The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for .
If you’re thinking about applying for a mortgage online, you’re not the only prospective homebuyer who wants to buy their physical home with the convenience of a digital screen. According to research from management consultants McKinsey & Company, around 60 percent of borrowers – both those looking for a new home and those looking to refinance their mortgages – “would be open to completing their entire mortgage application online,” even “without phone or in-person support.”
Most customers will take the ease of the online route, too. According to Christopher Davis, assistant vice president of field mortgage at Navy Federal Credit Union, more than 75 percent of the company’s mortgage applicants have applied online so far in 2023 – with less than 15 percent opting for a phone application and less than 10 percent coming into one of the credit union’s 356 branches to complete the paperwork.
Just about every company that offers home loans has a way to get preapproved online. But what about banks, credit unions and other lenders that offer a strictly online experience – having you do the entire official mortgage application, without the option of ever talking to a human in person? The digital lending process is now more efficient and easy than ever. Before you start tapping the keys, though, you need to consider all the benefits and drawbacks — to figure out if a 100-percent online mortgage experience is right for you.
Should you apply for mortgages online?
The process of getting a mortgage involves a lot of paperwork and time. Whether applying for a loan online, over the phone or in person, your mortgage lender will ask for documentation about your employment history and income, any assets you own and any debt you owe.
As of July 2023, the average time to close a mortgage for a new home purchase was 44 days, according to data from ICE Mortgage Technology. The timeline to actually signing your paperwork and getting the keys to your new home can be impacted by many factors, including the time it takes for an appraisal, title search and employment verification.
Applying for mortgages with an online-only lender could potentially speed up this process — it’s one of the big pros of the digital approach. Don’t rush in, though. Be sure to think about these questions as you try to find a lender that meets your needs:
- How complicated are your finances? If you receive a steady paycheck from an employer and have excellent credit, your financial picture is fairly easy to understand and an online-only lender is likely a good fit. However, if you don’t fit the standard applicant model, if you are self-employed or you have recently gone through some kind of big change in your life – a divorce or a bankruptcy, for example – you may face some additional hurdles on the pathway to secure a mortgage. And explaining may be easier face-to-face with a loan officer.
- How fast do you need to close? If you’re on a tight timeline, an online-only lender can be part of a recipe for success. Digital lenders boast about their ability to beat the industry average to close – Better.com, for example, says it closes loans 17 days faster than the average. However, if you aren’t in a serious rush, you may want to explore additional options, including lenders that offer in-person assistance.
- Have you ever done this before? If you’re a first-time homebuyer, buying a home can feel overwhelming, and you’ll want to make sure you are exploring all the ways to potentially lower the costs. Think about whether you can benefit from someone holding your hand a bit tighter to walk you through the process.
Pros and cons of online-only mortgage applications
You’re about to ask to borrow a lot of money to buy a home, so it’s important to think carefully about what you need from a lender. Be sure to consider the upsides and drawbacks of online-only mortgage options.
- Faster processing – Lenders focused on a high-tech application experience tend to offer faster processing times — handling loan applications 20 percent faster than traditional lenders, according to a report by the Federal Reserve Bank of New York. The time to close can vary depending on the lender, but an online mortgage application might be the better route if time is of the essence. One important caveat: You’ll need to be a straightforward applicant, as no lender is going to offer a streamlined timeline if your finances are a bit more complicated.
- Convenience – With an online mortgage application, you can easily locate and upload copies of documents, such as your latest bank statements, pay stubs and tax returns, to a secure website instead of needing to provide a hard copy to the broker or loan officer. “Convenience and a simplified process are key factors that more borrowers are now seeking out in their homebuying journey,” Brandon Snow, executive director of mortgage strategy at Ally Home, says. “Branch visits can be onerous and inconvenient.”
- Lower costs – Online mortgage lenders typically have lower overhead costs than traditional brick-and-mortar lenders, which can translate to lower interest rates and closing costs for you.
- It might not be that much faster – Many institutions that have a physical retail presence can compete with online-only lenders when it comes to timing. For example, Navy Federal Credit Union’s Davis points out that the majority of their applicants receive notice they’ve been preapproved within one day – regardless of whether they apply online, over the phone or at a branch.
- Less hands-on help – If you have a question during the loan application or underwriting process, you might not have a dedicated person to help you if you’re applying online. Also, if you prefer an in-person interaction, that may not be an option. Instead, you might instead find yourself on the phone (or worse, on hold) if you need to connect with someone.
- Potential for hiccups – A digital mortgage is designed to speed up the closing process through automation, but if your situation is outside the norm — maybe you’re self-employed, your credit history has some dings or your debt-to-income (DTI) ratio is high — it could take more time to process your loan application.
