New Mortgage-Shopping Websites: A Good Deal?

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Do you hate signing up for a website to shop mortgage rates and then getting flooded with sales calls? If so, you may want to try out one of the two new websites for mortgage shopping: Google Compare Mortgages and Refinance.com.

Google's new mortgage shopping site depends on paid ads, so only the lenders that want to advertise will be there. Right now, you probably won't see any major banks. They haven't signed on yet.

Google's search is available in 38 states. You can see if your state is currently being served by a drop-down menu on the left side of the page.

Refinance.com works differently. Before you get to compare any loan options you need to enter the following: address, e-mail address, primary phone number, basic financial information (such as salary, checking, savings, retirement savings), current mortgage details, mortgage preferences and Social Security number

Can either of these sites replace the traditional hunt for a mortgage? It all depends on what you're looking for.
On Google's service, you can narrow your search by using drops-downs for credit rating, loan type, points, home type and use of home. As you do so, the loan options will automatically change.

The options will also change as you put in your data, such as home value, mortgage value and whether or not you want cash out. You have the choice to state a home value or use the website's automated valuation done by IntelliReal.

After you get all available offers, you select the loans you want to compare.

You'll get a screen that clearly compares loan terms and loan costs, so you can compare apples to apples. Then you choose which lender or lenders you want to contact. You don't need to enter an personal identifying data on the website, so you don't need to worry about being contacted by anyone until you make first direct contact.

Refinance.com does a soft -- not a hard -- inquiry to get you a free credit report from Experian. The key difference is that a hard inquiry could lower you credit score: the last thing you want to happen when you're mortgage shopping.

The site then gives you a "mortgage grade" based on your financial situation. You may get some recommendations about how you can improve your situation to get the best loan available.

The site then filters possible loans by your "True Cost," which includes all fees, rates, and points and finds you the best loan that fits your needs.

As for Refinance.com, I didn't want to give all the personal information the site required, so I couldn't take the service for a real test drive. This is a big downside for a site pitching itself to buyers just starting out their home-searches.

Either way, I have some problems with any website filtering my loan options for me.

I prefer to shop around, compare offers and then start negotiating with the lenders that interest me most. I don't find it a problem to have lenders bidding for my business, as they do on a website like LendingTree. In fact, I find it much easier to negotiate when I know lenders see what each other is offering.

I got my current 4.5 percent loan a couple of years ago when I refinanced from a 6 percent loan. I started my mortgage shopping by contacting my current lender, who offered a 5.25 percent rate -- so I looked elsewhere.

My lender ended up being one of the five that bid for my business on LendingTree. I was able to leverage the other offers with my lender to finally get the 4.5 percent loan with much lower closing costs.

Neither of these two sites enable the type of competition I've found to be so successful in getting the best deal.

While the Google site allows you to pit lender against lender to try to negotiate better terms than those shown on the website, there is some value in the lenders bidding based on the offers they see.

You may benefit by using both Google and LendingTree: Compare offers from large lenders on LendingTree to smaller lenders that appear to populate the Google website.

Before you start shopping for a mortgage, you should get your free annual credit report through the official government website. Clean up any problems before you start shopping so you can be sure you'll get the best credit score possible. That can take a few months. I usually recommend starting to work on your credit report three to six months before applying for a major loan.

Once you're ready, read up on how to shop for a mortgage. The Federal Reserve's "Looking for the Best Mortgage" is a great how-to guide for finding and negotiating the best deal.

Lita Epstein has written more than 25 books, including "The Complete Idiot's Guide to Improving Your Credit Score" and "The 250 Questions Everyone Should Ask About Buying Foreclosures."
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