Opinions on online conventional mortgages?

Question

I see a lot of online companies promising extremely attractive rates for conventional loans. Some have even said they do 3.75% with no points, with 740 credit or above. Now, I have talked to lenders in person and everyone tells me that this is fake, its all a lie. I've gotten about the same rate with most lenders in person, between 4.25 and 4.75. Anyone have any experience with these online lenders, any opinions? Can this be true? Its very enticing but it sucks getting your hopes up for something that is a lie and on top of that losing so much time on a contract.

By the way, this is for a 20% down, conventional loan, for my primary residence, not for investment.

Benjamin Fine · Answer

@Ronny Gonzalez

Catching this late but if you want to figure out whether the rates are real from any lender you should get a loan estimate (LE) before you're getting ready to lock.  The LE is a CFPB mandated disclosure that forces lenders to accurately document all the fees associated with the loan. This is great for consumers like you as it lets you pit lenders against each other and cuts through all of the advertising games and assumptions that go into teaser rates. Once you've negotiated your rate down, you can proceed with the lender with whom you felt most comfortable.

On the topic of the category of "online lenders", the vast majority are websites backed by call centers with lower overhead and commission structures, not technology companies. The lower cost structure can theoretically enable them to offer more competitive rates than your local lender but there are no hard and fast rules here.

Full disclosure, I'm part of the founding team of a venture-backed online lender.

Chris Mason · Answer

It's all about the assumptions. When you meet someone in person, they are assuming your actual reality and quoting you that. People that live and lend in their communities can't really lie about things without consequences, but if you rely on advertising you can.

When you see an online advertisement, they are advertising with assumptions that very few borrowers actually meet, often still with points upfront to boot.

When you see an online advertisement, they are advertising with assumptions that very few borrowers actually meet, often still with points upfront to boot.

Melvin List · Answer

You can get very close to this scenario ALL DAY.  We need a little more information but the rate you are asking about is out there with no points.   I am here in Tampa.

Ronny Gonzalez · Answer

@Benjamin Fine

Thanks a lot for your response. A lot of great info there. I'll make sure to remember this for future transactions. Asking for an LE is an awesome tool to compare lenders.

Nicholas Covington · Answer

@Ronny Gonzalez

As an MLO for an online lender there are definitely benefits over a brick and mortar "face to face." Does everyone get the rates that are advertised? Heck no. Can they get the advertised rate or something better than what they are finding in person? Heck yes.

If you liked to talk, shoot me a request/message and I would be more than happy to answer any questions you might have.

Ronny Gonzalez · Answer

@Chris Mason

@Jason Little

thanks for the replies. Definitely makes sense. I prefer working face to face as well, but i just had that question in the back of my mind since they promise so much. I guess like everything with advertising, you cant believe everything they tell you.

Jason Little · Answer

@Ronny Gonzalez

All of the online quotes assume you have immaculate credit and mass reserves to make you the most qualified buyer of all time. Local lenders work with real people in real life situations.

Opinions on online conventional mortgages?

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