If you are considering a new mortgage to refinance your existing loan, the Internet can be an excellent resource for finding a new mortgage. The problem with using the Internet to find a lender is that there are always people trying to help themselves to your money in the process. Here are several tips to help you refinance your mortgage online without paying too much.
The Internet is a wonderful tool for researching mortgage offers and finding the lowest rates. However, there are fees that you need to be aware of when dealing with online lenders. The first fee you should be concerned with is the so called “Computerized Loan Origination Fee.”
What Are Computerized Loan Origination Fees?
You might be surprised to learn that many of the mortgage sites you encounter on the internet actually have nothing to do with mortgage loans at all. These companies put up a flashy mortgage website with a form to collect your personal information. Once you hit submit your information is sold to mortgage lenders and brokers so they can “compete” for your loan.
The fact that your information is sold online isn’t necessarily bad; problems arise when the lender passes this fee back on to you. This happens in the form of a “Computerized Loan Origination Fee.” Here’s an example to illustrate how this fee is used.
You’ve probably seen commercials on television from a website boasting that when “Lender’s compete, you win.” This website boasts that there is no fee for their services; however, what these commercials aren’t telling you is that if you fill out the form on this website is that if you refinance your mortgage with one of the lenders in their network a fee of $1,300 will appear on your Good Faith Estimate. This is a fee charged by your lender paid for their part in “arranging” your mortgage. How can they claim not to be charging you a fee when the lender’s paying them out of your pocket just for filling out a form with your name and address? This is just one of the mortgage scams you’ll find on the Internet today.
Computerized Loan Origination Fees Can Be Avoided
You can avoid paying this ridiculous fee by reading the fine print on every mortgage site you visit before submitting your information. Most mortgage websites are required to disclose their fees in the “Licenses and Disclosure” section of the site. There is one exception to this disclosure requirement that you need to be aware of; a special category of lender know as a broker-bank.
Mortgage broker-banks are basically banks masquerading as a mortgage broker. The only way you’ll be able to tell the difference is by asking your representative if they close in the name of the lender or in their own company. If the answer you get is that they close in their own companies name you’ll know that you’re not dealing with an actual mortgage lender, but a broker-bank.
What’s Wrong With Broker Banks?
The problem with mortgage broker-banks is that due to a loophole in the Real Estate Settlement Procedures Act they are not required to disclose any of their fees, markup, or profit margin on your loan. Another way to tell that you’re dealing with a mortgage broker-bank is that the disclosure statements are noticeably absent from the website. Never do business with any mortgage site that does not have a disclosure statement clearly published outlining their fees and compensation.
You can learn more about your mortgage refinancing options, including expensive pitfalls to avoid like Computerized Loan Origination fees by registering for a free refinancing video tutorial.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
