One way to save money when buying a home is by getting a mortgage online. You can quickly compare the best rates from online mortgage companies. Then you can begin the pre-approval process to make a serious offer on your dream house.
Getting a mortgage online can be quicker and cheaper than visiting your local bank. You can save time because the application process is digital. Instead of driving across town to deliver loan documents, you upload them from home. The time savings means you can close a few days sooner.
Some online lenders also have physical offices, so you can still speak to a loan officer in person if you want. But you’ll still probably same time because you can initiate the process from home and upload the documents there.
Online mortgages can also be cheaper than local banks, too. This is because online lenders have fewer operating expense. As a result, they can pass on the savings to you with lower interest rates and closing costs.
As with any loan, it’s a good idea to get several rate quotes. Comparing rates helps you find the lowest one. By comparing rates online, you can get several quotes in a matter of minutes. With this trick you can save money and time.
After going through the entire loan process with a local bank myself, I would strongly consider using an online lender for our next loan. Having local access to a loan officer wasn’t as beneficial as expected. We gave them our documents and they passed them onto the corporate office.
Applying online would have saved us the time of scheduling meetings. And, we might have saved some money had we compared online rates, too.
Table of Contents
- Online Mortgage Companies to Consider
- Tips for Choosing the Best Online Mortgage Company
Online Mortgage Companies to Consider
There are plenty of places willing to lend you money. But you might give these online lenders a look first. With any loan, make sure you compare rates from several lenders. On a $200,000 starting balance, a rate that’s 0.25% lower can save you $10,800 on a 30-year fixed rate term.
You can apply for both new home loans and mortgage refinancing online.
LendingTree is a mortgage broker that allows you to compare rates from multiple lenders for free.
LendingTree first asks a few questions to help determine what your personal credit history is and where you are in the house-hunting process.
For each quote you receive, you can see a breakdown of your estimated fees and monthly payment. What I like is that lenders show you different loan terms, like a 30-year and 15-year fixed rate term.
While you must still go through the pre-approval process with the lender you choose, you can save a large chunk of time by only visiting one website.
Why We Like LendingTree
You can quickly compare quotes from multiple lenders for free. For each lender, you can also see side-by-side quotes for 15-year and 30-year terms.
You might know Sofi as a company for refinancing student loans. They also offer new mortgages and refinance mortgages.
It’s possible to get a loan with a 10% down payment. And, unlike with other lenders, you won’t have to pay private mortgage insurance (PMI) if you choose this option.
Another reason to consider Sofi is that you get a 0.125% discount if you already have a Sofi loan. This is another way you can save on the total cost of your loan.
As a Sofi member, you can also enjoy free career coaching and unemployment protection. If you lose your job, Sofi pauses your loan payments for up to 12 months. Your mortgage goes into forbearance status.
However, interest on your mortgage still accrues during this time. You can either continue paying the interest or roll it into the loan principal when payments resume.
Sofi is a good option if you have a thin credit record. It looks at your work history and future career prospects, as well as your financial history to determine your interest rate. Other mortgage companies might focus almost exclusively on your credit score.
Sofi also considers your credit score, but it’s only one part of the big picture.
What We Like About Sofi
Sofi’s loyalty discount is a nice touch when you have multiple loan types. The unemployment benefits can also help if you lose your job. In addition, if you don’t plan on making a 20% down payment, not having to pay PMI is reason enough to consider Sofi.
3. Rocket Mortgage by Quicken Loans
With Rocket Mortgage, you can also secure your rate for up to 90 days, even if you’re still house hunting. Most online mortgage companies secure your rate for 45 days after you submit an official mortgage application. That’s enough time to complete the closing process after the buyer accepts your offer.
When you live in a hot real estate market, though, you might need more than 45 days to find a home and complete the closing process. Home mortgage rates are gradually rising, so securing a rate before you find a house provides peace of mind.
The 90-day RateShield Approval gives you more time to shop for homes. When you want to make an offer, Quicken sends the buyer a verified approval letter. If rates drop during the 90-day period, you pay the lower rate when your mortgage closes.
