Mortgage Tip: Internet Lenders …Know The Risks

Getting a Sonoma County Mortgage Loan requires careful consideration of not only the costs involved, but where you go to actually obtain financing. When people think of a mortgage they usually think of their local bank or a mortgage broker. Independent direct lenders are often lumped together with brokers because each is a paid to originate the home loan for the consumer. Another choice becoming more and more popular is that of Internet lenders. An Internet lender provides the same terms and rates as a local professional the difference is that they are thousands of miles away.

Internet Lenders usually operate online only which means you’ll never get to actually meet the person handling your home loan.

Let me ask you a question. How important is getting that mortgage loan to you? My guess is it’s probably going to be the largest financial transaction of your life. You might only do a handful of mortgages in your lifetime. Now let me ask you another question. How can you trust someone who you will never get to meet in person with such a large financial transaction, let alone with your social security number?

You see internet lenders operate solely on the volume. Because they operate in this fashion, they also run their business on very thin margins which means customer service is not a key focus. How can you provide outstanding stellar customer service while at the same time be the absolute lowest bottom-line competitor? The answer is you cannot. Internet lenders run their business solely on advertising. Their business model looks like a churn and burn situation. They churn out the business and the burn component is never actually having a relationship with them. You’ll never get a phone call from the Internet lender you closed your loan with two years ago down the road informing you of an opportunity to save money at no cost.

Internet Lenders offer one thing only and that is convenience.

As both a local lender and an online lender, I have the flexibility of being able to serve people both in person and over the Internet. Nearly all of the folks who work with me choose to meet in person. Most people like having somebody local that they can go meet with and talk to in person as opposed to a phone receiver only. Internet lenders are commodity only.

For example have you ever noticed that when mortgage rates drop you start seeing all of these ads for Internet mortgages? That’s right you’ve seen them Cashcall, Quicken among others. It’s because their business is cyclical and is not based upon forming relationships or providing tangible information.

If you are thinking about getting a home loan definitely use the Internet to get a feel for where mortgage rates are at. You can even get a free mortgage rate quote from me Scott Sheldon Sonoma County Mortgage Lender. Contact me Scott.Sheldon@nafinc.com today! The best mortgage tip I can offer you working with Internet lenders is know the risks.

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RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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