Imagine sending to strangers, over the Internet, your most confidential information — your address, the ages of your children, the amount of money you earn, your debts, your credit card numbers and, worst of all, your Social Security number.
A few home buyers have gone from simply shopping for interest rates on the Internet to pushing the Send button and applying for mortgages. No hand shaking, no eye-to-eye contact. Just a computer screen and some packages delivered overnight.
Kim and Gar Simers started shopping for mortgages over the Internet a few months ago when they put their home in Chicago on the market. Kim Simers, an ad agency owner, was familiar with shopping on the computer. She had bought gifts on-line and used the World Wide Web in her daily business communiques.
She liked the fingertip access to interest rates and closing costs. But she was slightly nervous about such an arm’s-length transaction.
“Our Realtor was warning us that we’d lose control,” she said.
The Simers, who now live in Orlando, are part of a small group of buyers. About 1.5 percent of home buyers get mortgages over the Internet, according to a recent survey of 50 lenders by Forrester Research, a technology research company in Massachusetts. As more buyers surf the Net looking for houses, the number of on-line borrowers is expected to include 10 percent to 15 percent of all mortgage customers in the next five years, Forrester’s analysts predict.
Internet borrowing has its advantages, like shopping for the best interest rates, said Holly Cherico, vice president of public relations for the Better Business Bureau. But consumers should make sure they know whom they’re dealing with when it’s time to do business, she added.
Cherico advised people to beware of unsolicited mortgage e-mails when navigating the world of on-line loans. The solicitations often are sent by scam artists, she said. Cherico recommended that consumers deal with recognizable companies.
For something as important as a mortgage, borrowers should check with the attorney general’s office or Better Business Bureau in the company’s home state. And they should look for Internet sites that have a seal of approval from a reputable organization, such as the Better Business Bureau, she said.
Cherico also advised checking out the company’s privacy policy on customer information and finding out what the company does with personal information. Do they use it in-house or sell it? Don’t provide any information until you’re comfortable with the situation, she added.
The Simers did not surrender the financial details of their lives over the Internet. Instead, they phoned the information to the mortgage agent who was handling their account. Kim Simers said she thought using the phone expedited the process because it would have taken 15 to 20 minutes to input the data into the computer.
The couple did hit a snag or two on their Web mortgage.
One Saturday in late June, they signed a contract on a house in Florida’s Orange Tree subdivision in southwest Orange County. Then they called the mortgage.com agent with whom they had been working. He quoted them an interest rate of 6.875 percent with no points for an adjustable-rate mortgage. They did not lock in the rate.
When they called back on Monday to lock in the interest rate, the loan they wanted had increased to 7.2 percent with 1 point. Borrowers pay points to reduce interest rates. Each point is worth 1 percent of the loan amount.
Gar Simers said the quick change in the promised rate taught them a lesson.
“If I were to give someone advice, it would be document, document, document,” said Simers, the executive director at Celebration Health fitness center in Kissimmee, Fla. He said he should have asked the agent on Saturday to send a facsimile committing the company to the low rate.
Another problem occurred when the couple were supposed to close the loan at 10 a.m. on Aug. 10 but couldn’t because the mortgage papers were late. This delayed the process a few hours.
Despite the complications, Kim Simers said the Internet mortgage process was the way to go. She said she thought the company’s closing costs were competitive, and the Internet deal was easy.
“The couple had shopped closing costs with other on-line lending companies and found that some had pumped up their prices with expensive administrative costs, or junk fees,” as Kim Simers called them.
The Simers, both in their 30s, are typical of mortgage.com customers. Most on-line borrowers have college degrees. But the number of high school graduates or people with some college credits applying for Internet mortgages has increased, said Seth Werner, president of mortgage.com, formerly First Mortgage Network of Plantation, Fla.
And in the past few years, the average age of borrowers has increased from the early 30s to about 40, Werner said.
The Internet loans generated on mortgage.com are typically about $185,000 compared with $105,000 for traditional mortgages, Werner said. The Simers borrowed about $200,000.
When interest rates were around 6 percent, about 80 percent of the on-line loans were refinances, but since the rates have increased, only about 20 percent of the Internet mortgage business is for refinancing, Werner said.
In most cases, Internet borrowers pick up the telephone. About 97 percent of mortgage.com’s customers make at least one phone call, Werner said. It makes them more comfortable talking with a mortgage agent, he added.
Hundreds of companies offer on-line mortgages. Some of the most high profile ones are QuickenMortgage, Lending Tree, E-Loan and iOwn.
Internet heavyweight priceline.com, a favorite of travelers looking for savings on hotel rooms and airline fares, recently entered the world of mortgages. The company uses its name-your-price strategy by letting customers specify what type of mortgage they want and letting companies try to meet the customers’ criteria. The address is www.priceline.com
Author Blanche Evans’ new book, “homesurfing.net” (Dearborn, $17.95, paperback, 227 pages), gives an overview of how some of the Internet mortgage companies work. QuickenMortgage and E-Loan search thousands of loans from multiple lenders and show customers the most suitable loan packages available at current interest rates. Lending Tree matches borrowers with four lenders most suited to their needs. The addresses for those sites are www.quickenmortgage.com and www.lendingtree.com and www.eloan.com
Customers using the QuickenMortgage are supposed to hear back from their selected lender within 24 hours, and Lending Tree e-mails customers with lender responses within two business days.
E-Loan sends applicants a loan package, which they must fill out before the loan can be approved.
The on-line companies ask that borrowers verify their financial information by sending W-2 forms, pay stubs, house appraisals and other documents.
Grant Simon, president of the Mortgage Bankers Association of Central Florida, said the on-line mortgages may work just fine for some home buyers.
“Some people are very successful at buying airline tickets over the Internet,” said Simon, manager for Sunbelt National Mortgage of Maitland.
But most people, Simon said, prefer looking their lender in the eye. People wonder if they’ll get what they thought they were supposed to get in the remote type of transaction.
“If there are problems with a transaction, it certainly makes it more challenging,” Simon said.
“Another concern is the dissemination of personal financial information over the Internet,” Simon said. The words “confidential” and “Internet” don’t exactly go together in many people’s minds, he added.
It’s true that Internet mortgage companies need to work on the confidentiality aspects of modem mortgages, Kim Simers said. But, she added, the convenience outweighs the concerns.
“It’s very convenient to never have to walk into an office and take up three hours of your time,” she said. “You can do this at midnight or in the morning.”