Also, Rocket Mortgage services 99% of their loans. Instead of ditching you after your mortgage loan closes to make a quick buck, they’ll take care of you for up to 30 years. That’s unusual for any mortgage lender, whether online or brick-and-mortar.
Why We Like Rocket Mortgage
Securing your mortgage rate for 90 days gives you more time to shop in a competitive real estate market. You pay the lower rate if rates go down during the 90-day period.
We also like the fact that you’re not handed off to a separate company for loan servicing after you take out a mortgage. The 2018 J.D. Power award is another reason to consider Rocket Mortgage.
When you compare mortgage lenders, besides comparing interest rates, you also need to look at estimated one-time fees. These fees are how many banks earn their loan income before transferring your loan to a servicing company.
As a direct lender, Lenda offers competitive rates and tries to keep their loan fees to a minimum. In addition, Lenda uses Notarize to offer digital notary services. That can make the application process simpler by allowing you to use your webcam and microphone to sign documents.
We had to go into our bank to sign notarized documents in front of our loan officer.
At this time, Lenda only offers conventional home mortgages for your primary dwelling and investment properties. You’ll need to use another lender if you need an FHA loan.
Another downside is that Lenda only serves a handful of U.S. states.
Why We Like Lenda
Lenda is a direct lender, which means they issue the loan money themselves if they approve your application.
Also, with Lenda’s digital notary service, the entire loan process can occur online. If you need a mobile notary, Lenda dispatches one to your current location.
Read our Lenda review to learn more about their online mortgage application process.
5. Guaranteed Rate
Some online mortgage companies are online-only. If you still want to enjoy local access during the approval process, you can try Guaranteed Rate. It has more than 200 physical branches across the United States.
With their Digital Mortgage option, you don’t have to visit a local office to start the loan process.
It’s possible to get 15-year and 30-year fixed rate terms for conventional, FHA and VA loans. Adjustable rate terms are available if you can pay off your loan in seven years or less.
Why We Like Guaranteed Rate
You can apply online or visit a local branch. They offer conventional, FHA and VA loans for new purchases and refinancing. Applying online via the Digital Mortgage helps reduce the lender fees, too.
6. Costco Mortgage
For one of my LendingTree quotes, estimated lender fees were $1,433. Even with the basic Gold Star membership ($60 per year), paying $650 in lender fees is half that cost. Those savings can be the equivalent of one monthly payment.
Getting rate quotes is similar to the LendingTree process. You submit your information on the Costco website. Then, up to four lenders provide a rate quote. Don’t forget to mention you’re a Costco member to secure the member discount.
It’s possible to get a Conventional, FHA, Jumbo or VA loan through Costco Mortgage.
What We Like About Costco Mortgage
With Costco Mortgage, you know upfront the maximum you will pay in lender fees. These are fees the mortgage company charges, such as application, underwriting and process fees. While you still have to pay third-party fees like title insurance and appraisal fees, you can save money.
Costco partners with notable national lenders, so you can get a competitive interest rate too.
7. Ally Bank
We already like Ally Bank for its industry-leading money market rates. You might also like its home mortgage rates. Those rates can be lower than other online lenders. As always, get quotes from at least two lenders to see which one is better for you.
If you’re a first-time homebuyer, Ally also offers Fannie Mae’s HomeReady program. This program helps low and middle-income households reach the dream of owning a home. You only need a 3% down payment (vs. 3.5% with an FHA loan). These loans can also be easier to qualify for than FHA loans because there aren’t any geographic restrictions.
What We Like About Ally Bank
Ally offers the standard fixed and adjustable rate mortgage terms. If you qualify for a Fannie Mae HomeReady mortgage, Ally can be a friendly lender.
Want to buy investment properties? PennyMac offers origination fee discounts on investment property loans. You can get quotes for your new primary residence, too.
