The Online Mortgage Has Finally Arrived

Now, you can apply for a jumbo loan while wearing, for example, purple pajamas (the ones with the footies). More mortgage lenders are offering digital portals in which home buyers can apply for a loan, submit documentation and track the approval progress.

In the fall, Alfonso Brigham, a 32-year-old corporate-loan underwriter, applied for a $711,000 mortgage from SoFi to purchase his first home, a $790,000 condo in San Francisco. While he did speak to a loan officer on the phone to ask questions, he was able to upload all income and asset documentation and track progress from the initial application right up to closing online, he says. “It made the process so much easier,” Mr. Brigham says.

Mr. Brigham’s experience is becoming increasingly common, says Michael Tannenbaum, vice president of SoFi’s mortgage business. “Almost everything at SoFi can be done without speaking to someone,” he adds.

Consumers have been going online to check rates and compare loan products for a long time. What’s different now is that lenders running the gamut from online-only SoFi to Wells Fargo, the nation’s largest jumbo lender, are creating one-stop tracking applications.

SoFi is best known for providing student loans, but the online lender expanded into mortgage lending in the fall, partly because it saw a niche to attract tech-savvy, first-time home buyers, Mr. Tannenbaum says. “We’re trying to bring the millennial approach to mortgages.”

Online capabilities are making the mortgage process vastly different from even a few years ago, but it’s a misconception that millennials—those born between the 1980s and the previous decade—are the only ones driving demand for digital mortgage services, says Brad Blackwell, executive vice president and portfolio business manager for Wells Fargo Home Mortgage. Older generations are also using Wells Fargo’s yourLoanTracker since it expanded its services last year, he adds.

With yourLoanTracker, borrowers can upload W2s, 1099s, bank statements, tax returns and other income and asset documents; receive loan approval; and track progress through all these steps, as well as check off and set alerts when an appraisal or title search is needed and completed, and every other step up to the closing.

SoFi’s online-tracking services are similar, Mr. Brigham says. Customers upload documents directly to the portal, which he considers to be more secure and convenient than email. And unlike old-school lenders, the websites are “open” 24/7.

Jumbo borrowers, however, may have a few additional hurdles with online services. For example, loan underwriting is automated and can go through in as little as 15 to 20 minutes for government-backed loans, says Victor Ciardelli, CEO of Chicago-based Guaranteed Rate, an online lender. In contrast, all jumbo mortgages (those above $417,000, or up to $625,000 in pricey markets) require manual underwriting, meaning that uploaded documentation must be inspected by a human being, a process that usually takes about 48 hours at Guaranteed Rate, he adds.

The handful of lenders that offered automated online approvals for jumbos before the mortgage crisis were “burnt so bad” that no one dares approve a loan of that size without human eyes on the documentation, Mr. Ciardelli says.

More improvements are coming, Mr. Ciardelli says. For example, now consumers can compare fixed-rate and adjustable-rate mortgages, but a more sophisticated decision-tree process could actually suggest loan products best suited to a borrower based on responses to a menu of questions, he adds.

Wells Fargo also is working on expanding its digital capacities, such as creating interactive tools to answer borrower questions and anticipate needs while filling out the loan application, Mr. Blackwell says.

Convenience of completing the mortgage process online was viewed positively by 79% of respondents to Wells Fargo’s “How America Views Homeownership” 2015 survey, which had about 2,000 respondents. However, 73% still wanted assurance that they could speak with a lender representative if they had questions.

And unless state and federal regulations change, a hard signature is needed on closing documents, meaning a full digital mortgage process will remain science fiction at least for now. In other words, don’t cancel that trip to the lawyer’s office for the closing.

Source: Realtor.com, Anya Martin
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