Online Mortgage Scams

Since the beginning of the 2000’s prospective home buyers have had an alternative to traditional mortgage lenders and brokers. The internet has provided consumers not only a wealth of information about mortgages, but also a completely new way to obtain one. However, you have to be extremely careful when hunting for a mortgage online.

There are three types of online mortgage lenders. The first type is traditional mortgage lenders such as banks and credit unions who are simply adding an online presence. Most of these are already established companies and are probably the safest online mortgage lenders to work with.

The second kind of online mortgage lenders is direct online lenders. These are virtual companies who have no physical presence. While online banks have become more popular over the past ten years, direct online mortgage lenders are still very dangerous to work with. Exercise extreme caution when dealing with any of these companies.

The third type of online mortgage lenders is aggregators that search the market based on your criteria and return possible matches. Aggregators are not actually lenders, but instead are mortgage brokers (Learn the difference between mortgage lenders and brokers).

No matter which type of online mortgage lender you use, it is important to exercise extreme caution especially when giving out any personal information. The following is a partial list of online mortgage scams and pitfalls to help you navigate the waters. Remember this is just a partial list, as scammers are coming up with more scams every day.

Online Mortgage Scams and Pitfalls:

· Credit Checks: Online mortgage sites that attempt to match you with the right lender may send your information to hundreds of different lenders. Each time one of these lenders checks your credit score, your score goes down slightly.

· Hidden Fees: Online mortgage lenders will try to suck potential home buyers in will low interest rates, but will jack up other fees to make up for it.

· Prepayment Penalties: While not just exclusive to online lenders, prepayment fees are more prevalent online. You will not be able to pay off your mortgage early even if you have the cash.

· Lack of Accountability: Getting in contact with the right person at an online mortgage company may be difficult to do even if they provide a phone number.

· Online Calculators: Many of these sites have mortgage calculators that allow you to figure out how much you can afford. These cookie cutter calculators can miss many expenses and as a result give inaccurate results.

· Identity Theft: It is possible that the entire site is just a front to get your social security number. No matter how professional the site looks, do your research before you give out any personal information.

I wrote this article to caution you about the dangers of using online mortgage lenders. However, there are some legitimate lenders online. It is just imperative that you know the potential downfalls and exercise the appropriate amount of caution before you use any of them.

For information about mortgages check out my other articles: