Best Online Mortgage Lenders: How You Can Save By Applying Online
With the pandemic still raging on, more and more mortgage lenders are moving their process online. Now, you can get a home loan without the effort of going to banks and applying in person. But which online lenders provide the best service?
In this list, we round up the best online mortgage lenders in the country. We’ll discuss how an online mortgage application process can make it much easier for you to buy a home, what you need to prepare, as well as share tips on how to get the most affordable mortgage rates.
How Online Mortgage Application Helps You
Applying for loans with online mortgage lenders is simply much more convenient than going through the entire process in person. In addition to that, there are other benefits to applying for loans with an online mortgage lender:
Potentially Lower Interest Rate
Maintaining brick-and-mortar bank locations can be expensive. Without a physical space, online mortgage lenders are saving a lot on overhead expenses. This saving is then forwarded to their customers through lower interest rates and fees.
Even if the interest rate difference is only one-quarter of a percent lower than other banks, you can potentially save thousands of dollars in monthly payments during the mortgage loan term. When you save on interest and origination fees, you can later use that money toward your mortgage payments or other financial obligations.
Faster Application Process
Applying for a mortgage at a physical bank requires you to fill out many forms and make copies of important documents. If you’re not well-organized, this process can take a lot of time and effort. An online mortgage lender circumvents this by allowing you to fill out forms and upload documents online.
Caveats Of Applying For A Mortgage Online
However, there are also some things that you need to keep in mind when applying for an online mortgage:
Lack Of Human Interaction
While not having to deal with a mortgage officer face-to-face may be a benefit to some, it can also present some difficulties. Sometimes, you may need to interact directly with your mortgage officer if there’s an issue with your application – for example, to explain a discrepancy on your credit report or ask what documents are required if you’re self-employed.
While customer service agents can help you with these problems, you’ll have an easier time clearing up these issues if you’re handing the documents directly to the mortgage loan officer.
You May Need Pre-Approval To See Rates
Generally, lenders advertise their interest rates and fees on their websites. The low interest rate offered by an online lender may seem appealing, but you should remember that’s usually only an estimate – you’ll be given personalized rates when you apply for the mortgage.
Some online lenders may not give you personalized rates upfront, which means that you may only see the rates you’ll receive on your mortgage partway through the application process.
Preparing Your Online Mortgage Application
Before you start applying for mortgages online, you should prepare for it by getting your documents ready. Here are the things you need to have on-hand.
Federal Mortgage Application
To standardize application processes in the United States, mortgage guarantor company Fannie Mae provides a standard form for mortgage applications. While lenders may have a version of the form on their online application page, you should look the form up and have the necessary data on-hand before applying.
This form requests most of the standard personal details required for mortgage applications, like your name, birthdate, Social Security number, and marital status, as well as residential and employment history. You’ll also be asked about your assets and debt balances, plus your history of bankruptcy or foreclosure, if any.
Credit Score
Because lenders determine your rates based on how much risk they take by providing your mortgage, your credit history is one of the most important determinants of your rates. Your credit score indicates how reliable you are at handling debt, and many lenders use this as a predictor of your future reliability.
Generally, you’ll need a minimum credit score of 620 to qualify for conventional mortgages and 580 to qualify for government-backed loans.
Proof Of Steady Income
Lenders want to see a consistent history of employment with their borrowers. A consistent source of income indicates that the borrower has the means to pay off their debt.
To prove this, lenders usually require pay stubs and W2 forms from the borrower’s employers. If you’re self-employed or a business owner, you’ll be able to provide proof of income by providing your federal tax returns as well as profit and loss statements.
Should You Apply For A Mortgage Online?
Whether an online mortgage application would be better for you depends on your needs. Generally, an online lender is the best option if you want to take advantage of the convenience offered by the simplified process, or if you can’t reliably go to the nearest mortgage lender office in your area.
You can also choose online lenders if you’d like to take advantage of their flexibility and generally lower rates – many offer a lower closing cost and mortgage origination fee. Additionally, online lenders often advertise their rates on their websites, allowing you to compare how they stack up against loans offered by brick-and-mortar banks.
Current Mortgage Rates
To help you get a better picture of the current mortgage rates on the market, we’ve compiled the rates from various loan types in the table below. This data is taken from a comprehensive survey of America’s major mortgage lenders and will be updated daily. Note that the data in this table is subject to change without prior notice.
