Buying a home today requires no more effort than lifting a finger, thanks to the power of the Internet.
A prospective homeowner with a personal computer and a modem can log on to any one of a half-dozen Internet Web sites and click their way through online tutorials to complete the home buying process.
They can quickly learn how big a mortgage they can afford, compare interest rates and closing costs among lenders, pre-qualify for a loan at the optimum rates, find a community that meets their requirements and then select a home there from among the hundreds of thousands of properties listed online.
Conceivably, the only human interaction involved would come at the closing of the deal.
If current interest rates are not to their liking, a consumer could “tell” a Web site what they’re looking for and then be notified by e-mail when those criteria are met.
Many homeowners got their taste of this digital future earlier this year.
“The key point was the refinancing boom that started in January,” said Alison Berkley, group product manager for Intuit Inc.’s nine-month-old QuickenMortgage Web site (www.quickenmortgage.com).
When mortgage interest rates tumbled to a six-year low, consumers flooded the telephone lines of traditional mortgage originators. Busy signals, long periods on hold and slow responses prompted many to turn to the Internet for advice.
“There were days in January when we had 30,000 to 40,000 visitors and by way of comparison, that’s the amount of calls that some of the biggest lenders get on a busy day,” Berkley said. “Now we’re getting between 500,000 to 600,000 users a month, which is more than double our expectations.
“Consumers have said they find a tremendous amount of value in it,” said Berkley, because they can accomplish “in minutes what used to take them two to three weeks before. And they’ve seen a tremendous cost savings.”
“Shopping” for mortgages is expected to continue to grow as consumers become more comfortable accessing the Internet’s resources via their home computers and as the medium gains acceptance as a secure means of sending sensitive financial data.
But industry participants differ on the outlook for closing mortgages online.
Some, including many of the biggest mortgage originators, contend the average consumer doesn’t have the confidence to close a mortgage over the faceless medium, so a majority of loans will continue to require the aid of a loan officer.
“In five years I would say maybe 10 percent of mortgage origination is done over the Internet and not any higher than that” because of consumers’ skittishness over what is for many the largest financial commitment they’ll ever make, said A.W. Pickel, president of Leader Mortgage Co., in Lenexa, Kan.
And Peter Wissinger, managing director of consumer lending and servicing for Norwest Mortgage Corp. said his company has taken very few applications over the Internet in the four years Norwest has maintained its Web site (www.norwest.com).
Currently, less than 1 percent of new mortgages are completed online, according to industry estimates.
Wissinger said he expects slow growth.
“We think (consumers) will continue to rely on the Internet more as an information source” and they will prefer to meet with a Norwest representative when it comes to the nitty-gritty of closing, he said.
For now, that opinion is in the majority.
But it is universally agreed that the number of consumers who will “shop” for mortgages and other financial data over the Internet will grow exponentially.
Just by logging on to a financial services Web site, a consumer is now bombarded with a wide range of teasers for mortgage finance sites.
QuickenMortgage’s Web site includes up-to-the minute data from 11 lenders, Berkley said. Consumers can fill out a mortgage application online “and get a good faith estimate that includes all costs,” she said.
The Web site also offers links to many other personal financial and mortgage information services and includes a link to a database with more than 600,000 home listings.
Intuit is licensed as a mortgage broker in 46 states and is now eligible to take applications on line and be compensated by the mortgage broker on the closed loan, Berkley said.
QuickenMortgage earns 0.4 percentage point as a fee on the transaction versus the one point that a mortgage broker usually gets. It then passes $225 of its fee to customers as a rebate toward closing costs, according to Berkley: “So that’s one of the reasons we think it’s so popular — the savings.”
Along with QuickenMortgage, E-Loan (www.eloan.com) and HomeShark (www.homeshark.com) are among the most popular multi-lender mortgage Web sites, while American Finance & Investment Inc.’s Loanshop (www.loanshop.com), Countrywide Home Loan Inc.’s Countrywide site (www.countrywide.com), and Chase Financial Corp.’s (www.chase.com) are all examples of lender-maintained sites.
And Fannie Mae’s Homepath (www.homepath.com) offers a step-by-step guide to buying or refinancing a home in eight languages.
Another player expected to make waves in the business is mighty Microsoft Corp., which launched its HomeAdvisor site, in July. Like QuickenMortgage, HomeAdvisor can act as a mortgage broker and collect a fee.
Its performance is being watched closely by everyone in real estate, said Jules Street, of technology consulting firm Killen & Associates. What’s piqued their interest is that Microsoft will make money on advertisements on the site in addition to taking referral and origination fees from its online partners, he said.
