Beware of Lending Tree

As one of the Nation's most popular origination sites for home mortgages, Lending Tree continues to draw customers with their catchy marketing pitch, "When Lenders compete, you win." But is there really a financial advantage to using their service or have we just succumbed to their ubiquitous advertising?

The prospect of Lenders underbidding one another to get your business is certainly an attractive proposition. However, when you delve a little deeper, there are some other aspects of this service that we found many people either did not consider or just did not know. The first thing to note is the affect on your credit score.

When you initially submit an application, Lending Tree pulls a copy of your credit report which, according to their privacy policy, can then be sent to up to 9 Lenders. However, we understand from interviews with members of the Lending Tree network, the credit report that is sent with your application does not include all the necessary information a Lender needs to accurately price your loan. So each Lender will often times pull your credit as well, so they know in advance if you qualify before contacting you. So before you've even gotten a phone call, your credit may have been pulled up to 10 times. Which brings up another good point, who are these Lenders that are calling you?

There is no way to distinguish in advance who Lending Tree will send your information to. And as far as we could tell through our investigation, the qualifications for a lender or broker to become a member of their network are at best, minimal. This is not to say that the members of the Lending Tree network aren't necessarily reliable, but it would be comforting to know that there were some stringent guidelines in place in order to join outside of just paying the lead fees and transaction costs. Which again, is something else to consider.

It states quite clearly in several locations on their site that "LendingTree, LLC does not charge you a fee for its service in matching you with Lenders." However, what you may not know is that Lending Tree charges each Lender $27 for each application they send and upwards of a $1,000 for every application that turns into a closed loan.* Now, common sense would dictate that even though Lending Tree is charging the Lender and not you directly, those fees are substantial and need to be covered by someone. It should come as no surprise that our interviews confirmed that very often those charges from Lending Tree are passed onto the customer in the form of inflated fees and/or rates.

This article is by no means an attempt to debase Lending Tree or uncover any misdeeds. In fact, the only thing Lending Tree is guilty of is effectual marketing. However, we have highlighted yet another reason why information is king and not necessarily convenience. nnn*These are the figures dictated to us at the time of publication.