(insert daily-updated rate table here)
How We Pick The Best Online Mortgage Lenders
To help you make an informed decision on your online mortgage lender, we’ve reviewed some of America’s best online mortgage lenders on this list. Our review will include a short description of each lender as well as discuss these major criteria:
- Its strengths and weaknesses
- Loan types offered
- Online presence, whether they are fully online or not
- Minimum credit score requirement
- Minimum down payment
Keep in mind that the best online mortgage lender for you is the one that fits your needs the most. When making your decision, consider your loan amount, the length of its term, as well as your current financial situation – these will determine the options that are available to you. You’ll also need to consider how much you’re willing to pay each month on mortgage payments.
Our Top Online Mortgage Lenders
To help you choose which online mortgage lender fits your needs best, here are our top picks for the best online mortgage lenders in the United States.
Rocket Mortgage By Quicken Loans - Fully-Online, Guided Application Experience
Rocket Mortgage by Quicken Loans (NMLS#3030) is an online alternative to the traditional mortgage process. All loan offerings by Rocket Mortgage are similar to the product lineup offered by Quicken Loans, its parent company.
With Rocket Mortgage by Quicken Loans, you can take out conventional 15-year, 20-year, and 30-year fixed-rate mortgages as well as 5/1, 7/1, and 10/1 adjustable mortgages for both home purchase and refinancing. It also provides government-backed loan options such as FHA loans and VA loans. If you need a larger mortgage, you can opt for one of its jumbo loans.
The fully-online experience provided by Rocket Mortgage is fast, casual, and convenient. If you have any questions about your application or the form, you can check out its FAQs and help pages. All in all, the home loan application process will take about half an hour from start to finish. Rocket Mortgage holds your hand throughout the entire process, making it the best overall choice for first-time homebuyers.
To make it easier for borrowers, Rocket Mortgage also downloads most of your financial information directly from various financial institutions – saving you the trouble of collecting them yourself.
However, Rocket Mortgage by Quicken Loans doesn’t provide any home equity loans or home equity lines of credit (HELOC), so your only option to leverage the equity in your home is a cash-out refinance. Getting a customized rate will also require a credit check, which may reduce your credit score.
Minimum credit score: 620 for a conventional loan, 580 for a government loan
Minimum down payment: 3%
Bank Of America - Best Rewards For Loyal Customers
As one of the largest banks in the world, Bank of America (NMLS#399802) provides numerous options for home loans. It offers conventional loans, so you can get either an adjustable-rate and fixed-rate mortgage for home purchase and refinancing. Bank of America also has a jumbo loan option for mortgages up to $2.5 million and government-insured options like FHA/VA loans.
Its digital home loan application allows you to complete the entire process online, through the website or app. If you already have an account with BoA, it will also pre-fill part of the application form with your information. In addition to the entirely-online process, you can still apply by phone or by visiting your nearest BoA branch.
If you’re a Preferred Rewards customer, you can get a discount of up to $600 on your loan origination fee. First-time homebuyers are also offered discounts on closing costs and down payment grants, up to a total of $17,500 if they fulfill certain criteria.
While the bank states that its origination fee averages around $1,200, there is no information on the exact costs. This can be an issue if you’re looking to save as much as possible by calculating all the costs before applying.
Minimum credit score: 620 for a conventional loan, 580 for a government loan
Minimum down payment: 3%
Better Mortgage - Guarantee Of Lowest Rates
Established in 2014, Better Mortgage (NMLS#330511), also known as Better.com, is a digital mortgage lender with completely-online applications.
When you apply for home loans with Better, you’ll be guided through the process. You only have to answer a few questions to get a basic pre-approval for your loan within three minutes. Better also encourages customers to contact its customer service agents if you have questions or concerns about the application.
Due to the pandemic, Better currently does not offer VA and FHA loans. However, it does offer the full suite of conventional loans for home purchase and refinance. This includes 15-year, 20-year, and 30-year fixed-rate loans as well as 5/1, 7/1, and 10/1 adjustable-rate mortgages. The company also offers jumbo loans for buyers who want larger real estate properties.
Better guarantees the lowest rates and offers to pay $100 to the borrower if it can’t beat a competitor’s offer. However, you may not be eligible for a mortgage from Better if you live in certain states like Massachusetts, Minnesota, and Nevada. Better also offers limited loan options to capitalize on your home’s equity – it does not offer HELOCs or home equity loans.
Minimum credit score: 620 for a conventional loan
Minimum down payment: 3%
Guaranteed Rate - Easy Personalized Rates
One of the earliest players in the online mortgage industry, Guaranteed Rate (NMLS#2611) provides a fully-online application that prioritizes customer service and experience. The company also provides a variety of loan products found in most mortgage lenders: conventional loans with fixed-rate and adjustable-rate terms, government-guaranteed loans, and a jumbo loan option.
When you start the loan application, you’ll be guided through basic questions. Guaranteed Rate then recommends mortgage options for you depending on where you are in the homebuying process and what you find most important in a mortgage.
