eMortgage: What is it and how does it work?

Getting a mortgage is an involved process that involves a significant amount of paperwork. Advances in technology have made it possible to manage many aspects of getting a loan electronically, including the storage and signing of documents.

These advances have led to the rise of eMortgages, also called electronic mortgages. These are loans that are handled completely electronically, from application all the way through closing. They’ve grown more popular in the years since the Covid-19 pandemic because they can make the mortgage process smoother and help avoid time-consuming in-person meetings.

If you’re interested in an eMortgage, such as one offered by Rocket Mortgage, read on to learn more about how they work.

What is an eMortgage?

eMortgages, like any other mortgage, are a type of loan that people can use to buy real estate. What sets eMortgages apart from other home loans is that applying for and closing on an eMortgage is a fully electronic process.

All documents are managed digitally, reducing the need for physical paperwork or in-person meetings.

How does an eMortgage work?

eMortgages work just like any other mortgage, having the same approval requirements. The application process is also largely the same, with the key difference that you’ll apply for an eMortgage online, have your documents stored digitally, and sign closing documents digitally.

You can get the same types of loans, such as a conventional mortgage or jumbo loan, using an eMortgage, the difference is simply in how documents are handled.

Digital loan application process

The eMortgage process begins with submitting a digital application. That means that you’ll apply for the loan over the internet and submit the supporting documents that your lender asks for, such as tax returns, W-2s, bank statements, and the like, through your lender’s digital portal. You’ll also receive important loan disclosures online.

This differs from traditional mortgages, where you may be asked to bring paper copies of these documents to the bank or mail them in. With an eMortgage, you can handle the whole process more quickly and from the comfort of your home.

Once you submit your application, the underwriting process begins. In some cases, underwriting may be automated, letting you get a decision more quickly than with a traditional mortgage.

eNotes

When you get a mortgage, you sign a promissory note, which outlines the details of the loan. With an eMortgage, you’ll sign an eNote, which is a digital version of the promissory note.

Unlike promissory notes, which lenders store physically to show proof of ownership of the loan, eNotes are recorded with the MERS mortgage eRegistry for digital storage. Just like typical loans, they can be sold to Fannie Mae or Freddie Mac and later traded on the open market.

eClosings

The final step in the mortgage process is closing. With a traditional mortgage, this involves visiting a physical location, often a lawyer's or notary’s office, and signing a lot of paperwork.

With an eMortgage, closing happens digitally. Depending on state laws, the type of eClosing available can vary. You may be able to do the signing entirely remotely with a remote ink signing or remote electronic signing, or visit an office to do an in-person electronic signing, or some combination of the two.

Providing an online signature can involve typing your name, uploading a photo of your signature, or drawing a signature on a touchscreen.

State laws on remote closings

Each state has different rules and regulations regarding closings, so fully remote closings may not be available depending on where you live. It largely depends on remote notarization laws. If a state does not allow remote notarization of closing documents, you may need to attend a hybrid eClosing, which Rocket Mortgage offers in all 50 states.

Currently, fully remote eClosings are not permitted in:

• Alabama
• Connecticut
• Mississippi
• Georgia
• South Carolina

What are the advantages of an eMortgage?

There are a lot of benefits to the eMortgage process for both lenders and borrowers. Some of these advantages include:

• Lower costs for lenders. Lenders spend less money on office space and physical paperwork, which can result in lower rates or fees, such as origination fees.
• A more transparent digital process. Digital documents can be easier for borrowers to review on their own time.
• Quick processing of documents. Paperwork can be sent back and forth quickly when it is done digitally, allowing processing to take less time.
• Convenience for borrowers. Borrowers can complete almost the entire process from home, which saves them the time and effort of multiple trips to the lender’s office.
• Eco-friendliness. Less paperwork makes for a greener lending process.

What are the disadvantages of an eMortgage?

eMortgages aren’t right for everyone, so it’s important to consider the downsides before you choose one.

• Limited availability. eMortgages are not offered by all lenders and may be limited in some areas due to state law.
• Privacy and security concerns. Some people are likely to be concerned about the safety of their documents if they are stored digitally on devices connected to the internet.
• Less flexibility. eMortgages are often more cookie-cutter than more traditional loans due to the automation involved, so they’re not ideal for people with unique financial situations.
• Aimed at the tech-savvy. If you’re not good with technology, you may struggle to deal with online applications and document submission.
• Less personal interaction. With a traditional mortgage, you get to work closely with your lender and have them walk you through the process, which can be appealing to some people.

Will your digital loan documents stay safe?

In today’s increasingly digital world, it’s becoming more and more common to hear about data breaches and people’s information being stolen by hackers and other malicious actors. Given that, it’s very reasonable to be worried about the safety of your loan documents if they’re stored digitally.

The good news for borrowers is that digitally stored documents are kept safe using state-of-the-art security technology and practices. In fact, eMortgage documents may be safer than physical paperwork, which can also be prone to destruction or loss in addition to unauthorized access.

Some techniques used to keep your data safe include data encryption, multi-factor authentication, and multiple backups to ensure your data is not lost.

Is an eMortgage right for you?

eMortgages can be a great fit for some people, but they’re not right for everyone.

If you’re the type of person who is comfortable with technology and who doesn’t mind handling all of their paperwork digitally, an eMortgage can be a great choice. This is also true if you’re looking for a faster timeline from application to closing or if your schedule doesn’t give you the time to visit a lender’s office multiple times.

On the other hand, if you’re not the most technically competent or simply want that in-person interaction with someone who can help walk you through the lending process, an eMortgage probably isn’t a good choice.

The bottom line: An eMortgage can streamline your next home loan application process

eMortgages are a type of mortgage loan that has a digital application, underwriting, and closing process. If you’re tech-savvy and don’t mind dealing with paperwork online, they can make getting a loan faster and more convenient. Ask your lender to see if they offer eMortgages and to learn more about the eMortgage process.

If you’re ready to start applying for an eMortgage, submit your application with Rocket Mortgage® today.