Local lenders vs. Internet lenders - Pros/Cons?

Just wanted to hear about some of your experiences with both. Mostly lending money through online lenders. They “seem” to have lower rates than my local lenders. Have any of you used internet lenders? How do they compare to a local bank or broker? Is there anything to watch out for if you deal with internet lenders?

I have a unique perspective on this because I am both- a local lender and an internet lender. I have a small office in Colorado and at this point about 1/3 of my business is local, but the rest is from the internet.

Internet lender, pros and cons: Yes, generally, you will find better rates, but you have to be careful. many internet lenders are not very honest and will tell you whatever you want to hear in order to get you in the door. I can’t really refer you to my website, but I have an article there about common mortgage scams. Look out for these shady characters because there are a lot of them, unfortuntately, in this business. Most of the mortgage business these days is done by phone, fax, and email anyway, so as long as you have a good broker to work with, who stays in communication with you and gives you a fair deal, it won’t matter where they are geographically.

Also, a lot of internet lenders are in large call centers and may or may not be knowledgeable. They are calling internet “leads” one after another in a numbers game type of philosophy. So, the quality of internet lenders also depends on how you meet them.

Local Lenders, pros and cons: The biggest advantage here is that the person will be at your closing and is someone you can look in the eye and beat up at the bar if they don’t follow through on their promises.

Regardless, it usually the best idea to go on the referral from someone you know and trust on who they had a good experience with. Talk to a couple different brokers when you’re making your decision. And be wary of “too good to be true” offers of super-low rates, etc.

I am also both a local broker and internet broker. You have to beware no matter who you deal with because there are people that always try to take advantage of you.

There are more of the “Good Guys” around than the “Bad Guys” just make sure you ask questions and work with who you trust or is recommended to you. I would also see what organizations they belong to, i.e., Brokers or Banker Association, BBB their local chamber, etc.

Do your homework and ask for a Good Faith Estimate then compare as best you can making the best educated choice. As mentioned most of us do business via email, mail and phone anyway so looking to the internet is not a bad way to go. If it is important to you to have your lender at closing ask if they go to their closings. I go to 90% of mine even when they are out of my local area. This week I will be driving to a closing 3 1/2 hours away. This is rare but important to myself and my customers.

Good Luck!


This is a great question that unfotunately is not asked enough. I am a local lender with a website to enhance my business. I do not consider myself to be an internet lender.

In working with the title companies and Realtors, I have heard many nightmares in dealing with many internet lenders. For example: the rate quoted was not the rate received. Fees were much higher at closing than originally quoted. Accessibility of the loan officer when questions arise (they always do). Many of the internet lenders miss closing dates. Accountablity to do a good job is very limited.

Your local lenders know the vendors (ie. appraisors, realtors, title agents, surveyors, inspectors, etc.) that will be pulling the deal together. The local lender has a lot more accountability if he wants to do business in the town and receive referrals from all of the above mentioned parties.

I have also been in a position on many occasions to save deals that were on the table to close and the internet lender was dragging his feet (came across as lack of caring to all parties involved). The clients I’ve worked with that have gone down that path have not had good experiences.

As mentioned previously, make sure who ever you choose to work with is someone that you trust or someone that you know trusts them. This is a very personal transaction for you.

Best Wishes,