Have you ever seen the commercials on TV for an “instant pre-approval” or a way to get “instantly approved” through an app? I had a client recently get pre-approved for an online application through a mortgage company that was not local with no local offices and was remotely based. She never had an opportunity to speak with the lender in depth regarding her rates, credit, income or programs she may qualify for. They pushed the application through and pre-approved her.

At this time they pre-approved her for a $3,000 a month mortgage. She was really happy she was pre-approved and felt like she was 100% ready to go. We spoke with her about her comfort levels with payments, overall home prices, etc and I had her speak with a local lender afterward. It was important she could buy a home she was comfortable in down the road and would not cause a financial stress. She sat down with the lender, they went over the documentation and turns out that she made $29,000 per year of funds that can be used towards a pre-approval amount. Which was great, however, this online mortgage company pre-approved her for a $3,000 a month mortgage, that’s a $36,000 a year mortgage but she is making $29,000 a year. The numbers just did not make sense at all.

When you are looking at these different online-only companies, it’s great you can get a pre-approval and it is great it is so quick, but you really do not know what you are getting. The fees on the back side (a lenders closing costs), of what they are charging on the interest rate and really how quality is that pre-approval overall. That’s the thing you need to understand with these online mortgage companies. They are not going in-depth, they are not looking at your documentation, they do not understand who you are, where you work or unique things that can aid in your income or debts. Those are the things that are extremely important when you’re going to spend hundreds of thousands of dollars on your next home. For most people, this will be the biggest purchase of their life, make sure it’s the right choice.

When selecting an online lender, look at their references. Learn everything you can about the company’s background so you can be certain you are not working with a company that may not provide you the best service and deal ultimately. Also, if a company charges a fee just to fill out a form on its website, you should keep looking for another lender. If you do have a question, you have not spoken with a lender yet, or just want to know what to look for in a lender, feel free to reach out and I would be happy to point you in the right direction ensure you get a quality mortgage that makes sense for you.