In today’s society, you likely shop, bank and keep up with friends online. As our lives become ever more digital, traditional paper-based processes are moving online — including closing on a home.
An eClosing (electronic closing) is a mortgage closing in which everything is completed electronically. eClosings can save you time and money, as well as reduce risk and offer an improved borrowing experience. Read on to learn more about the process.
How an eClosing differs from a traditional closing
Closing is the last step in purchasing and financing a home. With a traditional closing, a buyer will typically attend an in-person meeting to sign all the necessary documents, such as the closing disclosure, the loan estimate and a promissory note. Real estate agents, attorneys and representatives from the lender, title insurance company and escrow company may all be present. Certain documents are required by federal, state and local law, and by your lender. Once they’re signed, you become legally responsible for your mortgage loan.
Money may also change hands at your closing. You will pay the down payment, as well as closing costs. The lender pays the funds from the mortgage loan. The closing agent is responsible for distributing the designated dollar amount of the home to the seller and the closing costs, which are paid to the lender, attorneys and other professionals. The buyer often receives the keys to the property at the closing and can move into the home.
With an eClosing, these steps happen virtually. All documents are securely signed electronically. Funds are also transferred electronically. The involved parties may even choose to meet via video conference, though it isn’t required.
Another option is a hybrid eClosing. In this case, some aspects of closing are completed virtually, while others take place in-person. With this approach, borrowers may sign the documents electronically, but then meet in person with a notary public to have them notarized.
The benefits of going digital
As we continue to embrace digital technology and all the ways it can make our lives easier, it’s likely eClosings will only become more commonplace. But how do eClosings improve the closing process?
Without the need to meet in person, scheduling your closing is a lot easier. Plus, an eClosing is typically a faster experience, too. When you purchase a home, it’s normal to eagerly count down the days until you close. Mortgages utilizing eClosings close an average of 2.3 days faster compared to traditional face-to-face closings. The quicker the closing, the sooner you can start enjoying your new home.
An eClosing can cut down on costs as well. Doing everything digitally eliminates paper, shipping and storage fees. Lenders could streamline their costs up to $443 per loan with eClosings.
Reduce errors and improve understanding
Missed signatures and other clerical mistakes are caught more easily with an eClosing, reducing hassles and delays. In fact, eClosings resulted in up to a 31% reduction in errors.
eClosings also help borrowers better understand the mortgage process. A report from the Consumer Financial Protection Bureau found that borrowers have more confidence and feel more empowered about their home loan when they use an eClosing compared to a traditional, in-person closing.
Considerations to keep mind
Although eClosings come with many demonstrated benefits, some drawbacks are possible, too. For borrowers who aren’t as technologically savvy, eClosings can be more challenging. Access to a tablet or computer and reliable internet connection are required, creating a barrier to access for some borrowers.
Before you get your heart set on an eClosing, carefully check local laws, since some types of eClosing are only allowed in certain states.
Utilize an eClosing with ease
Thanks to technology, more and more major life moments happen over the internet. With an eClosing, you can even finalize your mortgage at a distance. eClosings offer convenience and savings, and the process might make you feel more confident as you become a homeowner. Consider closing on your home purchase electronically to reap the rewards of digital efficiency.
There’s a simpler, faster way to get a mortgage? Apply for a mortgage today.