Thanks to technology, home buyers can not only shop for a new home from the comfort of their current residence — they also can find financing.
With the touch of a finger, consumers can access and compare interest rates, closing costs, terms and fees, as well as track the progress of their application. Dozens of on-line mortgage companies, including E-loans, iOwn.com, AppOnline.com and Mortgageselect.com, are offering services through cyberspace.
Proponents say mortgage shopping on the Internet can save money by eliminating the middleman.
“Shopping on-line really gives you a lot quicker access to competitors to pinpoint companies with a lower cost,” said Rob Schneider, senior staff attorney for Consumers Union Southwest.
But consumer advocates and mortgage brokers say shopping on-line can have its drawbacks. Often, they say, consumers have no idea who they are dealing with, said Keith Gumbinger, vice president of HSH Associates, a mortgage and interest rate research company based in Butler, N.J.
“Before you commit your money and your time, make sure you know who you’re dealing with,” Gumbinger said.
Whatever their drawbacks, a growing number of home buyers are expected to opt for online mortgage companies in the future.
The online mortgage business accounts for only 2 percent of mortgage originations — or $20 billion, said Brian Carey, economist with the Mortgage Bankers Association of America. But that figure is expected to rise to 10 percent to 20 percent — more than $100 billion — by 2003, Carey said.
Consumers are attracted to its speed and convenience, along with the promise of greater bargaining power with traditional mortgage companies and banks.
First-time homebuyer Hieu Phan, a recent college graduate, looked online first for the financing for his $120,000 house in South Austin, Texas.
Although he eventually went with a traditional mortgage lender, Phan also looked at E-Loans.com, a $1.3 billion, San Francisco-based company and one of the oldest on-line mortgage businesses.
“It was unusual because here was a first-time home buyer, already getting loans on the the Internet,” said Phan’s Realtor Jaymes Willoughby.
“Money was a commodity and he didn’t care where he got it as long as he got it.”
It’s a trend that mortgage lenders, such as Countrywide Home Loans, also have observed.
“We’ve definitely seen a great response to our on-line Web site,” said David Espenschied, chief executive officer of Countrywide’s e-business division.
Although many borrowers want do research on-line, many also are unfamiliar with the process.
“A product like the one we offer, which people deal with only every three to five years, requires more hand-holding,” said Espenschied.
“It’s not like a stock trading site or something that people deal with everyday.”
That has prompted companies such as Countrywide to develop a “clicks and bricks” strategy — a direct relationship between a traditional mortgage office and an on-line mortgage site.
Phan employed the clicks and bricks strategy. While he found surfing the Web and comparing costs for different mortgage sites convenient, he also found it harder to find one-on-one help.
“Getting information was great, but actually getting help was difficult,” said Phan. “Since it was a long-distance thing, it was like voice mail phone tag.”
Countrywide, which has both a Web site and local offices, said that attitude works to its benefit when it comes time to close.
“That’s what gives us a significant advantage over the pure dot-com companies out there,” Espenschied said.
Willoughby agreed: “In a hot market like Austin, it’s difficult to rely on a faceless entity and the Internet can’t provide an immediate personal response.”
Customer service also can be lacking when you’re dealing with someone long distance, said Gary Akright, president of Dominion Mortgage in Dallas and president of the Texas Association of Mortgage Brokers, which has about 1,000 members.
“You typically would not get the experience level you’ll find with a mortgage brokerage operation,” said Akright.
“They’ll probably not ask the home buyer all the pertinent questions to find the right loan for them.”
But E-Loan.com is quick to point out its strong points — convenience and price. “Clicks and bricks companies use their Web site to channel a consumer into the branch,” said Cameron King, former head of Countrywide’s e-commerce division and now senior vice president of E-Loan.com.
