Are Online Mortgage Rates for Real?

The Internet could easily be considered the "misinformation" superhighway.  Every day, people post articles with inaccurate information.  But the big question for homebuyers is, how accurate are online mortgage rates?

The ease of shopping online is beyond compare.  Sitting back in your easy chair and scouring the websites of top retailers is fun, comfortable, and cost-effective, particularly when you take into account the rising cost of fuel.

Can the same claim be made for shopping for online mortgage rates?  A far more complicated purchase, a mortgage usually contains a number of variables that makes sales a somewhat convoluted affair.  Shopping online can work, but it generally depends on your credit score.

Quick quotes with a catch

Privacy concerns have compelled online mortgage sites to limit the amount of personal information submitted for a rate quote.  In the past, a consumer basically had to fill out a loan application.  Now, a number of rate-comparison websites ask for some superficial data, including your credit score, the value of your home, and the type of mortgage you need.  In return, they'll provide rate and term quotes from a variety of different nationwide lenders.  No social security number is required on your part.

Several caveats accompany these types of quotes.  First, most mortgage rates are provided based on the assumption that you have excellent credit, which would mean a score of 720 or greater.  Second, the interest rates are largely based on your description of the property and its estimated value.  Because a few variables could affect the rates quoted by these lenders, you should assume that there would be some wiggle room on the part of the bank.

Keep your credit clean

The biggest influence on your interest rate is your credit score.  The mortgage world is your oyster if you have terrific credit. If you maintain a high score, a bank or credit union will offer you their best online mortgage rates.  

Lower scores can tie a lender's hands, however.  If yours falls in the low 600 range, you can expect to see higher mortgage rates, or perhaps not qualify for a loan at all.  In the wake of the subprime mortgage crisis, lenders have tightened their guidelines.  They're only extending credit to the least risky borrowers.

To make sure that your credit score is the best it can be, request a free credit report from one of the three bureaus (Experian, Equifax, TransUnion).  Scour it to ensure that there are no mistakes, as erroneous information could reduce your overall score.  And, before you begin the shopping process, keep your credit clean for at least six months.  

Online mortgage sites provide all the conveniences of shopping via the Internet.  From the comfort of your own home, you can select the best rate and the loan that's right for you.  However, convenience is a privilege, not a right.  Make sure that you have a great credit score so that you qualify for a top-notch loan.