When it comes time to take out a mortgage for that new home, interest rates aren’t the only thing that matter. There is also the matter of paperwork. Given the lengths that lenders go to ensure that homebuyers are qualified, there can be mounds of it, not to mention the time in-person meetings take before the borrower is able to sign on the dotted line. Paperwork has gone the way of the dinosaur in many industries, but the wheels of change have turned slowly in real estate, until now.  

Consumers have gotten used to completing transactions with the touch of a button and buying a home shouldn’t have to be that much different. Fortunately, the rise of digital mortgages has taken the sting out of the mortgage application process, considering most if not all the steps can be completed over the internet. Indeed, human processors have been replaced by algorithms and machine learning, technology that has simplified the home buying process. As a result, mortgage document requirements are no longer onerous.  

If you are thinking of obtaining a digital mortgage, you are in good company. According to a survey by Discovery Home Loans, half of the homeowners would choose to access financing for their new home online, as of the year 2020, compared with slightly more than 40% before the pandemic reared its head. Homebuyers looking for a simple mortgage may want to continue reading to learn how a digital mortgage streamlines the process. 

How Does A Digital Mortgage Change the Application Process?

Buying a home is one of life’s major accomplishments. While the American dream may have evolved over time, one thing that had stayed the same was the mortgage process and the number of hoops that borrowers have had to jump through to prove their creditworthiness. Fortunately, that is all changing with the rise of digital mortgages. Applying for a digital mortgage means that you won’t have to worry about getting carpal tunnel syndrome just from filling out the documents required in the application process. 

The essence of buying a home online is a simple mortgage process from start to finish, from the application to the closing. Instead of scheduling appointments with loan officers and sorting through piles of paperwork, the home buyer will be reading over documents on their own time and on their own device in the privacy of their home. 

The automated nature of digital mortgages cuts down on the chances for human error, which in turn reduces the likelihood of pesky delays. One of the most common pitfalls in the traditional mortgage process is unsigned documents, triggering delays you won’t have to worry about with a digital mortgage considering these activities are completed online. 

The hours it takes to compile documents and schedule meetings with a loan officer have been dramatically reduced with the online mortgage application. Not only does minimal documentation accelerate the online mortgage application but it also makes it much simpler for the borrower, breaking down the pages into sections with a status bar to accompany the applicant’s progress. 

Borrowers no longer must wait around by the phone to learn their status and instead are kept in the loop by a transparent process that will let them know sooner than later where things stand. Don’t fret, either, as there may be some individual on the other end to troubleshoot if you have any questions or issues. It is really the best of both worlds. 

In a nutshell, digitization is the core of an online mortgage. The digital mortgage either massively reduces the need for paper documentation or it removes it altogether. Given that the steps are completed online, it might also remove the need for a loan officer and closing agent. Mortgage processing has never been so simple. That’s because the entire mortgage processing ecosystem is brought online, thanks to the software that is in place at the lender. 

As a result, the borrower can expect most if not all the steps to be digitally driven. This includes: 

  • Completing the application.  
  • Uploading the required paperwork or having it aggregated directly from a relevant third party. 
  • Receiving updates on the status of the mortgage application.  
  • Electronically signing the mortgage on a device such as a smartphone, tablet or desktop computer. 

What Documentation Do You Need For a Digital Mortgage?

A digital mortgage changes the game, but it doesn’t remove the need for documentation completely. Lenders will want to get a glimpse into your financial health by seeing proof of your earnings and how much money you may owe. You may be wondering, “What documentation do I need for a mortgage?” We are glad you asked! While the specific documentation you’ll need for a digital mortgage will vary depending on your personal situation, you can generally expect to prepare the following, all of which should be accessible in digital format:  

  • Proof of income, including pay stubs, W-2 forms, 1099 forms, direct deposit, etc. 
  • Tax returns from the past one to two years. 
  • Bank statements including investment assets and insurance contracts. Lenders want to verify that you have an emergency fund prepared should something go wrong. They want to see your assets in relation to your debts. 
  • Credit profile, which involves pulling your credit report online through aggregators such as Experian, TransUnion or Equifax. 
  • Gift letter if someone is helping you to reach your goal. 
  • Photo identification to prove you are who you say you are, such as a driver’s license. 
  • Renting history when relevant. 

In fact, much of the pain has been removed from the mortgage processing system now that lenders can directly access many of these documents from third-party service providers or aggregators. These data sources, as described by Oliver Wyman, may include the IRS, employer/payroll provider, financial institutions and investment firms, and lenders. Aggregators include firms such as credit rating agencies, database providers, etc. The process is more convenient for borrowers and lenders alike and in addition to saving on paperwork also slashes costs. 

Diagram of data sources and aggregators in the US
Photo Courtesy of Oliver Wyman

Learn more about Ratecloud’s Mortgage Options

If you’ve decided mortgage automation is the way to go, Ratecloud could have the product you are looking for. Ratecloud has bridged the gap between technology and homebuying to offer the best of both worlds to homebuyers and homeowners alike. To boot, Ratecloud’s simple mortgage process can save you time and money. Get started right away on your digital mortgage application today and leave the heavy lifting to Ratecloud. Still not convinced? Read more about how going digital can make for a more affordable mortgage.