In all, PennyMac offers these loans:
- Investment property
- Jumbo loans
After submitting an online application, you will talk to a team member on the phone to continue the application process. But, you can submit your documents online for a fast underwriting process.
What We Like About PennyMac
Well-qualified buyers might like exploring PennyMac’s investment property loan options. Its loan terms can be better than other lenders offer for buying rental property.
Tip: Consider buying single family rental homes from Roofstock.
Better offers many different purchase and refinance mortgage loan types. One nifty perk is its $1,000 price match. If another lenders offers a lower price in three days, it’ll pay you $1,000.
You can pre-qualify and lock in your rate within three minutes. After this first step, Better assigns you a loan officer to guide you through the process.
Also, Better tries to keep its fees to a minimum. Its agents don’t work on commissions, which means the lender fees should be lower than commission-based lenders.
After pre-qualifying, you receive a three-page report listing the different loan fees. Other online mortgage companies also offer this document. Go ahead and compare Better’s rates to other lenders to see which one has lower fees.
What We Like About Better
Better processes all applications online, but you can also call its customer support team for help. The $1,000 price match is another reason get a quote from Better.
We also like that Better has an easy-to-use website. It has plenty of videos to explain the confusing parts of getting a mortgage, too.
If you’re looking to refinance your home, consider loanDepot. After you refinance with them once, they will waive lender fees and reimburse you for the appraisal fee on any future refinances through them.
When we refinanced our mortgage a few years ago, the refinancing fees erased some of our interest savings. Still, as with all loans, you should compare interest rates and lender fees with other providers.
LoanDepot isn’t just for refinance loans, though. It offers purchase mortgages, too.
Like several other online mortgage companies, loanDepot agents don’t work on commission. Their duty is to choose the mortgage that’s the best option for your purchase.
Local branches across the United States offer in-person support as well.
What We Like About loanDepot
Not having to pay lender fees or appraisal fees reduces the costs to refinance your mortgage.
And, homebuyers from all 50 states can get a mortgage with loanDepot. We also like that agents don’t work on commission.
11. First Internet Bank
First Internet Bank has the best quote process I’ve seen. By entering your home purchase details into the rate checker, you can get a quote in about one minute. At least, that’s how long it took me.
The quote is one of the most comprehensive I’ve seen without submitting an actual application. I see a detailed list of lender fees and third-party fees that all fall into the closing costs category.
It’s important to note these are all estimated charges and you won’t get an accurate list of fees until the underwriting process begins. This uncertainty is standard with every mortgage lender. But, it’s nice to see an entire estimate without having to provide your contact information.
First Internet Bank offers conventional and FHA loans with fixed or variable interest rates.
It also does a good job of adding transparency to the online mortgage process. You can see its loan expert team on the website and even chat live with them.
What We Like About First Internet Bank
You can get a full quote estimate without having to create an account. And, you can chat with a loan expert.
If you happen to live in central Indiana, you can also apply for a home construction loan online.
If you qualify for USAA membership, you can’t ignore its online mortgage options. With its real estate rewards network, you get cash back based on the purchase price. For instance, buying a $250,000 house gives you a $1,250 cash back reward.
You can get a conventional or VA loan through USAA. In lieu of an FHA loan, you can get a “Conventional 97” loan if you’re a first time home buyer. You can qualify for this loan if you haven’t had one in the past three years. And, you only need to make a 3% down payment.
In addition to helping you find an agent, USAA also assigns you a real estate rewards advocate. Your advocate can help guide you through the mortgage and rewards process.
What We Like About USAA
USAA is a recurring favorite for military members and their families. The cash back rewards help defray any closing fees you pay.
Tips for Choosing the Best Online Mortgage Company
There’s a lot to learn when getting a mortgage and picking the best lender. Because you’re making a large purchase and potentially making payments for 30 years, choosing the wrong lender can cost you thousands of dollars in fees and interest.
Even paying 5% instead of 4.75% on a $200,000 starting balance for 30 years costs $10,000 more. You don’t feel the pinch when you only pay $30 more each month. But, you might cringe when you see the total interest paid estimates when you compare rates.
