The home buying process these days takes place primarily online. While house hunting and mortgage applications are done mostly electronically, the pen-to-paper closing process has remained largely unchanged. In recent years, though, electronic mortgage closings have become more common and accessible to both borrowers and lenders.
Electronic mortgage closings, eClosings for short, are meant to streamline the closing process and cut out additional fees like copying and shipping, and are commonly done using electronic tablets. They may also save a tree or two. Under COVID-19 regulations where social distancing is encouraged, eClosings could become the safer option for closing during this time.
If that all sounds appealing, read on and learn the ins and outs of eClosings.
How An Electronic Mortgage Closing (eClosing) Works
eClosings utilize a secure online portal to allow borrowers and lenders to electronically sign closing documents for real estate transactions.
Digital signatures can come in many forms. Examples of acceptable electronic signatures include:
- Typing your name into the space for your signature.
- Uploading a snapshot of your signature to the document.
- Tracing a finger or a stylus along the signature line.
For a remote signing process, borrowers may use software like DocuSign. Video conference programs like Zoom or Skype can be used to communicate with the other parties involved in the transaction and confirm the borrower’s identity and background.
Types Of eClosings
eClosing is a generally loose term that can refer to one of three main types of digital mortgage closings. The three types are:
- Hybrid eClosing: The most common type of eClosing. As its name suggests, a hybrid eClosing involves a combination of electronic and “wet-ink” signatures. It requires an in-person meeting between the borrowers and the notary public.
- In-Person Electronic Notarization (IPEN): This eClosing also requires a face-to-face meeting, though all closing documents are signed electronically with a tablet or computer.
- Remote Online Notarization (RON): The most convenient eClosing process allows all parties to meet virtually via a web video conference. All documents are signed digitally.
Different states allow for different eClosing types. As of last year, Quicken Loans® can perform eClosings in all 50 states.
The Virtual Mortgage Closing Process
The eClosing process is actually very similar to the traditional mortgage closing process. The same documents are signed, whether by hand or electronically, and the same parties are usually involved. The biggest difference depends on what type of eClosing is available to you – hybrid, IPEN or RON.
A hybrid eClosing still requires some face-to-face time with mortgage lenders to traditionally sign some of the more important documents, ink to paper.
Some of these closing documents include:
Documents such as the Closing Disclosure and escrow disclosure are usually available to sign electronically. It is important to note that even a single electronic signature categorizes the whole process as an eClosing.
In the case of a RON closing process, the borrower is walked through the documents by the notary over video. The notary will also confirm the borrower’s identity and other personal information during this meeting.
Pros And Cons of Mortgage eClosings
As with many processes throughout the years, it’s entirely possible that eClosings could become the way of the future. That is not to say that they don’t have their drawbacks.
See below the pros and cons of an eClosing.
Pros of eClosing
Some of the ways an eClosing benefits borrowers and lenders include the following:
- Allows more flexible scheduling to conduct the closing process.
- Cuts down on time and money spent on closing paperwork.
- Missed signatures and other mistakes can be detected immediately and spare everyone involved a headache later on.
A 2015 study by the Consumer Financial Protection Bureau also found that most borrowers completed closing with a better understanding of the mortgage process when using eClosing. The study also noted that consumers felt that eClosings allowed them to play a far more active role in the transaction.
Cons of eClosing
While an eClosing can be convenient, some of its possible drawbacks include the following:
- Transactions require access to a tablet or computer, and reliable internet access.
- They can create a technology barrier for buyers and sellers who aren’t as technologically savvy as others.
- Some eClosing types are only available in certain states, particularly RONs.
While it may be the way forward for the tech-driven generations, eClosings risk leaving the more traditional generations behind.
Best Practices For A Remote House Closing During COVID-19
In states that allow it, a RON eClosing is possibly the safest option for closing on a home while maintaining social distancing. For many, conducting such important business over video may seem strange and off-putting, and maybe a little unofficial. Rest assured that your digital signature is just as legitimate as your handwritten one. To ease into this different process, consider the following best practices:
- Ask your loan officer what eClosing options are available in your home state. To date, Quicken Loans has completed remote closings in states such as Michigan1 and North Carolina2.
- Have access to video conference programs like Zoom or Skype. FaceTime may also be acceptable.
- Ensure you have a stable internet connection.
- During the eClosing call, listen closely to the lender’s and notary’s instructions and sign in the correct spaces.
- Pay the closing costs electronically with a bank-to-bank or wire transfer.
- Finally, obtain the keys to your new home from the lender via the mail or another delivery service. Be sure to disinfect the keys upon arrival to avoid the possible spread of COVID-19.
When done right, a remote eClosing will allow you to close on your new home from the comfort of your old one.
eClosings have been around for years now, but you might see them become more prominent under our new socially distant lifestyles. Besides the safety factor, home buyers may just find the digital process more convenient. Lenders, too, can appreciate the cost-cutting and time-saving benefits.
While availability differs between the three types of eClosings, with a RON especially hard to come by, it’s worth talking to your mortgage broker or lender about your closing options.
Looking for a new home in these uncertain times? Apply for a mortgage today with Rocket Mortgage®.
1 Quicken Loans and Nexsys Technologies Perform Michigan’s First Remote Online Mortgage Closing. Quickenloans.com. December 18, 2019.
1 Quicken Loans and Amrock Team Up for North Carolina’s First Remote Online Mortgage Closing. Quickenloans.com. July 17, 2020.