Online Mortgage Lenders: The Fleece is in the Fine Print
Digital Mortgage Application! Pure Online Experience! Get Pre-Approved in Minutes!
These are some of the headlines that many large online mortgage lenders are touting these days. But with some lenders, the headline should read, “Get Ripped-Off Fast!” Please remember that although their technology can be slick and efficient, it can also be programmed to be highly profitable for the mortgage lender and not in the best interest of the mortgage borrower. Make sure you dig into the details and read the fine print before you start a mortgage application.
Beware of paying points
In most cases, paying points is not a good idea. As of the date of this article, a quick check of a very large on-line mortgage lender showed an advertised interest rate with 2.125 in discount points. Many traditional lenders can offer that same rate with no points. For a $200,000 loan, that equals an extra $4,250 in closing costs in addition to all of your standard costs. This is not a very competitive offer.
What are points?
In short, a discount point is a fee paid to the lender to lower your rate or provide a “discounted” rate. One point is equal to 1% of your loan amount so $2,000 for a $200,000 loan. There are some rare cases where paying points may be a better idea than getting a -0- point rate but these cases are few and far between. Since rates are not the same from one lender to another, it is very possible for a lender to charge points to provide a rate that may be offered with no points at another lender.
Why would a lender charge points?
In many cases, it is simply to make more money. They may have an interest rate with no points, but that rate could be a half of a percent higher than the rate quote with over 2 points.
In short, read the fine print. Get a Loan Estimate. Ask if there are discount points being charged for the rate that is being offered. Ask what the zero point rate is. And remember, this is one of the largest and most important purchasing decisions of your lifetime, take your time and talk to an expert. Complete the form below or call 708-531-8388 for a custom quote to compare to other lenders.