel they’re saving time and money processing your loan via an online application. As we discuss in Chapter 7
, mortgage brokers’ fees do vary and are negotiable. Some online mortgage brokers are willing to take less than the industry standard cut (1-plus percent).
But just because you’ve been offered a slightly better rate online, you shouldn’t necessarily jump on it. Local lender or mortgage brokers may negotiate with you to make themselves competitive. However, you have to give them the opportunity to do so. Other things being equal, go back to the runner-up on price and give
them a chance to meet or beat your best offer. You may be pleasantly surprised with the results.
Mortgage websites and apps are best used to research the current marketplace rather than to actually apply for and secure a mortgage. The reason: Mortgage lending is still largely a locally driven and relationship-based business that varies based on nuances of a local real estate market.
Beware of paid advertising masquerading as directories
Some sites on the Internet and apps offer “directories” of mortgage lenders. Most sites charge lenders a fee to be listed or to gain a more visible listing. And, just as with any business buying a yellow pages listing or Google ad, higher visibility ads cost more. Here’s how one online directory lured lenders to advertise on its site:
Sure, our basic listing is free, but we have thousands of mortgage companies in our directory. A free listing is something like a five-second radio advertisement at 2:00 a.m. on an early Sunday morning. To make your listing really work for you, you must upgrade your listing.
Upgrade,
here, is a code word for pay for it!
For example, a “gold listing” on this site costs $600 per year for one state and $360 for each additional state. What does that amount of money get the lender?
A Gold Listing sorts your company name to the top of all listings. In addition, the Gold Listings receive a higher typeface font and a Gold Listing icon next to their name.
Then there is the “diamond listing,” the “platinum listing,” the “titanium listing,” and you get the idea.
On another directory site, you can find a “directory enhancement program,” which for $125 per year enabled a lender to buy a boldface listing and for $225 per line per year place descriptive text under the listing. Thus, prospective borrowers visiting these sites are looking at the mortgage equivalent of an online Yellow Pages advertising directory rather than a comprehensive or low-cost lender directory.
If you’re considering using an Internet site or app to shop for a mortgage, first investigate the way the site derived the list of lenders. If the site isn’t upfront about disclosing this information, be suspicious. Do some sleuthing like we did; click on the buttons at the site that solicit lenders to join the fray. Here you can
find out how the site attracts lenders and you may also find the amount lenders are paying to be listed.
Perusing Our Recommended Mortgage Websites
In addition to seeking only the highest-quality sources for you, dear reader, we don’t want you wasting your time on a wild goose chase for some unreliable website or app that’s here today and gone tomorrow. In this section, we recommend a short list of our favorite mortgage sites. Yes, many more sites and apps are out there, but we don’t want to bore you with a huge laundry list of mortgage-related sites. And, please remember as we discuss in Chapter 7
, mortgages are distributed through numerous types of mortgage lenders and brokers. The Internet and the app craze are just simply another way that these players can reach prospective customers.
Useful government sites
Various government agencies provide assistance to low-income homebuyers as well as veterans. The U.S. Department of Housing and Urban Development’s website (see Figure 8-1
) at
www.hud.gov
provides information on the federal government’s FHA loan program as well as links to listings of HUD and other government agency–listed homes for sale (foreclosed homes for which the owners had FHA loans; see
https://portal.hud.gov/hudportal/HUD?src=/topics/homes_for_sale
). On this site, you can also find links to other useful federal government housing–related websites.
Also, if you’re a veteran, check out the VA’s website (see Figure 8-2
;
www.benefits.va.gov/homeloans
) operated by the U.S. Department of Veterans Affairs. In addition to information on VA loans, veterans and nonveterans alike are eligible to buy foreclosed properties on which there was a VA loan (see the website
http://listings.vrmco.com
).
The Federal Citizen Information Center (
www.pueblo.gsa.gov/housing.htm
) offers numerous free and low-cost pamphlets on home financing topics such as securing home equity loans, avoiding loan fraud, finding mortgages and home improvement loans to make your home more energy efficient, and qualifying for a low down payment mortgage. You also want to know the required lender disclosures so you know what the lender must tell you and what it means.
Fannie Mae (
www.fanniemae.com
) has many resources for mortgage borrowers and homebuyers. In addition to helping you find mortgage lenders for home purchases, improvements, or refinances, the site can also turn you onto helpful worksheets and counseling agencies. Freddie Mac (
www.freddiemac.com
) offers similar (although not as extensive) resources.
Finally, if you’re trying to fix your problematic credit report, don’t waste your money on so-called credit-repair firms, which often overpromise — and charge big fees for doing things that you can do yourself. In addition to following our credit-fixing advice in Chapters 2
and 3
, also check out the Federal Trade Commission’s website (
www.ftc.gov
) for helpful credit-repair and other relevant advice regarding borrowing.
Mortgage information and shopping sites
HSH Associates (
www.hsh.com
) is the nation’s largest collector and publisher of mortgage information. If you’re a data junkie, you’ll enjoy perusing the HSH site, which includes up-to-date mortgage rates and graphs showing recent trends (see Figure 8-3
).
Some lenders do choose to advertise online at HSH’s website and you can obtain their rates through the website’s ad links.
Many online mortgage brokers and lenders provide rate quotes and assist with your loan shopping. The interactive features of some sites even allow prospective borrowers to compare the total cost of loans (including points and fees) under different scenarios (how long you keep the loan and what happens to the interest rate on adjustable-rate mortgages). Interpreting these comparisons, however, requires a solid understanding of mortgage lingo and pricing.
Two other sites that we like are
www.bankrate.com
and
www.realtor.com
. Bank Rate’s site offers lots of information and perspectives on many types of consumer loans including mortgages. Realtor.com’s Mortgage section is more focused on mortgages. On both sites, you can shop for specific mortgages.
