Can The Mortgage Process Go Completely Digital?
Technology is making the process of getting a home loan more efficient than ever before, but can it remove the paper trail completely?
Advances in technology have essentially re-invented TV, music, mobile phones and most other industries in the past 10 years. Currently advances in technology are finally starting to modernize the mortgage process.
As the tech savvy millennial generation prepares to purchase their first homes, some experts say they will gravitate toward digital tools. Furthermore, recent home buyers tend to have higher income and a more-educated background than in the past, this means that they are more likely to shop on the internet (and probably apply) for mortgages online.
Is it truly possible however, to have a 100% digital mortgage?
Elucidating the digital mortgage process
The 2 biggest misunderstandings of digital mortgages are, you can easily get a mortgage with just the click of a button, and that you will not have to give as much documentation.
When you stream a movie or song or make a video call, you are really pushing a button-or-two. However, a mortgage is still an important financial transaction that requires a comprehensive analysis of your whole financial life, as a result you will have to put-in some effort – even when the process is sped up.
One of the factors that played an important role in setting-off the 2008 financial crisis is reduced documentation on mortgages, this is due to the fact that lenders needed less and less employment, income and asset verification for approval.
Then the opposite occurred for many years after the financial crisis: lenders would give seemingly never ending checklists of the needed documentation to authorize and close the mortgage.
Nowadays, you still have to provide the same amount of documentation, but technology makes the whole process a lot easier.
For instance, today you can answer questions about employment history, credit and residency in an online form. Just 2 years ago you would have had to write, sign and then send the letters to answer in an acceptable manner.
And currently you can give permission to your lender so that he/she can obtain tax returns, pay stubs and bank statements from the sources instead of assembling and then sending all the documentation yourself.
What you can do digitally versus what you cannot
The federal laws that were created after the financial crisis require the lenders to ascertain (with all your documentation) that they have verified that you are able to repay the mortgage before you take it out.
To do this, the lenders have to follow 8 loan approval factors that are federally required. Consequently if a digital process does not satisfy all the parameters for any reason whatsoever, you can be certain that your lender will send you follow up checklists requesting you to provide more documentation.
If you originally applied online, documentation and follow up checklists mighty be requested and given online, or through email. The process used by every lender is different, and your lender will give you specific instructions.
The process is different depending on loan type and size.
For instance, if you are applying for a conforming mortgage up to $ 417,000; you have been a straight-salary employee (that’s, receiving no commission or bonus) at a big company for over 2 years; you use an online service to file your taxes; and you have online accounts with various financial institutions, then the digital-mortgage process will most likely be quite easy. You apply online; permit your lender to get your tax returns directly, pay stubs and bank statements on your behalf; and then run a credit report. Your documentation will then be analyzed, and an automated-loan approval will be run. If have a setup such as this, you can be approved within 10 – 30 minutes.
On the contrary, if you are applying for a mortgage that is more than $ 417,000; you are self-employed with several income sources; you’ve had a tax adviser prepare your taxes manually; and you do not have internet accounts with all the financial institutions necessary, then the digital process will need more human intervention by your lender and yourself. You will apply online and give the same authorizations as explained above, but you will have to assemble and submit most of the documentation yourself, and you will likely see follow up checklists as the lender reviews the file manually and approves your file – because loans that are more than $ 417,000 are normally not qualified for automated approval. The whole process can take several hours or even days.
How many lenders offer digital mortgages?
Currently, the digital revolution is still making its way through the mortgage industry. You may get outstanding advice and service and amazing technology, but not all lenders have adopted both so far.
As more lenders embrace the digital processes that have been described above, the decision you’ll make as a mortgage shopper will depend on whether you would like to run the entire process yourself, on the internet, or if you would like an adviser to assist you in-person along the way.
Because purchasing a home is a large – and normally intimidating – financial decision, great advice is likely to still remain at the fore-front of the mortgage industry. Consequently, if you want the efficiency that’s offered by the digital process plus great advice, it is best to begin by finding a good local lender and then interview them about the digital mortgage options that they offer.
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