How a LendingTree Mortgage Works

October 12, 2018 — 7:00 AM EDT

A consumer in search of a mortgage has several options. He can visit a local bank or credit union. He can go online and submit an application with a broker, who then places the loan with one of the wholesale lenders in his network. Another option is to use a service such as LendingTree.

LendingTree is not a mortgage lender or broker. Rather, it is a third-party service that takes a borrower's information and submits it to multiple bankers and brokers within its vast network. These companies then compete for the borrower's business. LendingTree's selling point is that competition drives down prices, so mortgage bankers and brokers offer lower rates and fees when they know they are in direct competition with several others.

The LendingTree Process

The first step to obtaining a LendingTree mortgage is to submit an application, either on the company's website or by calling its 800 number. The application asks the standard questions a borrower finds on any mortgage application. LendingTree wants to know a borrower's income, assets, debts, occupation and length of time at his current job, and Social Security number (SSN) so a credit report can be pulled.

LendingTree does not actually process a borrower's application in-depth, nor does the company make any approval decisions itself. Typically, LendingTree uses a borrower's SSN to obtain his FICO score, and it uses this information to choose the lenders to which it submits the application. Certain lenders in the company's network favor borrowers with perfect or near-perfect credit, while others cater to borrowers who have a few blemishes.

Next, LendingTree submits the borrower's application to lenders and brokers within its network. In most cases, four or five companies receive this information. They can see the borrower's name, home address, phone number, desired loan amount, monthly income and FICO score. From this information, they can put together a preliminary quote to present to the borrower.

A LendingTree borrower often begins receiving calls from mortgage companies within five to ten minutes after submitting an application. The person on the other end of the phone is a trained salesperson whose job it is to convince the borrower there is not a better deal out there. For the borrower, it is highly prudent to listen to all quotes before making a decision. Moreover, in many cases, a lender is miraculously able to come up with a better deal when a borrower calls back to say that a subsequent lender beat his quote. This is another advantage of LendingTree: It provides an easy process by which a borrower can play several lenders against one another to get the best deal.

LendingTree Disadvantages

LendingTree offers several benefits, and borrowers who know how to make the most of the service can usually walk away with a better mortgage deal than they would have gotten by working with only one lender.

However, using LendingTree comes with a couple of drawbacks. Perhaps the biggest frustration voiced by LendingTree customers is they end up inundated with phone calls and emails. Five companies may not sound like a lot, but the loan officers at these companies are probably paid on commission. They have a huge financial incentive to earn the business of each borrower lead they contact. Therefore, it is unlikely they will call the borrower once, make their pitch and then hope they get chosen. A more likely scenario is that the borrower has five hungry salespeople calling and emailing at all hours of the day to shoulder their way in front of their competitors.

Borrowers wary of excessive credit pulls should tread with caution. In addition to LendingTree pulling a borrower's credit, the five lenders will likely want to run their own credit reports too. While the credit bureaus have esoteric algorithms for calculating credit scores, some people believe multiple pulls in a short period lowers score. Others argue that several mortgage pulls over a short period counts as only one pull. Since the credit bureaus keep their methods secret, no one knows with certainty which is the case.