The company claims that you can start an application and close the loan within 10 minutes. You can also upload documents online and put signatures on documents digitally.
To give you a better estimate on your mortgage rates, Guaranteed Rate can do a soft pull on your credit. This means that you can receive rates without impacting your credit score at all.
However, Guaranteed Rate offers no options to leverage your home equity. If you’re looking for a HELOC, home equity loan, or cash-out refinance, you’ll need to find another lender.
Minimum credit score: 620 for a conventional loan, 580 for a government loan
Minimum down payment: 3%
Wells Fargo - Wealth Of Loan Types
One of the leading residential mortgage providers, Well Fargo (NMLS#399801) offers a wide variety of loan products. It provides the full suite of government-guaranteed loans, including FHA, VA, and USDA loans. The lender also has a range of conventional mortgage options with fixed-rate and adjustable-rate terms. Additionally, you can take out a jumbo loan handled by a specialized mortgage team as well as renovation loans with Wells Fargo.
Wells Fargo has adapted to the demands of the modern digital world with its fully-online mortgage application process. It features document uploading and e-signatures, as well as a loan tracking feature. If you prefer to do things traditionally or want to clarify an issue in person, you can also visit one of Wells Fargo’s offices located across the country.
However, the diversity of loan products and easy application procedures that Wells Fargo offers are balanced by its customer service record – the financial institution has been at the center of several scandals in the past few years.
While the bank has gone on record about its commitment to make things right and re-earn the public’s trust, it’s always wise to consider its history when you mortgage shop.
Minimum credit score: 620 for a conventional loan, 580 for a government loan
Minimum down payment: 3%
SunTrust - Best For Doctors
Also known as Truist after its merger with BB&T, SunTrust Bank (NMLS#2915) offers mortgage products geared for first-time homebuyers and repeat buyers.
Alongside government-insured loans, the company offers conventional mortgages with fixed-rate and adjustable-rate terms. You’ll also be able to get jumbo loans with SunTrust.
In addition to the regular mortgage offerings, SunTrust also provides loan products designed specifically for doctors through its Doctor Loan Program. Doctors who have high earning potential but do not have large cash reserves on hand benefit the most from this program.
Like most lenders on this list, SunTrust provides a fully-online application option that allows you to upload documents remotely and get personalized rates. You can access this online application through the BB&T and SunTrust apps, but you can also apply for a loan traditionally in one of its branch offices.
However, to get personalized rates online, you’ll need to start the application – this may take some time and effort. Its options for home equity leverage are also limited to HELOCs and cash-out refinances.
Minimum credit score: 620 for a conventional loan, 580 for a government loan
Minimum down payment: 3%
How To Get More Affordable Mortgage Rates
Mortgages are 10-to-30-year financial commitments that you need to pay each month. To help lighten the financial load, we’ll share four tips to get the best mortgage rates.
Compare Loan Offers
Mortgage shopping doesn’t end at one lender. If possible, compare offers from several lenders to ensure that you’re getting the best rates.
While you sometimes need to start an application with an online lender to get personalized rates, try comparing their sample rates first to see which one offers the lowest. Then, apply to get your custom rates.
Keep in mind, however, that saving up on your mortgage isn’t just about getting the lowest rates – it’s also about origination fees, closing costs, and how much you’ll be paying in interest over the loan term.
Consider Paying Discount Points
Discount points reduce your interest rates and are paid upfront during closing. Generally, one discount point costs 1% of your loan amount. For example, one discount point on a $200,000 loan is priced at $2,000.
One discount point is usually worth 0.25% off your rates, driving down your monthly mortgage payment and how much you’ll be paying on interest for the rest of the loan.
If you’re planning to keep your loan until it’s completely paid off (and you have extra cash on hand), buying discount points may be a good idea to save in the long term.
Increase Your Down Payment
Another way to reduce your mortgage expenses is to increase your down payment amount. Paying more down will increase the loan-to-value amount and drive down your loan principal – resulting in more favorable rates.
Increasing your down payment above the minimum (3% for most lenders) also helps you avoid private mortgage insurance. This cost is often rolled into your mortgage costs, increasing the amount you have to pay every month.
Closing Thoughts
Many major mortgage lenders have built digital platforms to streamline the lending process and provide a more convenient alternative to applying for loans at a physical bank. However, some online lenders may not provide the best experience due to the lack of human customer support.
If you’ve read our list of best online lenders and would like further advice on which one to choose, reach out to Wesley LLC today! Our team of financial professionals is available for consultation regarding your online mortgage needs – we can help you find the best online mortgage lender that fits your requirements!