What’s Wrong with Online Lenders?

Ben Chenault
Sep 16 · 4 min read

You pay your bills online, bank online, order anything you need for your house or yourself online, and get all of your entertainment online. But you still can’t shop for a mortgage online.

The limitations of internet tools

If you’ve read my posts on internet home search engines or online mortgage calculators, you’ll pick up on a theme for anything to do with home-buying online. The theme is this: If you go online, you’re never going to get the right details, because nobody knows your market better than your local people.

Whether you’re looking for houses, trying to figure out what you can afford, using a mortgage calculator, or anything else to do with the home-buying process, there are just too many nuances for any of the online tools to handle.

Fees

In the real estate market, it’s customary for buyers and sellers to share the attorney fees and title fees — and those fees vary widely. Our company does loans in a couple of different states and the culture is completely different in each. Florida has way higher closing costs and recording fees than Alabama does. It comes down to different customs in different markets.

Lowball estimates

We’ve had a lot of potential clients send us an estimate from an online lender. I’ll take a look and say, “Well, their closing costs are less than ours, but comparing them side by side, you can also see they estimated that your attorney’s fee would be $200. But in our market they’re $950. You can see that their title charges are low, and they estimated really low for your property taxes. All of that will add up to a nasty surprise for you on closing day.”

I’ve had a potential client say to me, “I like this online quote better because the payments are less.” The client couldn’t understand that was because the online lender quoted less on taxes and insurance than I did. Those quotes don’t matter, because when you get to the closing table, the fees are going to be whatever the fees are. That quote, which is really an estimate and not some kind of contract, will be obsolete.

The salient point is this: Lenders can quote you whatever they like for fees.

Fair estimates

As lenders, we get the fun of trying to figure out what everybody’s going to charge you and then giving you an estimate. At Fairway, we like to leave some cushion because we don’t want unpleasant surprises — but not every lender does that. They know they’re not responsible for certain fees. So they will purposely lowball them to make their estimate look better than what you’re going to end up with. There is no regulation for that. They are well within their legal rights to keep on lowballing fees.

For example, they may put the attorney fee at $100 even though they know full well no attorney on the planet will charge only $100. Then you come to the table to sign the papers and suddenly you need $5,000 more than you planned.

You need local knowledge

Another issue with online lenders is you might end up using a small bank in California to get a loan for a house in South Carolina. That bank just can’t have the right information, even if they’re the most honest institution in the world. And you are going to be suffering the consequences, whether they underestimated your fees and costs intentionally or by accident.

The smart choice

Most of the time, clients don’t realize they made a bad choice until it’s too late. You can’t switch lenders a week before closing. When you find out you need $5,000 more than you planned for, you’ll be wishing you had spoken to someone like us.

At Fairway we like to say, “we never close late or ugly.” We’re going to close on time, and we’re going to close with no surprises.

If you have questions about fees, loans, or anything else to do with home financing, hit us up. You can call 205–986–4220, connect with us on social media, or ping our website. We are happy to help you in any way we can.

— Ben Chenault,
Certified Mortgage Planner
NMLS# 130305
MortgageBanc / Fairway Nmls# 2289

Copyright©2019 Fairway Independent Mortgage Corporation doing business as MortgageBanc. NMLS#2289.4750 S. Biltmore Lane, Madison, WI 53718, 1–866–912–4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Business Oversight under the California Finance Lenders Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License. Georgia Residential Mortgage Licensee #21158. Licensed Nevada Mortgage Lender.

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