You've likely seen TV commercials of the young couple standing in front of their dream house. With a few clicks on their phone, they're instantly approved for a mortgage and have the keys to move in. Could it be that simple? Has the mortgage industry finally caught up to the rest of the digital world?
Anyone who has bought a home—especially post-2008—knows the mortgage journey has grown increasingly complex. The financial meltdown and Great Recession placed more regulation and compliance stresses on financial institutions, leading to increased verification steps and strengthened lending requirements. Suddenly, there were more papers and documentation required.
Copies of tax forms, employment history, pay-stubs, bank statements and retirement accounts needed to be scanned or mailed. The mortgage application grew, requiring more signatures. And together, mortgage files suddenly exceeded hundreds of pages, needing verification by someone in underwriting to determine loan eligibility. It typically takes weeks to approve (or deny) a mortgage loan this way, with delays often surfacing when consumers fail to send in the correct documentation.
So, fast forward to 2017, and what has changed? With a digital mortgage, consumers might still meet with a loan officer, but most of the interaction takes place over the phone, a self-service portal and via email. In a true digital mortgage, borrowers begin the process by submitting their application online. The lender will then access the application, ideally assessing the borrower's financial situation and credit, and then draw up a preliminary offer and terms (i.e. $400k mortgage at 4.5% for 30 years). Depending on the lending platform you access, this is also when you could start to rate shop and compare offers. Some companies that offer digital mortgages include Rocket Mortgage, LoanDepot and Better Mortgage. (See also: How to Get Pre-approved for a Mortgage.)
Mortgages are obviously one of the largest financial commitments a consumer will make in their lifetime, so additional verification is needed. Consumers are asked to provide all the same documents as the traditional mortgage process (bank statements, paystubs and tax forms), but they can do this electronically, using their home computer, smartphone, or tablet in a paperless transaction. Newer technology—utilized by some lenders—allows consumers to authorize the digital lender to access their financial information directly, seamlessly verifying and extracting key numbers. It's important to note consumers will not provide their log-in credentials to these various financial accounts, but grant access via a link to see only the numbers the lender needs to validate. (See also: Tips for Finding the Best Mortgage Lender.)
After the appropriate documents are gathered and verified electronically, some lenders even offer eNotary services, or a virtual signing room. These online tools can shave off significant time during the mortgage journey, and in mean the difference in getting the home you want or missing out, possibly to a cash buyer. As is the case in any home purchase, there are certain steps that must be handled on-site, like the home appraisal and inspection. Still, as it pertains to the actual mortgage, lenders can manage the mortgage process entirely online.
So, if you are in the market to either refinance or purchase a home, there are opportunities to streamline the mortgage process, eliminate the searching, photocopying and mailing, and speed up the verification steps. There might still be 100-plus pages of documentation to address, but it can be handled digitally, saving you time and making the mortgage process less of an arduous task.