Online mortgage lending

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Whether you're looking to purchase a property or refinance a current mortgage, there's no shortage of options when it comes to obtaining home loans. While most Canadians may associate taking out a mortgage with a visit to their local financial institution, the rise of computers has made it easier than ever for individuals to obtain financing, oftentimes from the comfort of their homes.

Online lending
Online lenders are typically broken up into three types. The first type technically isn't a lender, but a website that aggregates products from many different lenders, offering interested parties a chance to browse what's currently on offer, including mortgage rates.

The second type is the online counterpart to a financial institution borrowers can visit in real life. These include websites for banks and credit unions where borrowers can fill out forms and find out their chances of getting approved for a home loan.

The third type of online lending, and the type most associated with the term, involves lenders that are focused solely on attracting customers online. These lenders are not as established or as diversified as major banks and credit unions and are typically focused solely on the mortgage market.

Staying safe online
While it's always important for consumers to tread carefully when it comes to their finances, it becomes even more essential to practice caution when dealing with online lenders. As technology has advanced, so have the types of criminals looking to take advantage of consumers willing to share personal information.

When dealing with online lenders, there are several strategies potential borrowers can use to protect themselves.

  • Research: Before deciding to do business with a particular lender, consumers should do all they can to make sure they're dealing with a legitimate business. This means looking up the lender online, seeking out detailed background information, reading reviews, looking for complaints or legal actions and finding references. The internet can be used for a lot more than taking out home loans, such as making sure that a lender is on the up and up.
  • Don't overshare: While eventually borrowers will be required to share detailed financial information, one red flag to watch out for is a lender that asks for vital information upfront. There's no reason to be sharing things like bank account or credit card numbers with a lender, let alone one you've just met.
  • Ask questions: Legitimacy isn't the only thing borrowers need to be on the lookout for. Even a legitimate lender can be a bad choice if their prices and products don't suit a borrower's needs. It's with this in mind that consumers should ask pertinent questions and receive detailed answers. Questions should address issues like mortgage rates, points, how closing will be handled, etc. Additionally, borrowers should always make sure to get these things in writing. Dealing with an online lender doesn't mean foregoing simple steps intended to provide borrowers with security.
  • Use common sense: The best guideline to follow when it comes to online lenders will ultimately be the gut instinct of potential borrowers. If a situation feels wrong, it probably is. If something seems too good to be true, that's most likely the case. There's no law saying a borrower has to do business with someone they talk to, so consumers should never be afraid to walk away from a situation that doesn't feel right, especially when it comes to something as important as buying a home.
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