Should You Apply for a Mortgage Online?

How Does Applying for a Mortgage Online Work?

The online mortgage application process varies depending on the lender and the loan type you've decided on. Some lenders offer a complete online experience from initial application to closing. Others allow you to start an application online, but require you to speak with a loan officer in order to complete the application and ensure you're seeking the right loan for your situation.

If the lender allows it, you can start by applying for mortgage preapproval online, which helps you understand whether you're in a position to be approved for a mortgage and, if so, for how much and at what rate.

You'll then officially apply for a mortgage once you've made an offer on a home that's been accepted by the seller. The documents you'll submit are typically the same whether you apply online or in person—W2s, pay stubs, bank statements, tax returns and your home's purchase agreement—but you'll upload these to a portal when you apply online. You'll also undergo a credit check.

Finally, your application will go through underwriting for several weeks, and when you apply online, you can view your application's status as it goes through each step. After your application is approved, depending on your lender and state, you may be able to choose from an in-person, hybrid or fully remote closing.

Learn more: What Type of Mortgage Loan Is Best?

Pros and Cons of Applying for a Mortgage Online

There are both benefits and drawbacks to applying for a mortgage online. Whether it's the right move for you has a lot to do with your personal ease with technology. Here are the top pros and cons to consider.

Learn more: How to Shop for a Mortgage

Should You Apply for a Mortgage Online?

Consider applying for a mortgage digitally in the following scenarios:

• You already do a lot of your banking online. If you're familiar with managing other accounts online, such as student loans, car loans or your checking and savings accounts, it will feel more comfortable to complete a mortgage application online. You'll also be able to easily access digital versions of documents you'll need for your application, or even give the lender permission to connect to your bank accounts to instantly confirm your assets.
• You have a relatively straightforward application. You're more likely to be able to take advantage of the benefits of an online application, without delays or the need for manual underwriting, if you meet the basic mortgage requirements: you have a good credit score, stable income, manageable debts and a sufficient down payment for your loan type.

Learn more:What Factors Do Mortgage Lenders Consider?

Tips for Choosing an Online Mortgage Lender

To choose an online mortgage lender that's safe and trustworthy, follow these steps:

• Check their license. Confirm the lender is licensed to work in your state by searching their name in the Nationwide Mortgage Licensing System and Registry. You'll be able to view information like the year the company was founded and their state licenses for acting as a broker, lender or servicer.
• Read independent reviews. Search the Consumer Complaints Database from the Consumer Financial Protection Bureau (CFPB) to see if any borrowers have lodged complaints against the lender, and how the lender responded. If there's a large volume of complaints, especially about specific issues that haven't gotten resolved, that's a red flag.
• Ask about fees and rates upfront. Gather as much information as you can about the lender's fees and rates before applying. By law, you'll receive a loan estimate within three business days of applying for a mortgage, which includes details about your estimated monthly payment, closing costs and more. But you should be able to get an initial overview of the mortgage fees you might be charged and how much they'll cost so you can decide whether to move forward with preapproval or a mortgage application. If the lender isn't forthcoming, that's another red flag.

How to Get a Mortgage Online

Here are the general steps to get a mortgage online:

1. Shop for lenders. Look across a range of big banks, community banks, credit unions and online lenders. Choose several whose reputations, loan options, rates and fees fit your needs. Some financial institutions have mortgage offers for existing customers, such as a discount on closing costs, so check if your current bank or lender also makes mortgage loans.
2. Choose a loan type. Make sure you're applying for the best loan for your situation, such as a Federal Housing Administration (FHA) loan if you have poor credit or a Department of Veterans Affairs (VA) loan if you're a member of the military community.
3. Seek preapproval. Applying for preapproval lets you compare potential rates and terms and provides you with a preapproval letter that can help you stand out when shopping for a home. You can apply for preapproval with multiple lenders, but getting preapproved isn't a guarantee your official mortgage application will be accepted later on.
4. Make an offer on a house. Your preapproval letter will likely be valid for 90 days. You'll have that time to shop for a home and make an offer on a house.
5. Apply for a mortgage. Once your offer is accepted by the seller, you can submit your mortgage application online to the lender you've chosen. You'll need to share if any information has changed since preapproval, and you may need to provide additional information if requested.
6. Close on the home. The lender will underwrite your mortgage, which can take up to several weeks, and give you final approval. You'll then be able to schedule closing, when you hand over your down payment and other fees. You may be able to complete some or all of the steps in the closing process online, if the lender has the capability.

Learn more:How to Buy a House: Step-by-Step Guide

Frequently Asked Questions

The Bottom Line

As more management of our financial lives migrates online, applying for a mortgage digitally will likely get more and more commonplace. Whether it's the right choice for you depends on the details of your application and your familiarity with technology. Most important, make sure you choose a trustworthy lender that clearly discloses your loan's details, no matter how you apply for it.

Before you begin shopping for a mortgage, check your FICO^® Score^☉ and credit report for free from Experian. You'll see where your credit stands and be able to gauge where your application may fall with lenders.