- Fees – Despite their lower overhead costs, online-only lenders may still charge fees that will add to your closing costs.
Are online-only mortgage lenders safe?
Online mortgage lenders are generally legit, but as with any business you’re considering working with, do your due diligence. Whether online or not, all mortgage lenders are required to comply with federal regulations for data protection and privacy. For example, they must notify you about how much of your financial information they share with third parties. They must also offer you a standard-form loan estimate — delineating the terms and costs associated with your mortgage — within three days of your application.
Before doing serious business with the lender, check the Better Business Bureau or your state’s banking department for signs of bad actors and complaints. There are many mortgage lenders out there, so if anything seems off with a lender you’re considering — a too-good-to-be-true rate, for example — don’t hesitate to move on to another one.
Applying for mortgages online is typically just as safe as submitting a paper application, if not more so. Online lenders typically use secure websites for you to submit your application and upload your documents. These portals usually have a login with a password, and sometimes two-step authentication for an additional layer of security.
That said, there’s always some level of risk if you’re submitting personal information online. It’s best to avoid sending documents with personal information via email unless it’s encrypted, or over a public Wi-Fi network unless you’re using a virtual private network (VPN). It’s wise to inquire about your lender’s security practices, too, so you’ll know how it safeguards your information and addresses any breaches.
Depending on the lender, your loan officer might email you a secure link where you can upload documents safely. Sometimes, phishing-scam characters send such links, so don’t hesitate to call your loan officer directly to confirm it’s legitimate. You should also hover your cursor over the sender’s address and any links (do not actually click them!) to see if you recognize them. If you’ve confirmed the email is legit, be sure to submit personal information using this link, not by replying to the email itself.
How to get a mortgage online
The process for applying for a mortgagee online is similar to the process of applying the traditional way. The key difference is that you’re doing it online and not in person or over the phone. Here is an outline of what you’ll need to do:
1. Shop around
To get started, gather your financial information (including bank statements, pay stubs and tax returns) and research at least three online mortgage lenders. Many will allow you to get a mortgage rate quote online before you submit an application. Keep in mind that rates change daily and your credit score can take a hit if there are several inquiries. With that in mind, aim to do this within a relatively short time frame — ideally on the same day for the most accurate comparison.
2. Review the loan estimates
Once you submit your applications and you’ve been preapproved for a loan, you’ll receive loan estimates from each lender. This estimate is based on the information you provided on your application, but it’s not a final offer — you’ll need to submit documents and lock in your rate for that to happen. Still, the loan estimate provides you information you need to understand the costs of each offer so you can choose the right one for you.
3. Choose a lender
Take the time to compare your options. Consider whether the lender charges an origination fee and whether discount points have been factored into the offer, and how much these expenses could add to your closing costs. (Depending on how long you plan to stay in your home, paying points could end up saving you money.)
In addition, keep an eye out for excessive fees that might not be necessary, such as an “email fee” or “miscellaneous fee,” and ask for clarification about any costs you don’t understand.
4. Submit documents
After comparing options and settling on a lender, you’ll proceed to the underwriting process. At this stage, you’ll be asked to upload your documents via a secure portal. The loan officer or broker will let you know which documents you need. Try to complete these requests as quickly as possible to avoid delays. The same goes for documents you’ll be asked to e-sign — but be sure to read them carefully to make sure you understand what you’re signing.
5. Close the loan
After you’ve completed all of the loan officer’s or broker’s requests, you’ll receive your final disclosures, which you’ll review and sign. When you get the closing disclosure, compare it to your initial loan estimate to ensure there aren’t any material cost changes you weren’t aware of. If there are, ask your lender for clarification. You’ll have at least three business days to review this document, so don’t feel pressured to sign right away.
As to the closing itself, It’s important to understand that this final step of the process will likely be the one exception to your “online-only” experience. Even most digital lenders still require an in-person closing process with a notary to get the keys to your new home.
Bottom line on applying for a mortgage online
Applying for a mortgage is easy – just about every lender has a website with a super simple “Apply Now” button. However, that doesn’t mean you should click on the first button you see. Think about your unique needs as a borrower to figure out which lenders are good candidates for your homebuying journey. Compare rates, fee structures and reviews from other customers about their experiences to get an idea of where you can find the best deal and the best service.
Be sure to consider how much you value having access to face-to-face help. If you prefer to do everything behind a screen, an online-only lender may be a great option. However, if you are more comfortable having a conversation, it’s smart to look for a lender with 24/7 customer service and a network of branches.