Compare Interest Rates to APR
When you get a mortgage quote, you will see two different rates: Interest Rate and APR (annual percentage rate). You probably need to pay more attention to the APR since that’s the more realistic rate. For example, one loan quote I have is a 4.875% interest rate and a 5.167% APR.
If I borrow $200,000, the annual interest rate is 4.875% for the life of the loan. The APR includes broker fees, closing costs and lender credits you don’t pay upfront
These add-on fees might be flat-rate or proportional to the amount you borrow. If you don’t pay these fees upfront, then you pay for them over the life of the loan.
To lower your APR, you can pay more of these add-on fees upfront. You might also consider buying points to reduce your interest rate.
Each point costs 1% of your loan balance. Most experts recommend only buying points if you plan on having your mortgage for at least six years. This six year mark is the breakeven point for most borrowers to start saving money from buying points.
As a side note, not every lender lumps the same expenses into the APR. Some lenders include more than others. To the best of your ability, try to get an itemized list with each lender quote. This gives you a more accurate projection of what your APR will be.
Consider Getting a Shorter Loan Term
Besides comparing interest rates and APRs for 30-year mortgages, also look at short loan terms. The most popular alternative is a 15-year mortgage. Some lenders also offer 10 and 20-year terms.
With shorter terms, you have a higher monthly payment and a lower interest rate. When comparing 15-year and 30-year loans, you’ll see you also pay a lot less total interest on a 15-year loan because you pay off the loan in half the time.
Here’s a sample quote I have for a $250,000 mortgage:
- 15 years at 4.62% APR: $96,920 total interest paid
- 30 years at 5.15% APR: $235,948 total interest paid
If you can afford a $600 higher monthly payment, getting a shorter loan term is well worth it. Even if you go with a 30-year mortgage, you can still make extra payments to repay your loan early and save on interest.
What’s the Difference Between Pre-Qualification and Pre-Approval?
There are actually three different steps to the mortgage application process:
To provide an initial quote, most online mortgage companies only require pre-qualification. This is to determine how much house you can afford, and the task takes less than five minutes.
You only give basic details like your household income and the purchase price of your home. During this stage, the lender doesn’t check your credit report.
When you want to submit an offer to buy a house, you have to get pre-approved. In this stage, the lender checks your credit report. You also have to submit proof of income to verify your application information. Based on this information, the lender can give you an official approval letter you can hand to the buyer. And you might be able to lock an interest rate.
After the buyer accepts your offer, the final stage is seeking official loan approval. In this step, the lender finalizes your loan amount and the actual interest rate and APR.
While you can get an accurate estimate when you pre-qualify or get pre-approved, the precise rate isn’t possible until you know the exact home purchase price and your exact down payment amount.
Improve Your Credit Score To Get the Best Rate
To qualify for a conventional mortgage, most lenders require a credit score of at least 620. For an FHA loan, you only need a 580 credit score. Having a higher score when you apply improves your approval odds. And, you may qualify for the lowest current interest rate.
Also, don’t apply for any new credit if you’re currently applying for a mortgage. Otherwise, you may have to restart the underwriting process to determine if you still qualify for your initial rate quote.
You can check your credit score for free on Credit Karma from two different credit bureaus. However, if you’re not sure if your score is high enough to qualify for a mortgage, it’s worth paying for a one-time score from FICO.
You can purchase a mortgage-specific score from one credit bureau ($19.99) or all three ($59.99). To get the most accurate picture of your credit, spring for all three, as the credit report from each bureau may be slightly different.
If your score needs a little help, consider creating a “credit builder account” using Self Lender. Each month, you lend money to yourself.
Your monthly payments deposit into an interest-bearing bank CD account. Those payments show up on your credit report. When your loan term ends, you withdraw the cash.
Self Lender reports that some users have seen their score increase 40 points in six months. This is possible because Self Lender reports your monthly payments to the three credit bureaus.
Have you applied for an online mortgage? Which company did you use?