Nearly three-quarters of mortgage borrowers will begin the mortgage origins process online, and most lenders will help them complete their pre-approval or loan application through an online portal. If you still don’t know if you should go online, here’s something to consider.
Do I need to apply for a mortgage online?
The process of getting a mortgage involves a lot of paperwork and time. Completing the application online, or using an online-only lender, can speed up this process, but that’s not for everyone. Think about it:
How complicated is your finances?
If you receive a stable salary from your employer and have excellent credit, your financial situation is fairly easy to understand when it comes to mortgage underwriting. In this case, an online application could be the easiest route compared to face-to-face with a lender.
However, if you are self-employed, you have recently experienced major financial changes in your life – for example, divorce or bankruptcy – or you will not otherwise fit into the standard applicant model.
How quickly do I need to close?
If you have a tough timeline, an online application with online only lenders can help to promote things. Online only lenders tend to have more sophisticated technology that can turn around pre-approvals in minutes or hours and make credit decisions within a day or two. That doesn’t mean that brick-and-mortar lenders can’t do the same, but it’s more likely that you’ll encounter this speed with online-only providers.
Have you done this before?
If you’re a first-time home buyer, buying a home can feel overwhelming. Think about whether you might benefit from someone to walk you through the process directly.
Pros and cons of online-only mortgage applications
You are trying to ask for a lot of money to buy a house, so it’s important to think carefully about what you need from the lender. The advantages and disadvantages of online-only mortgage options are:
The advantages of online-only mortgage applications
- Faster processing -According to the Federal Reserve Bank of New York, lenders focused on high-tech application experiences tend to provide faster processing time and tend to process loan applications 20% faster than other lenders. One important note is that for the quickest turnaround, your credit and finances should be fairly simple.
- Convenience – Online Mortgage Applications allow you to easily search and upload documents such as your latest bank statements, payment stubs, tax returns and more.
- Low cost – Online mortgage lenders typically have lower overhead costs than brick-and-mortar lenders, which can lead to lower interest rates and closing costs.
Cons of online-only mortgage applications
- It may not be that fast – Many institutions with a physical retail presence can compete with online-only lenders when it comes to timing.
- Less practical help – You may not know who to contact for help as you are applying online. If you don’t have an easy way to connect with a loan officer within the application portal, you can discover yourself on the phone (or worse, pending) and add more time to the process.
- Possibility of hiccups – Online applications are designed to speed up processes, but if your situation is outside the norm – perhaps if you are self-employed, your credit history will have a high ratio of some dings or your debt to income (DTI) – it may take some time to process your application.
- Fee – Despite low overhead, online-only lenders often charge additional fees to closing costs.
Is online-only mortgage lenders safe?
In general, online-only mortgage lenders are legal, but they do due diligence, just like businesses that are considering collaborating. All mortgage lenders, online or not, must comply with federal regulations for data protection and privacy. Typically, online lenders use secure websites to submit applications and upload documents. These portals typically have password-based logins and sometimes two-step authentication for an additional layer of security.
That said, there is always a risk when you submit your personal information online. Before you do serious business with a lender, here are some tips to protect yourself:
- Check the Better Business Bureau or the state’s banking department for signs of bad actors and complaints.
- Ask about your lender’s security practices. If the lender is legal, these should be well documented and provided to you without any issues.
- Unless you are using a Virtual Private Network (VPN), do not send documents containing personal information via email unless they are encrypted or via public Wi-Fi networks.
- Beware of fishing. Many lenders email secure links that allow you to safely upload documents, which is also a gateway for phishing scams. It is best to call your lender directly to ensure that your email is legal. Additionally, hover your cursor over the sender’s email address and link (don’t click!) to see if it is recognized. If you have confirmed that your email and link are authentic, please use this link to send your personal information, rather than replying to the email itself.
- Check out our lender’s online customer reviews. But beware of false testimony that often has a general language, full punctuation and spelling, and seems overly positive.
How to get a mortgage online
The online mortgage application process is similar to the traditional application process. The key difference is that you do it digitally, not directly or via email. Here’s an overview of what you need to do:
1
Collect financial information (including bank statements, payment stubs, and tax returns) and investigate at least three mortgage lenders through an online application. Many people will provide you with your first mortgage fee estimate online before you apply. Please note that rates change daily and if you have some enquiries beyond the 45-day window, your credit score may be hit. With that in mind, compare lenders ideally on the same day for the most accurate comparison.
2. Check your loan estimate
A loan estimate is a document that details fee estimates and other loan information based on what was provided in a pre-approval or loan application. However, this is not a final offer. For that to happen, you need to submit a document and lock the rate. Still, loan estimates provide information to help you understand the cost of each offer. This will allow you to choose the one that suits you.
3. Choose a lender
Take your time to compare options. Consider whether the lender will charge an origination fee, whether discount points have been applied to the offer, and whether these costs can be added to the closing fee.
Additionally, be aware of excess charges you don’t need, such as “email charges” and “other charges.” Also, ask for an explanation of the costs you may not understand.
4. Submit the document
After comparing options and settling down to the lender, proceed to the underwriting process. At this stage, the lender will ask you to upload the document via a secure portal. To avoid delays, try to complete these requests as quickly as possible. The same applies to documents you are asked to e-sign, but read them carefully to ensure you understand that you are signing.
5. Close the loan
Once approved and allowed to close, you will receive final disclosure. This is reviewed and signed. Once you receive closing disclosure, compare it with your initial loan estimate and make sure there are no material costs changes you may not notice. If so, ask the lender for an explanation. There will be at least 3 business days to review this document, so don’t feel pressured to sign it immediately.
The closure process is probably one exception to the “online only” experience. Even most digital lenders still need a face-to-face closure process with a notary to deliver keys to new homes.
