A digital mortgage is nearly identical to a traditional mortgage in every way but one: a digital mortgage utilizes technology to engage borrowers at every step of the mortgage lending process. From application to servicing, every facet of the transaction takes place electronically, including more involved processes like verifying third-party assets notarizing documents. Ultimately, digital mortgages help speed up the journey of home ownership for buyers by streamlining overall operations.
For lenders, digitizing the mortgage loan process has served to reduce internal costs such as labor, and preserve resources (like paper). Lenders also experience increased profitability since they’re able to attract prospective borrowers with the offer of online convenience.
Why Would Someone Want a Digital Mortgage?
Again, convenience is a big factor in modernization. For example, look at grocery stores – how many in your own city now offer a delivery service or pick-up alternative? Even a purchase as big as a car can be made from the comfort of your home. Digital mortgages offer the same type of service for people going through the process of making arguably the biggest purchase of their lives.
Digital mortgages also tend to close more quickly than traditional mortgages. According to the New York Federal Reserve, digital lenders can process loan applications up to 20% faster than traditional lenders. That equates to about nine days faster for purchase applications and up to 14 days for refinancing applications.
And finally, online mortgages are simpler and less fussy. The mortgage process requires submitting extensive information and documentation, which means signing a substantial amount of paperwork. Many digital lenders now offer their clients the option to upload documents such as bank statements, tax returns, and W-2s directly, which means one less trip to the lender’s office. A digital file keeper is not only more efficient but also helps lenders stay more organized, which facilitates a smoother process for both lender and buyer.
Some Top Lenders That Use 100% Digital Mortgages Today
Better.com offers a 100% online digital mortgage process without fees or commissions and will match other lender offers. They also offer digital HELOCs for up to 90% of the property’s value.
Guaranteed Rate claims to have created the digital mortgage. They also offer face-to-face meetings if the client prefers. They funded $70 billion in mortgages in 2021 and work with various types of clients. They also have over 500 locations.
PNC Bank offers mortgage and refinancing applications online. They also have brick-and-mortar locations.
Ally offers pre-approval and mortgage loans with no lender fee. They also offer appraisals and inspections.
LoanDepot offers mortgage, personal, and refinance loans. They also have 200 locations nationwide.
Rocket Mortgage has a special program where they will cover 1% of your rate for the first year and cut your closing costs. They also offer debt consolidation refinancing loans.
The Future of Digital Mortgages
While the mortgage industry has been slow to adopt new technologies, competition (and the demand for convenience) is necessitating automation. For now, lenders have mostly invested in technology that focuses on the front end of the process, such as the application and other client-facing features. In the future, mortgage companies are expected to focus even more on the back-end technology, thus rounding out the automation process.
One of the newest developments in the mortgage industry is blockchain technology. Although blockchain is often associated with cryptocurrency, it actually has other uses. Blockchain technology can record data about property transactions, verify it, collect digital signatures, and give a unique identifier to each record. This technology could assist the mortgage industry by speeding up the process and making transactions more secure and accurate in a more cost-conscious manner. Further, the decentralization of the database makes information more accessible.
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