Today's market is an ideal time for first-time homebuyers to buy a home. Economic indicators such as low unemployment, low inflation, and higher salaries are contributing to a favorable homebuying climate as illustrated by the current interest rates -- the lowest in almost 30 years.

New technologies such as the Internet are making it easier for homebuyers to negotiate their way through the intricacies of homebuying with the aid of instantly accessible information, user-friendly guides, and no-cost counseling. A natural extension of the new technologies are mortgage-lending services that not only walk customers through the loan process, but provide virtually instantaneous loan approval. As with all technological systems that can perform faster and more efficiently than their human counterparts, the number of people needed to take you through the loan process has been substantially reduced.

Quicken Mortgage is an online mortgage broker or loan origination service. Although the site "aims to lower the costs of obtaining a loan by reducing paperwork and automating time-consuming steps," it does not post any actual savings in dollar amounts to be obtained. That is the discretion of the participating lenders.

I applied for a loan and was prequalified by several mortgage lenders. When I wrote and asked how much money could be saved by applying online, product manager Alison Berkley replied, "We do not disclose how much you can save by applying online because it depends on what your other method of application might be. In general, our lenders have competitive pricing and tend to have faster response time than most channels. Some consumers have indicated they have found rates that are significantly lower than other channels, suggesting that some consumers could save thousands." She then directed me to contact the lender with whom my loan was prequalified in order to obtain more information.

I contacted Countrywide, one of the lenders with whom I qualified, and asked the same question. Lisa Squires, vice president of the electronic commerce division of Countrywide, said, "We only have one product that saves the online consumer additional money, and it is not available on any service other than our own site." I was shown how to click on the front page of the site, click on home financing, and then find out about special offers. The program called Gold Credit Home Loan will allow a credit of .75 to 1.25 discount points toward buying down the cost of the loan for online consumers who meet the stringent loan criteria. Discount points are an additional revenue-generator for the loan company over and above the interest gained on the loan.

Some lenders such as Homeside are only prequalifying borrowers online, but are not yet giving online approval. "We are still doing most of the work by phone and courier, but the consumer can still save a substantial amount of time and some savings," says loan officer Bob McClemens with Homeside. And where are the savings? "By prequalifying, much of the cost of the preliminary work is done, but I can't say the consumer benefits directly except in terms of convenience at this point. But online approval will be coming soon."

E-LOAN states up front that you can save 80 percent on fees. According to E-Loan VP of Sales and Business Development Doug Galen, the fees referred to are brokers' fees, also known as loan origination fees. "In five months, we are averaging between 20 and 50 loans every day. That is phenomenal growth," Galen says. "You can get more information more quickly, and there is a substantial cost savings to online loans.

"Traditionally, a mortgage broker is paid a point or 1 percent of the loan amount," Galen continues. "Typically, 70 percent goes to the broker, and 30 percent goes to the house to process the loan. We eliminate the need for a mortgage broker, so we eliminate 70 percent of the loan origination costs, and we use technology to save other fees. That is why we say we can save the consumer 80 percent of fees. If a loan agent charges 1 percent, we charge .2 percent to the consumer." The site charges a one-time $295 processing fee regardless of the size of the loan amount. "On a 500,000 loan, a loan agent will charge $5,000. We will charge $1,000. We saved the consumer $4,000. In addition, we offer free services that e-mail our customers when it is a beneficial time to refinance."

Lesli Alexander, director of customer service for I Qualify, a new online loan qualifying service backed by Fannie Mae, takes the borrower through the savings available on iqualify.com. "The first thing that happens is that the credit report is credited back to the borrower, if the loan goes through," she says. "That is usually about $59. Another advantage is that if you are serious about a buying a house, your loan approval is good for four months, locked in from the last date on your credit information, pay stub, and bank statement. A third way to save money is to use the Fannie Mae underwriter system to generate a drive-by appraisal, which is about half what a normal appraisal is, at about $300, and a drive-by appraisal is no less accurate in any way. The fourth advantage is that you are in a better negotiating position with the lender as an approved borrower. We have already done the work, so you have effectively eliminated the loan officer. You can then negotiate either a reduction or elimination of the loan origination fee, which is about a point or 1 percent of the loan."

Once you have a loan approved through iqualify.com, Alexander recommends contacting whatever lender you choose to use, and compare a good-faith estimate to see what the costs are. "Prequalification is a bargaining chip. These companies have salaried as well as commissioned people handling loans, so your loan is always negotiable," Alexander says. If a salaried person handles your loan, the cost for the lender is lowered.

An additional advantage is that loans can be qualified in near-record time, within as little as eight to 10 minutes, putting you in a much better position to negotiate with a multitude of lenders for the best rates and points on your loan approval. With a desktop underwriter, the language of the loan transaction is translated into normal English so that consumers can understand the process.

"Eventually, there will be one organization that will bundle loan-related services to reduce fees. Title and escrow fees will be done on a volume level, and then costs will be significantly lowered," Alexander says.

The bottom line is that for now, shopping online for a loan is a matter of saving time and enjoying convenience, with some substantial savings possible on the loan itself. Your true savings will be a matter of negotiation with lenders, and negotiation is a matter of operating from a position of strength. If you are knowledgeable about the loan industry, and if you can qualify with excellent credit, you can save money online.

Published: June 5, 1998

Use of this article without permission is a violation of federal copyright laws.

Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.