Technology has made getting a home loan more efficient than ever. But can it eliminate the paper trail completely?
TV, cell phones, and most other industries have changed drastically in the last 10 years because of advances in technology. Currently, the Southern Maryland mortgage industry is starting to feel that modernization, too.
As tech-savvy millennials begin to purchase their first Southern Maryland home, experts say they will look for digital tools. In addition, recent home buyers tend to have higher incomes and more education than in the past, which means they are more likely to shop – and apply for – mortgages online.
But is it possible to have a mortgage that is 100 percent digital?
Explaining the Digital Mortgage Process
There are two big misunderstandings about digital mortgages:
- You can easily get a mortgage with just the click of a button
- You won’t have to give as much documentation
Getting a mortgage is different than streaming a movie or making a Skype call. Those process truly involve pushing a button – maybe two. A mortgage, however, is still an important financial transaction. It requires a comprehensive analysis of your whole financial life. As a result, you will have to put in some effort, even when going digital speeds up the process.
Remember the 2008 financial crisis? One of the things that played an important role in setting off that crisis was reduced documentation on mortgages. Lenders needed less and less verification of employment, income, and assets for approval.
After that financial crisis, the pendulum swung the other way: Lenders issued seemingly never-ending checklists of documentation needed to authorize and close the mortgage.
These days, you still have to provide the same amount of documentation. Technology is making the process easier. For example, you can answer questions about employment history, credit history, and residency in an online form. As recently as two years ago, you would have had to write, sign, and send letters in order to answer those questions in an acceptable manner.
You can also now give the lender permission to obtain your tax returns, pay stubs, and bank statements right from the sources rather than having to assemble and send the documentation yourself.
What Can Go Digital – and What Cannot
Federal laws enacted after the financial crisis require lenders to ascertain (with your documentation) that that have verified that you can repay the mortgage before you even take out the loan.
To do this, lenders have to follow eight federally required loan approval factors. If a digital process doesn’t satisfy all of the parameters for any reason, your lender will send you follow-up checklists requesting more documentation.
If you originally applied online, those follow-up checklists might be requested and given online or through email. The process every lender uses is different, and you will get specific instructions from your lender.
Loan Type and Size Can Change the Process
The process you need to follow can change with type and size of loan for which you are applying.
For example, if you are applying for a conforming mortgage up to $417,000; have been a straight-salary employee (receiving no commission or bonus) at a big company for more than two years; use an online service to file your taxes; and have online accounts with various financial institutions, the digital-mortgage process will likely be quite easy. You apply online and allow the lender to get your tax returns, pay stubs, and bank statements on your behalf; and then run a credit report. Your documentation will be analyzed, and an automated-loan approval will be run. If have a setup such as this, you can be approved in 10 to 30 minutes.
On the other hand, if you are applying for a mortgage that is more than $417,000; are self-employed with several income sources; had a tax adviser prepare your taxes manually; and do not have internet accounts with all the financial institutions necessary, 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. You will likely see follow-up checklists as the lender reviews the file manually and approves your file. 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?
The digital revolution is still making its way into 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 go digital, the decision you make as a mortgage shopper will depend on whether you want to run the process yourself on the Internet or have an adviser help you in person along the way.
Because purchasing is a large and sometime intimidating financial decision, great advice will remain at the forefront of the mortgage industry. If you want the efficiency of the digital process plus great advice, begin by finding a good local Southern Maryland lender and ask them about the digital mortgage options they offer.
Mechanicsville MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309
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