Types of eClosing and how they work

The entire world has gone digital. Mortgage paperwork doesn’t have any reason to be different. Home buyers and those looking to refinance have probably come to expect digital transformation in real estate. And with that, eClosing brings mortgage closing into the 21^st century.

What is eClosing?

An eClosing is a mortgage closing process that involves signing digital documents in place of paper ones. This is either accomplished through electronic signatures over a computer or mobile device, or physically signing documentation on a tablet in the presence of a notary.

Many mortgages now feature an eNote, which is an electronic version of the promissory note containing the loan terms under which the borrower agrees to pay back the mortgage. However, even if the mortgage note itself isn’t an eNote, also sometimes referred to as an eMortgage, you would still be able to sign certain documents electronically in a hybrid eClosing.

Your Client Care Specialist will let you know what to expect in terms of documentation you need to have for your closing process. This will include identification. It’s also important to note that state and local laws vary, but Rocket Mortgage^® offers hybrid eClosings in all 50 states.

Types of eClosing

When lenders refer to eClosing, they’re really talking about one of a few different closing, or settlement, procedures. While we’ll get deeper into the various types of eClosing below, here’s a table that will help you pick out some of the key differences at a glance, with a comparison to a traditional closing included for reference.

Hybrid eClosing

In a hybrid eClosing, some documents are signed digitally. Others require a physical John Hancock on paper, also referred to as a “wet signature.”

In some cases, you may be allowed to sign the digital documents ahead of time, allowing for a more streamlined process on closing day. If your state and local rules allow for this, your lender will contact you ahead of your closing. Documents requiring a physical signature will be signed on closing day in the presence of a notary.

In-person E-Notarization (IPEN)

During an IPEN closing, you’ll meet a notary in person. The key difference is that all of the documents signed are digital. The notary will bring a device for you to use in the signature process, typically a tablet.

Remote online notarization (RON)

During a RON closing, you’re remotely connected with a notary via videoconference. All documents are e-signed. The thing setting this apart from IPEN is the ability to close from anywhere. No need to leave the beach in Hawaii if you can find an internet connection. In this way, you can think of RON as being a full eClose.

Right now, Rocket Mortgage offers RON in states and counties that support it. The option is currently available for certain refinances.

How does eClosing work?

The exact details of how an eClosing works are going to vary based on the type of eClosing you’re doing with your lender and title company. With an IPEN or RON, all documents are e- signed.

If you’re doing a hybrid eClosing to close on your house, some of your documentation will be able to be electronically signed, but not everything. Which documents will be able to be signed electronically is likely going to be dependent on the local and state law.

One document you can often digitally sign is a closing disclosure. You received this document at least 3 business days prior to your closing. It goes over all of the relevant terms associated with your loan including its length, interest rate and all closing costs associated.

After reviewing this to make sure everything matches what you’re expecting, you would sign the document either with your finger, a stylus, by typing your name or clicking a button. The exact mechanism will depend on the technology being utilized by the various eClosing platforms.

What are the pros and cons of eClosing?

eClosing mostly has advantages, but there are a couple of disadvantages as well.

Pros

• Streamlined process: In a hybrid eClosing, because you’re able to sign certain documents in advance, the process on closing day could end up moving much more smoothly. You’ll spend less time signing paperwork and more time making sure everything is in order and having your questions answered. It could speed things up.
• Environmentally friendly: Mortgages have traditionally relied on mountains of paperwork. Eliminating a physical paper trail could have a hugely positive impact on the environment and the air we breathe. According to one estimate cited by the U.S. Department of Agriculture, a large tree is likely to produce enough oxygen to support up to four people for 1 day.
• Flexibility: If you’re doing a RON closing, you don’t have to meet anywhere special to close on your home, meaning you can do so on vacation or while waiting for the kids to finish soccer practice before hustling them off to ballet.
• Accessibility: For those with certain types of physical disabilities, traveling to a location for closing or making a consistent physical signature can be difficult. An eClosing can help remove some of these obstacles using technology.

Cons

• Regulations vary: Not every state or county supports every eClosing method. Your options are going to change depending on where the property is located.
• Technology access: To do an eClosing, it may be necessary to have a Wi-Fi or hardwired ethernet connection. RON will require a microphone and WebCam. It’s also worth noting that not everyone has the same level of comfort with technology. So take into account your preferences.

How to prepare for an eClosing

Even in an eClosing, there are certain things you always want to bring on closing day. For example, you’ll want to make sure you thoroughly review your closing disclosure. You’ll want to have your funds ready along with forms of identification. If you’re doing a RON closing, you’ll receive communication on how to verify ID and transfer funds.

Beyond that, you’ll want to make sure you have a strong Wi-Fi or other form of data connection. If this is a RON eClosing, you’ll want to add the WebCam and microphone to your connection testing.

FAQs about eClosing

While we’ve covered many of the ins and outs, let’s take a moment to touch on those last few questions that might occur to you.

When is a physical signature required?

If you’re required by state or local law to physically sign something, we’ll make sure to obtain that signature in ink. However, more and more states allow IPEN and RON so that everything can be e-signed.

How does digital signing work?

The method of digital signing depends on the technology being employed. You might sign with your finger or a stylus. In other cases, you could be typing your name or clicking a box.

Will my documents be protected?

Your documents are protected to the maximum extent allowed by today’s technology. Additionally, because these are digital documents, the closing package isn’t going to be misplaced or lost. Lenders take steps to be sure that only the people who need access to your closing paperwork get it.

What should I bring to closing?

Your lender will be able to give you specifics on what you need to bring to closing. Make sure have a copy of your photo ID and your closing disclosure at minimum. Your lender will let you know how the transfer of any applicable closing costs will be handled.

How can I get more information?

The availability of any form of eClosing depends quite a bit on state and local law. For this reason, it’s important to stay in communication with your lender about what options may be available to you.

The bottom line

eClosing is any process that involves the digital signing of mortgage documents. In a hybrid eClosing, some documents are still physically signed. Meanwhile, IPEN and RON have a fully digital signing process. In the case of RON, your notary doesn’t even have to be in the same location. The meeting takes place via videoconference.

Now that you understand the particulars of eClosing, you can apply online if you’re ready to purchase or refinance!